Wine in the United Kingdom

The United Kingdom (UK) remains a significant wine importer from around the world. However, growth of the UK wine market is forecast to be slow in the next five years as the economy recovers at a lower than expected growth rate following the 2009 economic downturn. Intense market competition and the UK Government's plans to reduce alcohol consumption will also have a negative impact on market growth.

New Zealand's volume exports of bulk wine to the UK has been declining and this is expected to continue. In 2012, the United States replaced the UK as New Zealand's second largest wine market. 

Market structure

  • The size of the UK wine market is estimated at US$13billion by value and 1.5 billion litres by volume. The domestic wine production base of around 1.5 million litres per year is not sufficient to meet market demand: around 1.3 billion litres wine is imported around the world, making the United Kingdom one of the most significant wine importers in the world[i]. The top wine producers, such as Denbies Wine Estate, Camel Valley, Nyetimber Vineyard and Chapel Down Valley account for less than 15 percent of industry revenue[ii]. Chardonnay, Pinot Noir, and Bacchus are the top three varieties planted in the UK and together make up almost half of all vine varieties planted[iii].
  • In the next three years, the retail value of the wine market is expected to reach over US$15 billion with a strong growth in the demand for UK-produced wineiii. However, a bad harvest in 2012 due to wet and frosty weather will lead to a shortage of English wine in the market.
  • Still wine is the largest segment of the market both by value (84 percent) and volume (90 percent). Within this segment, white wine accounts for over 42 percent of still wine sales, followed by red wine, which accounts for around 35 percent. Still rosé wine has been showing the strongest growth, with a rise in value of sales of over nine percent in retail stores, and close to 22 percent in food service locations. This has been due to the widening appeal of rosé wine varietal and style offerings. Cabernet Sauvignon and Merlot were the leading grape / varietal types in the still red wine segment, with both comprising approximately 30 percent of volume sales shares. The segment that showed an overall poor performance was fortified wine and vermouth as consumers cut back their alcohol and sugar consumptioniii.
  • Wine sales are dominated by sales in retail locations, which accounts for over 80 percent of total volume sales. There has been a decline in wine sales at bars, pubs and licensed restaurants as consumers tightened up their pockets due to the economic uncertainty, instead choosing to purchase at retail outlets that offered cheaper prices and price promotionsiii.
  • Over 61 percent of alcoholic drinks sales are sold in hypermarkets and supermarkets, with hypermarkets accounting for around 42 percent of value sales. The top grocery retailers are Tesco Plc (over 3,000 stores), Asda (over 300 stores), Sainsbury and Morrison (over 475 stores). These four hold over 60 percent shares of the grocery retailer marketiv. 
  • The UK market is highly fragmented and diverse, filled with the presence of many small players. Accolade Wines Ltd is the largest company by volume, holding more than 10 percent of the market by company shares. Accolade was created by Champ Private Equity of Australia's purchase of Constellation Brands' Australian and UK wine businesses in January 2011. Other notable players are DiagecoPlc, Viña Concha, Toro SA. The rest consists of players holding less than two percent of company shares. The top wine brands in the market include Hardys, Blossom Hill, Echo Falls, Kumala and First Capeiii.
  • The downturn in the UK economy will affect consumer spending patterns and this is expected to cause wine sales to grow at a modest Compound Annual Growth Rate (CAGR) of 1.9 percent in the next four yearsvi.

Growth drivers

  • Health-conscious consumers are switching from beer to wine due to the health benefits of wine and this is expected to drive growth in the wine market. These consumers are also showing more interest in low alcohol and non-alcohol wine, although there is scepticism among taste-focused consumers. Increased familiarity with wine will cause consumers to trade up and experiment more with a wide range of grape / varietal wine types.
  • The growth of the wine market is constrained by factors including: a slower than expected recovery from the economic downturn, intense market saturation, and the UK Government's plans to reduce alcoholic consumption through the use of higher duty levels, stricter pricing legislation and a proposed ban on multi-buy promotions. If the ban is introduced, it will impact wine sales in retail outlets. The low returns from the UK wine market is causing wine companies to shift their focus to other higher yielding markets in Asia and South America.
  • UK consumers are more influenced by product pricing than branding when making purchases, and they tend to buy a larger quantity of wine than usual during multi-buy wine promotions offered in supermarkets and hypermarkets. Consumers are also trading up to higher priced wine when attractive price promotions are available. Therefore, volume sales of economy and premium wines are expected to decline once the proposed government ban on alcohol reduction is introduced.

