1.External Environment 1.1.Current situation in UK market Wine market had been with long and sustained growth over the past two decades. However there are existing signs at the moment that this industry is struggling, with user number decline. The volume sales are declining from 1.26 million litres in 2007 to 1.14 million litres in 2012 (1Wisson, online). In-home and out-of-come channels in value sales are expected to increase in 2012, but the fall in value sales reveals that the increase in price of wine and the efforts to cut back the reliance on aggressive promotional strategies continue be an important part. Due to high mark-up on wine in restaurants and pubs, people are buying less, meaning volume sales are low in the on-trade. In Mintels report it is stated that value sales are growing, estimate to increase 2.4% to 10.6 billion in 2012,and annual growth rates are expected to slow to fewer than 2% in the following year (Wisson, online). Eurominitor revealed that 83% of total volume sales in 2011 were by the off-trade wine sales, the on-trade unit price were three times more than the off-trade (Euromonitor, online).1.2.Political TrendsIn the years of financial crisis worldwide countries have take fiscal and monetary decisions to keep their economies stable. United Kingdom was experiencing weakened Sterling, rising unemployment rates and loss of confidence in consumers. One of the measures British government took was rising duty, but along with the weakened Pound have put additional pressure on wine producers, driving up retail prices. Consumers started to change their spending habits because they were affected by the economic struggles and rising pressures on real incomes. The share of the alcoholic market among adults has shrunken from 88% in 2006 to 82% in 2011 (2Wisson, online). Moreover in the past 5 years there was change in the on-trade and off-trade in wine consumption. Not only the increase in prices, the pressure on family incomes but the introduction of smoking ban in 2007 changed the trend from on-trade to off-trade, leading to high rate of pub closures. Due to new legislation, the rise in VAT from 17.5 to 20 percent in January 2011, while excise duty was rising at 2 percentage points above the level of inflation in a year, was the reason for the change in prices [BBC, online]. In 2011 compared to the year before, wine experienced high 5% increase in total current value unit price, with constant value unit price rising by 2% (Euromonitor, Online). Additionally in January 2011 UK government introduced a below-cost alcoholic drinks ban, even though in had small effect.See Appendix A.1.3. Technological advancements1.4.Social-cultural trendsPremium goods of wine on the UK market are getting more threat. Figure 1 Trends in agreement with selected lifestyle statements on quality and premium goods, 2008-12

People are concerned more about their budges as the economic downturn gets worst and people confidence is not so strong. Wine consumers willingness to spend more money on a good quality wine is falling. The fall of premium goods wine among people indicates that wine brands have to work in new ways to encourage consumers to keep buying, they should think of changing the away from promotional-strategy more to targeting new image of the market (2Wisson, online)Figure 2 Trends in agreement with selected lifestyle statements, 2008-12

The budget pressures consumers fell negatively impacted loyalty. Rather than buying what customers are like and to what they are loyal to, people increase their dependence on special offers. Since 2008 the proportion of the people who look for special offers has increased by almost 10 percentage points, to 69% in 2012. Moreover during the same there was decline of 8 percentage points in the customers who said that they stick to their favorite brand.Demographic changes provide various opportunities but also some treats. The ageing population in UK is likely to have positive impact on wine market, with increasing numbers of 45to 65 years old presenting opportunities for brands with sophisticated and cultured proposition. In the next 5 years people between the ages of 45-54 old in UK are expected to increase by 2.4%, and furthermore over-55s are expected to grow by 10% (4 Wisson, online). From this data we could say that there is prospective for brands that are looking for more mature positioning. However Mintels reports points out that among people over-65s the usage of wine declines. This could be a good market for potential growth of lower-alcohol wines. People started to be more concerned about their health, and they started to look at what is best for them, low alcohol or even no-alcohol wine. Towards the end of 2011 there was rapid growth in sales of low-alcohol wine, with identifying volume growth rates at around 50 percent in 2011 in contrast to the year before (Euromonitor, online). Furthermore low-alcohol drink have lower excise duty which makes them cheaper than the full-strength wine, average cost per bottle 3.27 in contrast to 4.95 (Hall, 2012).Wide range of grape/varietal types in wine is something that interests UK consumers. People feel cognoscente and pride of themselves when they are able to select the right bottle of wine to go along with a mean or in the event of social situation. Weather it is still red wine Merlot and Cabernet Sauvignon, still white wine Sauvignon Blanc, Chardonnay and Pignot Grigio, or still rose wine Syrah and Grenanche. The types of the grape made the price promotion of the wine so strong and thus draw value-conscious clients (Euromonitor, online).Wines from new world dominated the UK wine market, 55% was the share of still red wind accounted for, 62% was the still rose wine and 52% was the still white wine (Euromonitor, online). Unfortunately due to problems with wine harvest and currency fluctuations, the new world wine lost share of the market, prices rose and consumers turned to wine from old world.

BibliographyBBC News. 2011. VAT rises from 17.5 % to 20%. [Online] BBC News. Available at: [Accessed 21 February 2013].

3 Beckett, A. 2012. Drinking in the home-UK. Available at: [Accessed on 20 February 2013].

4 Wisson, C. 2012. Broader Market Environment. Wine UK. Available at: < http://academic.mintel.com/display/634890/?highlight=true#hit1 >[Accessed on 20 February 2013].1. Wisson, C. 2012. Executive Summary. Wine UK. Available at: [Accessed on 20 February 2013].2 Wisson, C. 2012. Internal Market environment. Wine UK. Available at: [Accessed on 20 February 2013].Euromonitor International. 2012. Wine in the United Kingdom. [Online] Available at: Accessed on 20 February 2013].Hall J. 2012. Sales of low-alcohol wine soar. [Online] Telegraph. Available at:< http://www.telegraph.co.uk/news/uknews/9556502/Sales-of-low-alcohol-wine-soar.html> [Accessed 21 February 2013].

Appendix A: Political TrendsFigure 3 Value and volume sales of the UK alcoholic drinks market, 2007-12

The figure above shows the changes of Figure 4 Taxation on 75cl bottle of table wine from retail outler,2000-11

The figure above shows the taxation of a bottle of table wine from retail outlet = over a time of 11 years. In the table we could see the big annual percentage change in between 2003-2004 of 4.2, and in 2007-2008 the change was of 7 percent and the biggest one in 2010 and 2011 of 9.7 annual percentage change in total tax, due to the rise in Duty and VAT.

Figure 5 Annual average exchange rates for sterling

The less strong Sterling against wine producing countries like New Zealand, South Africa and Chile are the most rapidly increasing imports to UK in the past years, taking advantage of the ability to offer wines at more reasonable price than many international competitors. However because of the development in these economies, along with the increasing production costs, wine is now becoming more costly to import.Figure 6 Frequency of drinking in pubs/bars, May 2012

From the figure we could see that 19% visit pubs on weekly bases and around 46% go at least one a month.17% said they never visit pubs and bars, which highlights the importance of on-trade experience for the most British consumers (Wisson, online)Figure 7 Trends in consumption of alcohol, in home versus out of home in the past 12 months, 2007-11

Recent trend however is, that drinkers stay at home, pressured by their incomes, shopping in the supermarkets, looking for promotions to get the best value for their money when it comes to drinks and wine. 7 percent decline in on-trade for 5 years and the off-trade between 2007-2009 increased by 3percent but then had fallen with around 2(Wisson, online). Another Mintels report Drinking in the home-UK from 2012 revealed that 69% of the adults who buy alcohol for the use at home, feel that they are saving money like this rather than going out (Beckett, online)