UK Market summary
Looking at the spirits market as a whole:
- The most recent 12-month Customs annual clearances by volume are down by 1.3% and Spirits Revenue Receipts are steady in year on year terms (i.e. a small
reduction in real terms).
- Taking out spirits based RTDs, which have continued their volume decline, this leaves the spirits sector having recovered by 1.5% by volume.
- This compares with ACNielsen spirits sales which show up 2.9% by volume for the most recent twelve months, and sales value showing 2% growth
- Spirits account for 21% of the market by volume but pay 29% of total Excise.
In terms of the overall spirits category, gin and vodka now account for over 40% by volume and are by far the largest sector of the spirits market. But the
vodka growth has masked the decline in Scotch, gin and RTDs.
Vodka
Vodka has been the driver of volume growth in the UK spirits market for a number of years. It is now the highest selling spirit category in the UK by volume
and sales value. The relevance is that Excise is a volume based tax and it has primarily been the growth in vodka that has prevented the decline in revenue
growth from being more apparent in the spirits sector. Within the vodka category, premium brands have performed well but these account for only some 1% of the
market and it has been Supermarket 'Own label' vodka that has been the main driver of this volume growth, having developed from a low level some eight years
ago to 40% of the vodka off trade (29% of the total vodka market). These are predominantly produced by SMEs.
- On Trade. Vodka has been in the On-trade by 1.1% by volume
- Off Trade. The Off Trade accounts for 74% of the UK vodka market. The bottom end of the Off Trade - notably in Own Label and Cheapest on Display (COD) -
has been characterised in recent years by aggressive price pressures at the retail end, therefore experiencing acute price sensitivity. It is this sector that will now be the most vulnerable to any tax increase as they have the tightest margins.
Gin
After a slight decline by value and volume in 2006, gin has shown an increase of +1.1% by value and 0.7% by volume in the most recent twelve months.
- On Trade. Gin sales were down by -2.8% in the most recent 12 months but value has grown by +0.8%.
- Off Trade. Gin is in small growth year-on-year (+1.6% by volume and +0.6% in value). There has been some migration from 'standard' products into more premium and higher value products. More premium Own Label products have been brought to market and this may in part cause some possible positive impact on Revenues due to the increased strength.