Import and exports

  • France is the largest exporter of wine into the UK, with exports valued at about US$1.7 billion, followed by Italy (US$715 million) and Australia (US$508 million). While value exports from France and Australia experienced a decline in 2009 due to the economic downturn, Italy's exports were resilient and grew steadily throughout the period [iv]. 
  • The UK is the third largest export market for New Zealand's wine exports valued at around US$258 million. The United States replaced the UK as New Zealand's second largest market in 2012 when exports reached US$262 millioni [v].
  • Bulk wine represented almost 46 percent of New Zealand wine exports to the UK, however, as the New Zealand wine market acquires market equilibrium and wine companies look to other higher yielding markets, all wine exports (including packaged wine) to the UK is expected to decline [v].
  • New Zealand supplies close to 50 percent of all Sauvignon Blanc volumes sold in the UK although there has been a recent decline in export volumes. The retail average retail price per bottle for New Zealand wine is the highest compared to wine from Australia, France and Argentina. On the other hand, the retail selling price for all varietals of New Zealand red wine is 50 percent higher than our nearest competitor [v].

Market entry and development

Market strategy

  • The market is saturated: over 120 New Zealand wineries are already present in the UK, with each having a sauvignon blanc varietal since this is expected as a classic exemplar of New Zealand wine. Due to the high concentration of sauvignon blanc varietals in the market, there may be opportunities to focus on other varietals such as pinot noir and chardonnay.
  • Product sustainability is becoming more important to UK consumers due to their concerns about the environment. Since Grove Mill achieved success for its carbon zero status, all market entrants are expected to be scrutinised for their carbon credentials.
  • New Zealand wine enjoys premium pricing in the UK although there has been a drop in premium margins. Average retail price per bottle for wine is typically higher in the UK compared to other EU countries due to higher excise duty and taxes, however, fierce in-market competition reduces actual profit margins for wine makers.
  • Popular ways to enter the market are the matching of premium wines with food, participation in regional wine tasting events, and the sponsorship of UK journalists on trips to New Zealand to raise profiles of New Zealand wines. The New Zealand Winegrowers' UK branch organises promotional wine campaigns, and there are various international wine events throughout the year such as the New Zealand Trade Tastings in London and Dublin (January / February), ProWein trade show in Germany (March), and the London International Wine Trade Fair (May). The UK also serves as a good springboard for entry into the Irish wine market.

Regulatory information

There are no quotas on wine into the UK. In January 2011, the UK government announced that it would ban the sale of alcohol for below the cost of duty and VAT, effectively introducing a minimum price in England and Wales. For more information about duty rates, go to HM Revenue & Customs website

Sales tax (VAT) is added to the final bottle price and this increased from 17.5 percent to 20 percent in November 2011. More information about the duties and taxes on alcohol can be found at the Wine and Spirit Trade Association website.

Importers require a licence if they seek to import more than 3,000 litres of either red or white wine from outside the EU. These are issued by the Rural Payments Agency.

In addition to EC wine regulations there is a wide range of national legislation that applies to the UK wine industry. A guide to wine law can be found on the Food Standards Agency website

Organisations with a certain level of turnover and packaging handling are required to register with one of the private sector Producer Compliance Schemes.

For information on sustainability with wine imports, refer to the website for Waste Reduction Action Programme (WRAP).

The Courtauld Commitment is an agreement between WRAP and retailers to reduce packaging. More information can be accessed at the Department for Environment, Food and Rural Affairs  website.

Market resources and contacts

For information on Alcohol Strategy 2012, refer to the Home Office website.

Government

Industry

Trade publications

Trade events

Sources 

[i]Business Monitor International (2013).United Kingdom Food and Drink Report.
[ii] IBIS World (November 2012). Wine production in the United Kingdom.
[iii] Euromonitor (April 2012). Wine in the United Kingdom.
[iv] International Trade Centre (2013). Wine imports into the United Kingdom statistics.
[v] PwC (November 2012). New Zealand Wine Insights.

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