Alcohol Consumption in the UK: What has changed and what can be expected?

During the first lockdown this year, the patterns in the consumption and sales of alcohol throughout the UK changed significantly. The sale of alcoholic beverages is split into two groups: on-trade, which includes the sale of alcoholic drinks in pubs, restaurants, hotels and coffee shops; and off-trade, which comprises the sale of alcoholic drinks in supermarkets, convenience stores, mini markets, kiosks, and wine and spirits shops. Over this lockdown, consumers were only able to purchase their alcohol from off-trade premises, causing changes in alcohol consumption patterns.

 

Although this led to surges in sales of alcoholic beverages across major retailers, the overall consumption of alcohol across the lockdown period decreased from 2 billion litres in 2019 during the same period to 1.3 billion litres this year according to data from Nielsen Scantrack and CGA, two companies that provide data analysis on the food and drink markets. Nevertheless, the sales of bring-home alcoholic drinks increased over the summer lockdown period in comparison to the same period from last year, with beer increasing from 1.5 billion to 2.2 billion GBP, wine from 1.8 billion to 2.4 billion GBP and spirits from 1.45 billion to 1.9 billion GBP. Surprisingly, however, the sales of champagne decreased over this period by 9 million GBP. This could be due to fewer occasions for celebration during lockdown due to social distancing and harsher economic circumstances for the consumer.

 

With major retailers profiting from these surges of sales, the supermarket Co-op experienced the highest proportionate growth in sales of alcoholic beverages of 29.8% (equating to 361 million GBP) over the past year from 4th October 2020 according to Kantar, a British market research company. This contributed to 14% of the overall growth within the market despite the fact that Co-op only holds a 7.5% share of it. This seems to be due to its ownership of several convenience stores: multiple consumers chose to shop at these rather than face the long queues at large supermarkets. The second highest growth of alcoholic beverage sales over this period belongs to Ocado with 27.9%. The reason for this appears more evident, as the purchasing of alcoholic drinks online surged by 91% across all retailers.

 

Despite the re-opening of the on-trade business in July, sales did not re-surge as much as one would expect: usually on-trade sells 52% of all alcoholic beverages within the UK. Gemma Cooper, Nielsen’s senior commercial business partner, stated that this was due to nervousness from consumers and preference of drinking outside while the weather was warm. Perhaps now that the second lockdown has ended, there may be a larger return of sales in the on-trade business as consumers no longer have the luxury of drinking outside in enjoyable weather. However, as social distancing still remains in effect, many social drinkers will continue to refrain from their usual consumption levels.

 

Nevertheless, even if consumers contribute more to the on-trade business in 2021, Brexit still remains a significant obstacle due to increased bureaucracy and tariffs. For example, to import wine after leaving the EU, importers will have to fill out a VI-1 form (an import certification) for every shipment. In 2019, the Wine and Spirit Trade Association (WSTA) warned that the introduction of VI-1’s would generate over 600,000 customs forms and cost the wine industry 70 million GBP in the first year alone. In addition, WSTA policy director Simon Stannard claimed that each VI-1 will cost merchants between 300-400 EUR per shipment. Fortunately, the EU suspended this requirement until 1st July 2021 on 28th October 2020, delaying a hurdle for the industry. It is expected that other alcoholic beverage categories will suffer similarly to the wine industry, with increased tariffs leading to increased prices and consequently potentially lower consumption levels.

 

Overall, this has proved a challenging year for alcoholic beverage producers. The extent of recovery of the on-trade business in 2021 depends on the potential relaxation of social distancing rules and whether more consumers resume drinking. In particular, it is possible that the sales of champagne will increase in both the on-trade and off-trade sectors as consumers begin to have more access to group celebrations. In addition, Brexit poses a new set of challenges alongside the preexisting COVID-19 ones. When the rules eventually take effect, it is likely that the new trade barriers will prove financially problematic for the import and export of alcoholic beverages in the UK, continuing the anomalous trend in alcoholic beverage consumption started by the onset of the pandemic.

 

By Robert Armstrong-Jones

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