Spotlight on the UK, a Leading but Highly Challenging Market

The UK is now a wine producing nation, with increasingly well-regarded sparkling wines. These, however, represent a tiny part of national consumption and this is a market that is open to wines from across the world. Unlike the US with its three-tier-system, British wine retailers can import wine directly from producers. There are limited restrictions on marketing and communications. However, as Chris Losh reveals, this is a far from easy market. (Additional reporting by Robert Joseph)

Reading time: 12m 30s

Big Ben and the Houses of Parliament at night in London, UK (Photo: Horváth Botond/stock.adobe.com)
Big Ben and the Houses of Parliament at night in London, UK (Photo: Horváth Botond/stock.adobe.com)

Trends

The UK is a mature wine market, with all of the positives and negatives that this entails. On the plus side, a significant proportion of the population (49%) drink wine regularly – making for a large base of consumers. But this is 10% lower than in 2015 and wine’s growth has slowed to low single-figures (at best) for much of the last decade.

Some of this fall can be attributed to an ageing population. The ‘boomers’ are loyal consumers of wine, but as their numbers inevitably decline, they are not necessarily being replaced by Generation Y and – particularly – Generation Z drinkers.

Wine’s growth has slowed to low single-figures (at best) for much of the last decade.

The latter are flexible consumers rather than category loyalists, often happy to hop from drink style to drink style. For this generation of UK drinkers, wine is just a part of a wider drinking occasion that can take in craft beer, RTD cocktails, artisanal coffee and low- and no-alcohol products. Wine faces stiff competition.

While older wine drinkers value brands, reliability and value for money, younger drinkers often prize authenticity. Organic, biodynamic, sustainable and ethical products play well.
 

Price sensitivity

British wine drinkers ‘show off’ less with wine than their US, Australian, Asian and European counterparts. Indeed, they are often happy to boast about the inexpensive nature of the wine they are pouring. According to Nielsen, only 4% of wine in the UK retails at over £10. The data behind this figure does not include many the independents and some online businesses where prices are higher, but it is almost certainly indicative. It is not unusual for even financially comfortable British hosts to serve wines selling at under £15 (€17) at dinner parties. If purchased from an independent retailer, these would reflect an ex-cellar price of €5/$5.  
 

Lower alcohol

Overall, in the UK the shift is towards lighter and lower-in-alcohol styles – often drunk pre-dinner. This is borne out by the fact that sparkling wine – particularly prosecco - has been the most successful wine style with white and (particularly) red wines flat or falling. Sauvignon Blanc and Pinot Grigio remain popular. The UK has yet to embrace the full-flavoured, premium and super premium  red blends that have done so well in the US, but the success of Felix Solis’s Spanish The Guv’nor brand suggests that the market is ready to accept these styles.

Production hybrids

Production hybrids, such as wine aged in bourbon barrels or infused with a shot of coffee are adding interest and are increasingly on offer in big supermarkets, but remain a small – and polarising – part of the market. Other mash-ups such as fruit, chocolate-flavoured wines have appeared and disappeared.
 

Packaging

In terms of packaging, glass bottles still rule, though younger drinkers are open to alternatives such as cans. Bag in box has a long history in the UK, but has struggled to grow beyond 5-10% of volume. However, as with cans, premium bag in box is creating a niche.

High taxes

The UK is very price conscious, partly thanks to its very high taxes - £2.23 excise duty (€2.51) on all wines from 5.5-15%, plus 20% VAT sales tax. The value of the UK pound has dramatically fallen against the euro and dollar since Brexit in 2016. This means that a wine retailing at the average price of £6.37 (according to Nielsen 2022 estimates)  would have an ex-cellar price of between one and one and a half euros or dollars. 

The UK tax picture is expected to be significantly complicated this August with the introduction of taxing-by-alcoholic strength. Wines with 11.5% might be at the current rate of £2.23 but for every extra 0.5%, the tax would rise by £0.09 or £0.10. Many in the UK trade believe this will be unworkable and it will certainly raise the price of most wines consumers now enjoy. Winners from this move – if it happens – will be producers of lower strength wines whose cost will fall at a similar rate.

News

British wine drinkers are set to pay significantly more for their wine.

Reading time: 2m 30s

UK bottling

The high taxes help to explain why shipping in bulk and bottling in the UK has become increasingly popular. In 2010 the UK imported 340 million litres of wine in bulk – or 26% of all imported wine. By 2019 this figure had risen to 516 million litres - 39% of the total.

Part of the attraction of this arrangement was the ability for non-EU countries to bottle wines that could sell in both the UK and the European Union. But Brexit has complicated matters.

