Executive Summary

The UK wine market was worth £6.15bn in 1997, accounting for 20.8% of the total market for alcoholic drinks. This value includes the fortified wines -- such as port, sherry and vermouth -- as `wines of fresh grape', but it excludes the so-called `made wines'. Unusually for a sector of the UK food and drink industry, the market depends almost entirely on imports.

Still light wines (SLWs), sometimes called table wines, are the largest sector, worth £5bn in 1997, or 81.3% of the wines market. Champagne and other sparkling wines are worth £700m. Within these markets, consumer choice is subdivided almost infinitely, with interlocking systems of colour, country of origin, varietal (grape type -- e.g. Chardonnay), and quality of production.

Fragmentation of choice is reflected in the industry structure, where the individual vineyard is as important as the wine shipper or wholesaler. This structure is as fragmented as ever, due to changes in wine sourcing; between 1992 and 1996, France, Italy and Germany lost market share in SLWs, mainly to the benefit of South Africa, Australia and the US.

The fragmented supply structure has allowed retailers to take the initiative in developing the UK light wines market. Multiple grocers have been the main proponents, but specialists such as Oddbins Ltd, Majestic Wine PLC and Direct Wines (Windsor) Ltd have played a key role.

The fortified wines sector has a different structure, and one which changes less, due to declining sales (for sherry and vermouth) and a fairly static market for port. Brands are important in these markets, led by: Cockburn's port; Harvey's and Croft sherries; and Martini and Cinzano vermouths. These brands are owned by some of the world's largest drinks firms -- Diageo PLC (formerly Grand Metropolitan PLC and Guinness PLC), Allied Domecq PLC and Bacardi-Martini Ltd.

The future for fortified wines is fairly gloomy, but per capita consumption of light wines has a long way to go, if it is to reach the levels of other countries (three times as high in France and Italy). Assuming continuing changes in lifestyles (eating out, wine with meals at home) and greater consumer sophistication in eating and drinking, Key Note forecasts steady growth for this market, reaching £8.4bn by the year 2002. The Millennium celebrations will also provide a boost for the sparkling products.

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