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Spirits lead UK alcohol industry back to growth
The UK alcohol market has finally returned to growth after “years of continuous decline”, but the sector remains “fragile”, according to a new report by the WSTA.
Spirits have helped the UK’s alcohol industry return to growth, however the market remains “fragile”
The Wine and Spirit Trade Association’s (WSTA) latest Market Report has revealed the UK experienced modest growth in off-trade volumes in the second quarter, while declines in the on-trade slowed – resulting in the first overall volume growth for the sector in five years.
Consumers and trade members benefited from the 2% spirits duty cut introduced by Chancellor George Osborne during the 2015 Budget, as well as lower inflation.
Alcohol inflation this time last year was around double CPI inflation at 4% due to the “lingering effects” of the automatic alcohol duty escalator – which was scrapped in the 2014 Budget.
However, the WSTA notes that the market remains “fragile”, with many categories facing “tough trading conditions”, particularly wine.
Overall spirits off-trade volumes increased 3%, leading growth along with beer, sparkling wine and Champagne. Meanwhile, still wine, fortified wine and cider all declined.
In the on-trade, however, fortunes were reversed and spirits led decline with a 3% volume dip, along with beer (-2%) and wine (-3%). Only cider, fortified wine and sparkling wine showed any growth.
“It is welcome news that consumers are benefitting from lower taxes and the impact of lower inflation,” said Miles Beale, chief executive of the WSTA.
“It is clear that the retailers and producers are passing these on and that consumers are finally getting the break they deserve after years of inflation-busting tax rises.”
“While this is a positive development, the market remains fragile and a recovery unsure – with volume growth very low. The levels of taxation for the wine and spirit trade remain high in absolute terms.
“As we see the benefits of lower food and fuel prices beginning to recede there is a real prospect that the market could tip back into decline.”