Known knowns: increasing taxes and resilient consumers?Here’s what we know: tax is moving upwards again. VAT changes will add nearly 11?p to a £5 bottle of wine; duty is set to increase in this government’s final budget in March (with the amount of increase a known unknown).
We also know the WSTA team is lobbying intensively to reverse this nonsense, but will again be ignored by a government that is scrambling for every penny it can find and which has built much of its social policy around the demonisation of alcoholic beverages.
We can also safely put in the known knowns bucket continuing retailer warfare in the wine aisles or, more likely, gondola ends. Whether three-for-£10 remains the primary mechanic is less certain, but intensive discounting will keep a choke-hold on trade margins.
Slightly more positively, Wine Intelligence consumer tracking shows that neither consumer interest in, nor overall spend on, wine has fallen off a cliff. So, we can confidently include among the known knowns that the UK’s love affair with wine is not going to end in tears any time soon.
And, while it was certainly not a good Christmas for the many people who are direct victims of the two recent multiple specialist failures, there will in the short-term be fewer outlets from which to buy wine and thus slightly more footfall to those retailers who are still open for business, particularly in the specialist high street space, which tends to get more interest anyway? over the festive period.
Finally, we know there will be a new government of some flavour by the time we gather for the London Wine Fair next May.
Known unknowns: it’s the economy, stupid?Experts and commentators are divided on what’s going to happen to the UK domestic economy and exchange rates.
Extracting sound directional guidance from their scribblings is like trying to get consumers to agree what shade of pink (or orange) rosé wine should be – everyone has a different and well-argued view, and they seem to delight in contradicting each other.
Having researched and tracked several mildly reliable economic and business forecasters and applying the Rumsfeld methodology, the most important known unknowns seem to be:
Underlying economic measures, such?as GDP, unemployment, availability of?funds for mortgages and business investment, are all unlikely to improve significantly in the next six months, unless force-fed by the current Number 10 incumbents to increase their chances of keeping the keys, which itself may well lead to a run on the currency?.
Exchange rates will remain volatile, driven by financial and political forces outside the UK, and support for the pound may well fall away if the markets lose confidence in the government’s ability to rein in spending.
Post-election, we traditionally experience a honeymoon period, but the huge burden of national debt may prevent any stimulus measures to significantly uplift the consumer will to spend.
The anti-alcohol “police” may triumph with trading restrictions that suffocate our industry, or maybe just dampen enthusiasm for wine with the deluge of daily media coverage frightening otherwise sane people into consuming less, although it’s important to note that the hysteria so far hasn’t had a significant effect on Middle England’s behaviour.
Unknown unknowns: how afraid should we be??According to the teachings of the learned Mr Rumsfeld, we can’t document unknown unknowns because we don’t know what they are and when/if they will happen. But to future-gaze for a moment, the usual nasties have to remain on our agenda: bank failures (which seem less likely, but could return with a vengeance); the anguish of terrorism and military action; those nice people in Number 10 going into complete paralysis and thus prompting further short-term economic slowdown. Nasty surprises, it seems, pop out of the woodwork any time – as I’m writing this, Dubai World debt problems are prompting global stock markets to tumble.
Commentators like to find new labels to describe what is happening out there. We’ve already had “the grey market”, “the pink market”, “the greens” and “the worried-wells”. For the wine industry, perhaps we should focus on the “worried-haves” – families and individuals who are just about OK financially and socially, but do not feel anything is happening to their world in the next six to 12 months to encourage more wine consumption or trading up.
With no hard diagnostic evidence yet available, I would estimate at least half of our UK market of regular wine drinkers are in this box; that’s 14 million regular wine buyers who will just continue consuming regularly but shopping competitively and spending cautiously.
Not a very buoyant outlook. But, if most of us are by now case-hardened enough to survive in the present conditions, it might just feel slightly better by next summer.