Countries with whom the EU has a Free Trade Agreement – such as Chile and South Africa – would now need to pay a tariff when entering the EU if the wines were bottled in the UK.

However, another advantage of bottling in a high tech UK bottling plant like The Park (recently sold to the Spanish giant Vidrala) or Greencroft. Both these UK bottlers also have the advantage of being carbon neutral which helps big retailers towards their own environmental goals.

Discounts on big brands are common - and account for a large proportion of sales
Discounts on big brands are common - and account for a large proportion of sales

Discount culture

Discounting is also built into the UK psyche. Historically, there were deals such as 3-for-£10 before these became financially impossible, Buy-One-Get-One-Free and 3-for-2. Today, the German discounters’ EDLP – Everyday Low Price – model is more popular but consumers are used to saving 25% or more in supermarkets during cyclical promotional periods when a large proportion of any particular wine may be sold. Producers looking to sell in volume should be ready to discuss the two prices at which their wine might be sold.

Country of Origin

Australia has for 20 years been the number one country of origin for wine in the UK off-trade, with Italy coming second thanks to the success of Pinot Grigio and prosecco. However, UK consumers are less focused on origin than some might suppose, or wish. One of the biggest suppliers of Pinot Grigio to the UK has been Cramele Recas in Romania. While Argentine Malbec has developed a huge following, a UK retailer would happily consider a well-packaged, attractively-priced example of this grape from another country.

The success of New World wines since the mid 1980s has meant that generations of drinkers have had little or no exposure to European ‘classics’ like Bordeaux. In other words, UK consumers are less traditional than many outside the country imagine.

Retail

The off-trade accounts for 80% of all the wine sold in the UK. Within this, supermarkets – Tesco, Sainsbury, Morrisons, Waitrose, Asda M&S, the Co-op, Aldi and Lidl - are key. There are minor regional variations (Morrisons and Asda are strong in the north, for instance, whereas Waitrose tends to concentrate on the south-east) but essentially, retail in the UK is a story of national chains. Tesco, Sainsbury’s and Asda dominate, accounting for around 60% of the grocery market.

Wine-wise, the most feted supermarket ranges are at the upmarket Waitrose and Marks & Spencer chains, where a less price-sensitive and more engaged customer, coupled with smaller volume requirements gives greater buying flexibility.

But ‘more expensive’ doesn’t necessarily equate to ‘better’.  The discounters – Aldi and Lidl -  are both growing in influence and attracting plaudits for their wine offering. Their regularly-changing ranges are more adventurous than those of the traditional supermarkets, who rely for the bulk of their sales on big brands and own-label. The discounters’ EDLP (Every Day Low Price) strategy is attractive to consumers. In 2022 Aldi overtook Morrisons to become the fourth biggest UK supermarket.

As elsewhere, the German discounters major on private labels, but so too do the supermarkets, both under their own names – taking all of its products into consideration, Tesco Finest is the biggest wine brand in the UK – and under soft brands that consumers may imagine to be independent of the retailer.
 

Specialist retailers

Apart from the supermarkets, the retail landscape has changed dramatically over the last 25 years, with the disappearance of once-powerful specialist chains such as Victoria Wine, Peter Dominic, Thresher, Wine Rack, Unwins, Augustus Barnett, Bottoms Up, Wine Cellars, Haddows, Davisons and Fullers.

However, despite the loss of over 3,000 high street retail shops, specialist wine retail has been the success story of the last ten years.

The biggest operator is Majestic which, having dropped to 195 stores during a turbulent period of ownership by Naked wines, is now back up to 204 stores and plans to open 30 more in the coming years. Its market share is over 5% of retail for the first time.

Oddbins, its one-time competitor is a shadow of its former self. From over 270 stores in its 1990s heyday, it is now reduced to 17, all but six of them in London. A sorry situation for a business celebrating its 60th birthday this year.The only other remaining chains of any significant are drinks-discounters Bargain Booze with around 400 franchised outlets, a small number of Wine Rack shops under the same ownership.

The real growth in the UK has been in the field of independent wine merchants – businesses that typically own just one or two outlets.

According to specialist magazine The Wine Merchant there are now over 1000 independent wine shops, run by 777 businesses - an increase of over 50% in ten years. This sector of the trade seems to have survived Covid intact, and with numbers continuing to rise, seems to be in the rudest of health.

Some ‘indies’ group together to ship mixed parcels directly from regions/producers. Brexit has made the practice more complicated, but cutting out importers in this way is still seen as worth doing for bigger-selling lines.
 

Online

When it comes to selling wine online, the UK is a vibrant market. As you might expect, the large grocery chains are doing an increasing amount of their business online. Upmarket supermarket Waitrose says online is now 17% of all drinks sales – twice where it was in 2018, pre-pandemic. Total BWS sales for online at the grocer have increased by 270% compared to 2019.

