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Alcoholic Drinks in the UK: (The Still Sorry) State of the Nation

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With the recovery still apparently waiting ‘just around the corner’, the nation’s Olympic sized expectations  proving to be an exercise in optimism and the Jubilee flotilla downgraded to a royal pram, the alcoholic drinks industry in the UK is still looking like the aftermath of a stag party gone wrong.

Official projections on the pace and scale of the recovery have been reduced to jokes involving wordplays on ‘green shoots’ at the same time that unemployment, discretionary incomes and private and business lending figures are getting increasingly less funny. While GDP appears to be finally showing some first, extremely fragile and very tentative signs of positive growth for the second quarter of 2013, the underlying fact is that output remains more than 3% lower than were it was back in 2008. And it gets worse.

Beyond the persistent macroeconomic headwinds, mainstream pundits’ and alcoholic drinks industry figures’ simplistic and frankly delusional expectations of massive gains on the back of the Olympic tourist influx and the Queen’s inauguration celebrations spectacularly failed to materialise - as we had already previously highlighted . Unfavourable weather, the prolonged squeeze in incomes and subtle undercurrents  reshaping the country’s drinking patterns and rituals remain far more important than one off, regionally limited and over-hyped events.

How did the key categories fare then?

In summary, according to Euromonitor International’s latest research, top line total volume growth for alcoholic drinks in the UK in 2012 could not be described as celebratory - not by a long shot. Posting a decline of 2.7%, the figure was actually a sure sign of a severe and sobering deterioration compared to the less than 1% decline posted in 2011.

The overall beer category’s demise accelerated further with a 4% decline for the year. Cider, once a steadfast icon of resilience in the face of recessionary storm clouds fell victim to the actual weather patterns and while it did register positive growth of less than 2%, that was a far cry from the high single digit momentum it has historically enjoyed.

Spirits were also largely disappointing, moving a step deeper into negative territory with 1% total volume decline for 2012. Key categories like vodka, blended and single malt whiskies all saw minor declines that were unfortunately pointing towards further weakening instead of an improvement.

Total wine did not provide any refuge either. Witnessing 1.4% total volume decline for 2012, one has to wonder what the category’s performance would have been had it not received the much vaunted Olympic boost everyone seemed to be talking about. Even Champagne sales, touted – primarily by producers themselves- as the a-priori champions of the Olympic year, never really popped.

And yet there are bright spots amidst all the gloom. Take champagne for example; as ostentatious consumption and its bling associations are increasingly out of step with austerity Britain, other sparkling wine is casually happy to oblige in filling the gap. Cavas and proseccos are driving the once snubbed category’s resurgent growth at the same time that offerings on tap and specialty bars are cementing its newfound reputation.

The nostalgia trend that we first identified a couple of years ago is now in full swing across the board. From Aspall bringing ciderkin  back from the dead, to Truman’s brewery rediscovering the original yeast used by the brand back in 1666 and from iconic sweet perry brand Babycham going back to its 50s roots to English gin proudly embracing its history and heritage , the industry’s future in the UK will undoubtedly be painted with vivid strokes from an ever expanding palette of retro references.

It is the same trend that is offering some much needed vitality to the still struggling on-trade. Vintage cocktails are providing a convincing narrative, elicit a strong emotional response while essentially making the most of younger drinkers’ shift towards a lower volumes/ better quality mentality. From Nightjar in Shoreditch offering vintage recipe menus and spirits to Broadway Market’s Behind this Wall Pop up Bar taking over one of London’s oldest pie and mash shops, nostalgia inspired concepts are proving successful where traditional pubs continue to fail.

The expected shelving of the controversial minimum pricing proposals in the face of the backlash from both drinkers and key industry players alongside the scrapping of the brutal tax escalator for beer should also, at the very least, avoid adding barriers for parts of an already battered industry. However, actually supportive governmental intervention should not be expected as the coalition is walking a tightrope between conservative leanings and laissez-faire economic policies.

Any hope for the industry’s future in the UK will come from the grassroots. Daring and experimental craft brewers and distillers will continue pushing innovation to its limits, in the process recruiting hordes of the ever –illusive millennial generation. The majority of key alcoholic drinks categories are expected to continue haemorrhaging sales for the foreseeable future as the British cocktail of macroeconomic and drinking patterns continues to sour or evolve. High levels of diversification, a strong focus on innovation, a convincing story, multimedia communication and - last but not least- pragmatic and informed expectations will become the benchmark separating success from a place in the proverbial alcoholic drinks dustbin of history. Waiting for the recovery will otherwise be reminiscent of Waiting for Godot, and all the Olympic or royal distractions in the land would do little to lighten up the tragicomedy.

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