In its submissions to Michael Gove, Cabinet and BREXIT negotiators, The Wine and Spirit Trade Association declares that the UK is ‘the number one global hub for wine imports and the world’s biggest exporter of spirits’.
Will that still be the case in 20 years time and if so what will that leadership position look like? What impact does that have on the Hospitality and Catering industry?
The combined wine and spirits industries support over 550,000 jobs in the UK and contributes £50bn of economic activity.
There are 38M wine drinkers and 31M spirit drinkers.
There are now well over 500 vineyards registered in the UK and 63 licence applications to produce wine in the last 6 months.
The UK is responsible for producing ¾ of the gin imported and over 1Bn litres of UK spirits across global markets.
It makes significant contribution to the UK and to the global drinks culture and trade.
A pointer to the future might be in the recently released Australian wine exports numbers, which showed significant decline of 7% in Australia’s largest volume export market – the UK.
But first, a little history to put things into some perspective.
Not so long ago Australian wine ruled the world or so the UK wine trade of the time would believe. 21 years ago Wine Australia wrote a strategy paper 2025, which declared that Australian wine would achieve $4.5Bn export sales by that time, and in an update in 2007 carped that it had achieved that 20 years early and was now set to achieve $5Bn of sales by June 2007. The most recent report on Australian wine exports shows $2.3Bn sales, significantly less than its 2025 target.
UK Supermarkets urged Australia on to achieve the 2025 targets with big visions of volumes and markets that they could create together. Equally the Aussies bought into it. In actual fact Aussie wine was massively over sold as a commodity and many executives were sizzled on how big it could become.
The fact is that if it looks too good to be true then it probably is. The Australian wine industry has done a terrific job in turning such a dramatic decline into a real success story once more, but with a much more sold base. But there are some messages in this turnaround that the alcohol industry needs to heed and the hospitality industry can benefit from.
Fast forward to 2017, Australia is the world’s fifth largest exporter of wine behind France, Italy, Spain, and Chile. The usurper in this list is Chile, whose export wine sales were minimal 20 years ago. The old ‘Med’ trio remain top dogs in wine export.
Looking deeper into the drivers of the Australian numbers China’s trade with Australia is nothing less than astonishing. In 2016/17 the value of China’s trade with Aussie wine increased by a staggering 44% and all wine exports was up by 10% pushed by further strong growth in the USA.
What is also impressive is the increase in the value of the imports. The $30-$49.99 per litre (roughly £20-£35/75cl on shelf) segment of bottled wine has increased by 70%. With a not insignificant share of 7.7% of the above $10/litre shipments from Australia, these figures are an indicator of the growth driving sentiment.
Further, this huge Chinese growth has been stimulated by the 2015 ChAFTA – China-Australia Free Trade Agreement.
There are a number of different meta messages that are embedded in the Australian performance.
Firstly – despite any future trading agreements the Aussies are not going to be reliant on the UK trade in the same way again. China and USA are helping them spread the risk.
Secondly – the importance of Trading Agreements (Free trade, Customs Unions or otherwise) between different countries and trading blocks cannot be underestimated as a strong stimulus for trade. The rapidity in such a networked global communities makes these agreements work at pace. In hospitality it will dictate to an extent the likely sources of wine and (less so) spirits.
As business people , small and large, we need these in place so that our businesses can continue to thrive.
Thirdly – wines and spirit is not a commodity. Its variety, shape, and span of pricing are too varied to be described as a commodity. Thereby hangs the differentiation that we in the Hospitality trade need to bring to our dining and drinking theatres.
Fourthly- the premium categories of wines and spirits are the main drivers of trade for the foreseeable future and this is a global market that we are all competitive in.
Alongside these factors there are other aspects, which will contribute to leadership in the next 20 years of Wines and Spirits. UK Hospitality and Catering industry has thrived on a vibrant wines and spirits industry for the last 20 or so years and vice versa. For the next 20 years we require the younger generation to be advocates for this sector as much as those that have in the last 20. The problem is they are increasingly less engaged.
A recent of 18-24 Yr olds reported that 30% are teetotal and going to the pub its 16th most popular pastime. There has been an 18% drop in alcohol consumption in the UK between 2004 and 2015.
As much as a strong UK hospitality market creates strong pubs/hotels/establishments, it also creates a strong drinks trade. If the UK is to be at the centre of this global hub in the next 20 years, as the WSTA would have it, then a strong collaborative, visionary approach will be needed with wisdom with self-awareness. What does quality look like, and how is that created will be as key a question as how a younger generation is truly engaged.
Alistair Morrell
Hospitality & Catering News, Wine & Drinks Editor