But there are powerful specialists in the field too. Some of them, such as Laithwaites (which began as a mail-order business) and the Wine Society (a venerable and venerated member-owned model) have adapted old retail formats.

Others, such as Naked Wines, Slurp and Virgin Wines have always been heavily digital. They frequently use discount vouchers with other retail areas (white goods, clothing etc) to pull in new customers.

The use of pre-mixed themed or ‘discovery’ cases for a set price allows them to sell less well-known wine styles – particularly if the wines are good value.
 

The UK on-trade

The hospitality sector in the UK has suffered a turbulent time of late. Covid, clearly, has had an impact. Industry body, UK Hospitality, estimates that around 15% of businesses closed as a result of the pandemic. But there are other significant headwinds to contend with too.

Some are long-established - the number of pubs closing every week has been a trend for the best part of a decade – others are more recent. Brexit, for instance, has led to a shortage of staff both front-of-house and in the kitchen, meaning many businesses are unable to work the hours they want. Double-digit inflation, meanwhile, is pushing up costs and making customers nervous.

Industry estimates suggest that the next 12 months could see the on-trade lose as many venues as it did during Covid.

Most vulnerable are smaller operations (without significant savings or wealthy backers) and middle of the road chain restaurants. Customers are eating out less often (to save money), but often looking for a special occasion – and willing to spend rather more – when they do.

Top-end restaurants, with long waiting lists and high prices are still seeing strong demand and remain some of the most desirable places to get listings. The sommeliers may not buy huge quantities, but they exercise considerable influence nonetheless.
 

Importers

With costs rising and Brexit creating more paperwork the UK’s importers were under pressure even before the pandemic. Margins remain low and rumours continue to circulate about the long-term viability of some businesses. The last five years have seen some merchants either merge with like-minded competitors or sell a percentage of the business to a producer.

The most powerful operators are Bibendum and Matthew Clark – both now owned by C&C International group – which supply huge numbers of hospitality venues, from pubs to fine dining restaurants, nationwide.

Other influential importers include Enotria&Coe, Hallgarten & Novum and Liberty, followed by Ehrmanns, Berkmann and Alliance, but a plethora of smaller specialists have sprung up in the last decade, often concentrating on smaller producers, particular regions – such as Burgundy or Italy - their own brands, and/or organic/biodynamic/natural wines. So, Off Piste Wines created the highly successful, multi-origin Most Wanted range while Copestick wines (now a subsidiary of Freixenet-Henkell) is behind the similarly best-selling iHeart range, while les Caves de Pyrene is a one-stop shop for natural wines.

The fact that Liberty is now a subsidiary of the Portuguese company Sogrape and Armit wines belongs to the French giant Vinadeis reflects a long-standing trend. So, Hatch Mansfield. Mentzendorff and JE Fells are import wines produced by shareholders who are prominent producers.

It is also worth noting that restaurant groups in particular often like to do all their sourcing from one supplier.
 

UK regional distribution

Unlike many other countries, the UK has limited variation between the styles of wine that are consumed across the nation. The range on offer in any supermarket is more driven by the spending power of the customers than its geographic location. However, again unlike many other markets where several cities may compete for prominence, London and the surrounding region within the M25 ring road dominate consumption and trade. This is partly explained by the disproportionate importance to the UK economy of financial services which are based in the capital.
 

Trade fairs in the UK

The biggest trade tasting in the UK remains the London Wine Fair, usually held mid-May. It no longer attracts international buyers in the numbers it once did – most are drawn to ProWein – but is in the process of returning to how it started life - as a national, rather than international event.

Imbibe Live – aimed entirely at the hospitality industry – is a lively couple of days in July. It’s attendees are mostly bartenders. Though sommeliers do go as well it’s largely a spirits/cocktail show.

The key importers all hold at least two portfolio tastings a year and there are dozens of generic tastings, dealing in everything from Beaujolais to Australia.

Natural/organic/biodynamic wines are served by both the RAW wine fair and the Real Wine Fair.

The Specialist Importer’s Trade Tastings (wines aimed at the independent sector) are increasingly popular.

Online tastings – an essential during Covid – are still a popular option, particularly for regions or wineries located a long way from the UK.
 

Wine Competitions

For a country that produces a relatively small volume of wine, the UK is home to a lot of major competitions. The Decanter World Wine Awards (affiliated to the magazine) is the largest, and has the advantage of a globally respected brand to promote its results.

The International Wine Challenge (IWC) and the International Wine and Spirit Competition (IWSC) are also sizable operations with many thousand entries.

