Executive Summary

The UK market for alcoholic drinks was worth £31.5bn in 1999, accounting for 5.6% of all consumer spending. The share of spending is gradually decreasing, and the drinks market is generally a mature one.

The take-home trade accounts for a third (33.5%) of the market, with the `on-trade' channels such as pubs, nightclubs and restaurants, still taking the lion's share. In the long term, take-home's share has grown at the expense of the on-trade, but recent years have seen a more stable ratio of sales.

Prices in the take-home channel have been depressed by competition, not least from cross-Channel shopping and bootlegging — a major concern among off-licence owners — while the on-trade has been more buoyant on the back of a thriving economy. The proportion of adults who buy drink to take home is certainly not increasing.

Conventional off-licences, where most drink for the home was once bought, are continuing to lose share to the multiple grocers and their superstores, with alcohol having become a component of the regular food shopping expedition. Independent grocers and off-licences are also losing out and are having to adapt to a convenience-store role. Nevertheless, the UK still has around 50,000 outlets selling take-home drink, of which 11,000 are specialised off-licences.

Supermarket competition has forced off-licence groups to merge, and the major brewers which once dominated the trade have largely withdrawn. The outstanding group, First Quench (owner of Thresher, Victoria Wine, Bottoms Up and other fascias), has 2,670 outlets, more than five times as many as its regionally-based competitors — Parisa in the North and Midlands, and Unwins in the South East. The future ownership of First Quench is in doubt in 2000.

The specialists' fight-back has involved niche marketing through wine superstores, discounters such as the Bargain Booze chain, and current investment in online catalogues and direct delivery. The cards are stacked in favour of the grocery superstores, but innovations should keep the current balance of trading in a similar position for the next few years. Key Note forecasts that the take-home trade will increase by 17.7% in the period from 2000 to 2004, from £10.85bn to £12.78bn.

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