The average price for a bottle of table wine in the UK has passed £5.50 ($9.50) per 75cl bottle for the first time, according to the Wine and Spirit Trade Association’s latest Market Report, covering the last three months of 2016.
The new average is £5.56, up from £5.34 in the third quarter of 2015, with Brexit and the resulting devaluation of sterling being touted as the reasons. Out of that £5.56, about £1.11 goes to the Exchequer in value added tax (VAT), and a further £2.16 is taken by the Chancellor in duty. That leaves £2.19 for bottle, capsule, box, transport, profit and wine.
It’s tight and all about pennies, deals, or wine sold in the higher price sectors to spread the profit. What is interesting to observe are the Australian wines retailing at £5.50 and below. Tesco Wine by the case lists a total of 89 Australian wines, which is way down on the 150-plus it used to stock.
Fourteen wines are £5.50 or below – eight are Accolade products, with two each from Australian Vintage (AV) and Treasury Wine Estate (TWE). Both TWE and AV have been making noises over the past year or two about getting out of this sector, but it appears Tesco still has some hold, possibly based on stocking wines in higher price sectors.
At rival supermarket Sainsbury’s, AV holds the lower price sector, with Accolade having a smaller presence. Morrisons supermarket looks to TWE for the cheaper brands. Like AV, TWE blathers on about premium wines and higher prices, but still has a big stake in the cheapo market.
What is Accolade up to? Pushing through stock to generate cash flow? Could be. Accolade’s owner, CHAMP Private Equity, had a cruisy time with the company until about a year ago, when planning to list on the ASX and leave with a healthy profit on its investment. It would also retain a stake in the listed company, but life went pear-shaped.
Accolade has many great wines and talented winemakers, but one gets the feeling the higher CHAMP management is somewhat lacking in knowledge of the weird and not always logical world of wine. The Accolade marketing team has also gone to pot, or has been put on a tight rein; it doesn’t appear to be doing a great deal for the many marvellous brands Accolade has, instead wittering on about how great Hardy’s is in the UK (the reality being that Accolade has reduced it from great to common). Overall, Accolade is suffering from a loss of direction, or to use that quaint old saying, it’s on its way to hell in a handbasket. Will CHAMP do more harm than good over the next year? TKR wouldn’t be surprised if it did, but keeps fingers crossed that it won’t.
The UK average of £5.56 per bottle is set to rise, as it doesn’t take into account the 3.9 per cent increase in duty imposed in the March 2017 budget.
Jancis Robinson, writing in the Financial Times on 2 June, covers a presentation in London by Professor Kym Anderson of the University of Adelaide: “Will Brexit Harm UK and Global Wine Markets?”
The answer, says Robinson is, “depressingly, yes and yes”. Anderson’s thinking and modelling (along with associate Glyn Wittwer) shows that “by 2025, wine prices in the UK are likely to rise by 22 per cent, with consumption falling by 28 per cent and the value of wine imported into the UK falling by 27 per cent”.
Are these figures as bad as they first appear? Not really. In eight years price rises of 22 per cent are not excessive if one considers the average low price of wine in the UK, after tax and duty. Besides, producers, no matter from which country, bemoan the meanness of the UK consumer and the harsh bargaining of the retailers. Going back eight years, a bottle of wine retailing at £5 should now, with inflation, be retailing at about £6.15. The fact most of those wines that were £5 wines in 2009 are still £5 in 2017 shows there is something fundamentally wrong with the system.
If wine prices increase and wine stops being the go-to source of cheap alcohol, there is nothing wrong with that. TKR is not convinced the committed wine drinker will forgo the pleasure of the drink; they may adjust their pattern of consumption: cheap on Wednesday, not so cheap on Friday, and a posher bottle to show off to friends when going out to dinner on Saturday.
With health coming to the forefront of many in the modern western mind add in the recommended two/three alcohol free days by 2025 the average young couple could be drinking less and better also paying more for it.
According to the UK national office of statistics in 2016 the average weekly spending on alcohol, tobacco and narcotics fell below £12.00 for the first time. Figures from the Australian Bureau of Statistics the Consumer Price Index (CPI) for the three months to March 2017 show the rise in alcohol and tobacco rose 6.1 per cent over the preceding year.
Prices are cheap because of global over-production. Though the International Organisation of Vine and Wine (OIV) shows concern about production, we think less quantity will be better for the whole industry, as some current prices are very low. In the first quarter of 2017 Spain exported 525.6 million litres, up 8.9 per cent, worth €628.6 million ($946.1 million), up 8.8 per cent. The average price (bottle and bulk) was €1.20 ($1.81) a litre, up 10 cents. The average price for wine exported in bulk was 68 cents a litre.
In the same period Australia exported 343.3 million litres worth $509.2 million (bottle and bulk), the split being: combined bottle and bulk average $4.40 a litre; bottle average $5.43; bulk 98 cents.
If Spain could do away with a couple of million litres of its cheapest wine (per quarter), perhaps its figures would come closer to Australia’s. Yes, UK consumers would be paying more for their wine, and maybe drinking less, but growers, producers, consumers and the environment would be healthier for it.