The Sommelier Wine Awards – dedicated completely to on-trade wines – has recently been closed by its owners (who also own the Imbibe Live show). The London Wine Competition judges packaging and value as well as liquid quality.

The UK is also the home to the first international competition dedicated entirely to drinks below 0.5% abv, the World Alcohol-Free Awards. The first judging takes place in March 2023.
 

Opinion

The UK has its first wine PDO, with boundaries that reflect a county, rather than an area with specific vinous characteristics. Robert Joseph wonders how much this matters.

Reading time: 2m 50s

PR consultants

Larger PR companies tend to steer clear of wine PR, generally leaving it to smaller, more specialised agencies. Many have teams of just two or three.

Well-respected operators with many years in the business include Phipps PR, Emma Wellings PR, Fleet Street Comms, R&R and Limm PR.

Most are stronger with old-style media than the new generation of communicators.
 

Drinks publications

Wine columns in national newspapers are shorter and less common than they used to be and only Decanter remains of the regular wine-specialist press, though its impact is global. The Times, the Daily Telegraph and Decanter might not have enormous circulation figures, but they punch above their weight; their readers are knowledgeable, engaged and influence others.

Club Oenologique (owned by the company that runs the IWSC) is a glossy quarterly wine and lifestyle publication; The World of Fine Wine (owned by the New Statesman group) is serious, niched and – though produced in the UK – global rather than parochial in outlook.

The UK’s Trade press has shrunk over last 20 years. But there are still some well-established names. Harpers is – broadly speaking – the magazine/website for the UK’s wine world. Drinks Business is more international (and includes spirits). Drinks Retailing News concentrates on the off-trade, The Wine Merchant (mentioned earlier) on independent merchants.

The Buyer, established by former Harpers editor, Richard Siddle, is entirely digital, newsy and fast-moving.
 

People, podcasts and media

The UK remains home to some of the biggest names in drinks journalism.

The opinions of influential thought-leaders and commentators such as Jancis Robinson, Tim Atkin, Robert Joseph, Oz Clarke and Jamie Goode are respected around the world.

Some of these critics have banded together to create their own events. The Wine Gang (Anthony Rose, Joanna Simon and David Williams) and the Three Wine Men (Olly Smith, Oz Clarke, Tim Atkin, Tom Surgery and Susy Atkins) host consumer events all over the UK.

The Three Drinkers (Helena Nicklin, Aidy Smith plus guests) have recorded TV series on Amazon Prime and podcasts. Their website includes product and venue reviews. The Thinking Drinkers are perhaps the world’s only stand-up drinks-driven comedy duo.

Wine features in food and lifestyle shows – Saturday Kitchen at the start of the weekend is the most prized slot. The Wine Show - sparky and entertaining – now runs to three series (27 episodes) with more ‘specials’ being released in 2023.

In terms of new media, the Wine Blast podcast (hosted by MW couple Peter Richards and Susie Barrie) is popular around the world. Jancis Robinson launched her own podcast at the end of 2022.

Key influencers online include Bradly Horne – winetimelondon – (11000 followers), Aleesha Hansel  -@aleeshahansel (4000 followers), Georgie Fenn @winingawaytheweekend – (39,000 followers), and Charlotte Kristensen - @thelondonwinegirl – (19,000 followers).

Bolney Estate Pinot Noir. English wine from a long-established estate, recently bought by Freixenet-Henkell. Image: Bolney Estate
Bolney Estate Pinot Noir. English wine from a long-established estate, recently bought by Freixenet-Henkell. Image: Bolney Estate

UK wine production

The UK’s domestic production has increased enormously in the 21st century. With almost 4,000 hectares under vine, the industry has quadrupled in size since 2000. The most planted regions are in the (warmer, drier) counties of the South-East: Kent, Sussex, Essex, Hampshire. But grapes are found everywhere from Wales to Yorkshire to the West Country.

The UK is a cool climate, and still marginal, despite global warming. So vintages can vary significantly in volume, style and quality. But generally, around two-thirds of the production is sparkling wine. Most of this is methode traditionelle, using ‘champagne grapes’. Approximately 10m bottles of sparkling wine are now produced each year, generally retailing at prices similar to those commanded by Champagne. Though some use hybrid varieties such as Seyval Blanc or Reichensteiner and especially Bacchus to good effect in some more moderately-priced Charmat-method examples which can compete with Prosecco.

Most quality restaurants and retailers would expect to list at least one UK sparkling wine.

General

The sparkling wine category is booming, with Champagne in hot demand. This has led to the embrace of top-quality sparkling wines from elsewhere, including England which now produces around 10m bottles per year. Nyetimber is the UK's longest-established, largest and most highly respected producer, as Simon Werner reveals.

Reading time: 2m 30s

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