Brexit is an opportunity, not a swear word
Brexit is an opportunity for us to look forward and discover new horizons, new markets and leave certain elements of the past behind. Most of the UK population is frankly fed-up with the Brexit circumstance. Remainer or Brexiteer in business or even personally we don’t care. We just want the situation sorted out so that we can do business on as level a playing field as we can have.
The equation is on the surface fairly simple. On the one hand, if the UK leaves the EU customs union and undoes the close trading ties with Europe there will be consequences for many businesses, which will lead to job losses for many and changes for many others.
On the other hand, if we stay in the relationship with the EU will be strained and uncomfortable, if not unsustainable. The genie is out of the bottle and it is not possible to put it back. We cannot turn the clock back to 3 years ago pre-referendum and simply return to the EU fold on the basis that was then.
So there is only one way in which to look at Brexit – as an opportunity and there are plenty available in the drinks industry.
· Strong Economics
In stark contrast to the political scene, the UK economic statistics are holding up especially well. Low inflation rates, low-interest rates, rising real wages and highest ever employment rates mean that according to Mintel 31% of consumers report that they are better off today than they were a year ago. These are the statistics which belie some of the politics. A number of polls and surveys have declared that at least 50% of people believe that Brexit won’t impact their household income.
· Consumer Spending Growth
Strip away the heated debates and hyperbole down to what the business environment for drinks needs and at the bottom we find that if consumer spending remains buoyant so do booze sales. When recessions, have happened in the past the biggest effect on booze sales has been consumer spending, after all it is a luxury for most people.
The ONS reported that in the first quarter of 2019 consumer spending remained buoyant, showing +1.9% year-on-year verses 2018. Albeit that the shape of that spending is changing, as sales move online.
· Retail is Detail
The recent disposal of the long-standing famous bricks and mortar name of Majestic by online retailer Naked Wines is a part of that changing shape. And by describing that I am not suggesting that one is likely to be more successful than another or that Naked has disposed of the ailing bricks and mortar part of their business.
There is no doubt that traditional retail is tough in the UK, with the sector accounting for 5% of the economy, 10% of business costs & 25% of business taxes. Clearly there is an imbalance which needs to be addressed here. But even that is not the whole story of retail.
The retail sector needs to deliver on experiences especially for the Millenial and Generation Z consumers. They want fewer possessions and more memories, according to financial reporter Experian. Selling alcohol is ultimately experiential – create the right environment and experience for the consumer, deliver a memorable occasion and gain loyalty, not to mention, likes and shares. Naked have arguably disposed of their most experiential asset, whilst Majestics new owners have taken on the higher cost of bricks and mortar, shaped in the right way they may be the winners.
· Drinks Sector Growth
Spirits and craft beer continue to grow in value. Gin is a revelation, spritzers and light cocktails are the talks of London, and many other towns, natural, organic, vegan and vegetarian wines continue to gain focus and drive interest, not to mention lower alcohol categories such as the emerging premium ciders, where they are made entirely from apples like wine. Sparkling wines continue to gain share as regular consumers stick two fingers up at the politicians and celebrate with a glass of fizz.
Then there are the doom and gloom merchants that peddle the idea that everything will have a massive tariff on it once we leave the EU. A quick reflection on wine sales is worth consideration at this stage. Every bottle of wine, with one or two exceptions, sourced from outside the EU attracts a standard EU tariff of around £0.10 per bottle currently and has done since the UK joined. Which country supplies the most wine to the UK? Australia, New Zealand is 6th, Chile, South Africa and the USA are in the top 10. So should we in the drinks industry concern ourselves too much about tariffs? I’d suggest that the evidence suggests that successful drinks marketing is driven by other factors, and whilst I would not advocate unilateral tariffs, they are the same for everyone and clearly not a hurdle to success.
· The Future
The future of drinks marketing is about entertainment in a bottle, not Brexit. Consumers have decided that they want to drink less alcohol, but that they want to treat themselves when they do. So they are prepared to spend more when they do splash out. This is the general direction of alcohol marketing. The equation of selling alcohol has also shifted from being a producer being good enough, to ensure that your story stacks up, fits with its audience and equals great value for money. According to the GS1 British Buying Report for UK supermarket Waitrose, 79% of consumers care about provenance. Locality and authenticity are critical aspects of your brand’s credibility.
Brexit is not a swear word, but an opportunity for us to look forward and discover new horizons, new markets and leave certain elements of the past behind. I predict that the UK will reap a Brexit bonus, however it leaves this tawdry division in its wake, as indeed we will. Collectively the UK population will breathe a massive sigh of relief and start popping the Champagne, Prosecco, Cider, Cava, Aperol spritz, Gin & tonic, Hipster Craft beer; name your poison. And if that is the case then the UK booze business will have at least a temporary uptick.