Maintaining perspective

on 11 April, 2016

Whatever your outlook, it’s easy to lose sight of the bigger picture. Retailers are too often introspective, focused on what’s happening within their own four walls. Sales reps can get lost in monthly targets and fail to appreciate the longer-term needs of their customers. Wine writers spend far more time tweeting other wine writers about wine writing than considering what readers actually want.

That’s why it’s always good to pan out and view our industry in more general terms. At the recent Enotria & Coe tasting, chief executive Troy Christensen did exactly that. He set the global context for the alcohol trade as one of turmoil, with economic uncertainty and exchange rate fluctuations having the governing influence on our industry.

For instance, in the US the recent growth in wine sales is slowing as craft beer becomes more popular, while the Chinese market is going backwards. Christensen believes producers are turning back to the UK as an established and more stable market – but that we risk becoming a dumping ground in the process.

Taking Prosecco as an example, he compared recent sales figures between the US and the UK. Over the pond, value has increased slightly more than volume, by 44% and 41% respectively. In the UK, volume growth is much bigger at 67%, against value growth of only 60%. The bigger picture is that our market gets a reputation for high volume sales but only at lower prices. At the global drinks party, boozy Britain guzzles all the plonk while sophisticated Stateside sips on the good stuff.

You might argue that there’s an alternative interpretation – that UK buyers are better negotiators on price, for example. Yet the reality of our market today suggests that the cost of our miserly model is what Christensen referred to as “cost reduction and consolidation”, otherwise known as shrinking portfolios and job losses.

That, in turn, restricts innovation and investment. Meanwhile, beer and spirits are enjoying far stronger reputations for excitement and profitability through dynamic categories such as craft beer and premium gin.

This is partly why the Wine & Spirit Trade Association was campaigning for a cut in wine duty. The idea is that cutting duty by 2% would allow more profit to be shared down the supply chain. That gives the industry greater confidence, encouraging investment in quality.

Before we could get too excited about that possibility, however, the chancellor recently announced that duty on wine would rise in line with inflation. The bigger picture he had to consider was the stalling economic recovery and his own determination to reduce the national deficit. In that context, cutting tax on wine never seemed likely, despite the WSTA’s protestations that a duty cut would actually increase tax revenue.

Regardless of the Budget, it’s the responsibility of everyone within the trade to keep the bigger picture in mind. We may not always agree, but the more knowledge and perspective we can share, the better equipped we will be to keep our industry healthy and profitable.

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