Price-cutting, premiumisation driving multiple drinks sales growth

By Mathew Lyons

Published: 19 November, 2015

The drinks sector is still in growth at the UK's major multiples, against a background of both declining overall sales and significant price deflation, according to figures released this week.

Beers, wines and spirits grew by 0.7%, according to the latest four-week data from Nielsen for the four weeks ending November 7, 2015.

But declines in dairy (-4.2%), meat, fish and poultry (-4.1%) and bakery (-3.2%), drove overall sales value at the tills down 1.2%, the biggest slide since October 11, 2014.

Mike Watkins, Nielsen's UK head of retailer and business insight, said: "Heavy price-cutting to combat the discounters, coupled with deflation, is great news for consumers but increasingly problematic for the supermarkets, who are seeing less money going through the tills."

At the same time, UK inflation as measured by the Consumer Prices Index (CPI) remained at -0.1% in October, the latest government data revealed this week.

Within the drinks sector, wine prices fell 5.0% year on year. Spirits declined by 4.6% while beer fell 3.1%.

Tim Wilson, managing director of Wilson Drinks Reports, said: "The pressure exerted by the discounters is being felt across all categories within beers, wines and spirits.

"Wine in particular shows a big fall compared to last year, and this time there is no change in wine duty to impact the results as wine duty was unchanged in the March 2015 Budget."

Premiumisation within the drinks category is key to its resilience at the tills, distributors report.

"Branded premium spirits continue to grow," said Chris Richardson, UK category and customer marketing controller at Maxxium. "Premiumisation has been an ongoing trend for the year as consumers are going out less, but drinking better, treating themselves to premium spirits or cocktails."

In addition, strong brand profiles are encouraging consumers to experiment.

"Consumers are increasingly interested in knowing about a brand's history and educating themselves within their favourite drinks categories," Richardson said.

"Within this discovery, many consumer are branching out and experimenting with different categories that they have never tried before and often times trading up to a more premium expression within the portfolio of a trusted brand.

Bourbon is a category that is on fire at the moment and doesn't show signs of slowing down, for example. Jim Beam is one of the fastest growing whisky brands in the UK growing at 53.5% volume."

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