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KN52034

KEY NOTE Market Report : Take Home Trade : January 2004

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This report covers: take home trade, drinks, alcoholic drinks, soft drinks, wine, spirits, liqueurs, beer, cider,

Companies covered include: Bargain Booze, Majestic Wine, Oddbins, Thresher, Unwins, Wine Cellar,

EXECUTIVE SUMMARY

In 2003, the UK market for take-home drinks, which comprises alcoholic and soft drinks sold through off-licences, was worth £17.4bn at retail selling prices (rsp), a rise of 6.3% on 2002.

In the 2000s, growth in the take-home drinks market has been reasonably strong and, between 1999 and 2003, the market rose by 18.6%. However, consumer expenditure as a whole grew slightly faster, at 21.4%. Although sales of take-home drinks have increased over the past 5 years, Key Note forecasts that this will drop back to around 4% by 2005.

Growth is difficult to achieve in the market, as a result of falling prices in the take-home channel. At the same time, prices for drinks in catering, pubs, etc. have been increasing, which reflects the intense competition between the multiple grocers that now dominate take-home sales. The leading four multiple grocers — Tesco, ASDA, Sainsbury's and Morrisons — account for over half of the take-home market.

Specialists have had to fight back against the grocers in various ways. Many off-licence chains have merged over the past 10 years to produce only a handful of leading companies. These are led by the Thresher Group, which has over 2,000 branches. The main competitors — with between 200 and 500 branches each, including any franchised outlets — include Unwins, Wine Cellar, Oddbins and Bargain Booze.

Despite intense competition in the market, future trends for the take-home trade are favourable for several reasons. Binge-drinking is making many people wary of using pubs and bars, and drinking at home is biased towards wine, which is the fastest-growing of the alcoholic drinks markets (not including beer or alcopops). Future opportunities for the market lie in dividing off-licences; for example, between convenience outlets, those that sell food and specialised wine merchants. In addition, deregulation of the licensing laws in 2005 will allow off-licences to provide more convenient shopping hours.

TABLE OF CONTENTS

Executive Summary

1. Market Definition

REPORT COVERAGE

MARKET SECTORS

Retail

Drinks

Market Trends

Supermarkets Have Become the Superpowers

Drinks are An Essential Part of Grocery Shopping

Wine of Greater Importance, but Other Drinks Hold Their Own

Further Concentration Among Drinks Producers and Brands

Difficult Conditions for Specialist Off-Licences

ECONOMIC TRENDS

Population

Table 1: UK Resident Population Estimates by Sex (000), Mid-Years 1999-2003

Gross Domestic Product

Table 2: UK Gross Domestic Product at Current and Annual Prices (£m), 1999-2003

Inflation

Table 3: UK Rate of Inflation (%), 1999-2003

Unemployment

Table 4: Actual Number of Unemployed Persons (million), 1999-2003

Household Disposable Income

Table 5: Household Disposable Income (£ and %), 1998-2002

MARKET POSITION

The UK

Alcoholic Drinks

Table 6: The Total UK Alcoholic Drinks Market by Distribution Channel at Current Prices (£m at rsp and %), 1999-2003

Soft Drinks

Table 7: The Total UK Soft Drinks Market by Distribution Channel at Current Prices (£m at rsp and %), 1999-2003

Overseas

2. Market Size

THE TOTAL MARKET

Table 8: The Total UK Take-Home Drinks Market at Current and Constant Prices (£m at rsp), 1999-2003

Table 9: Retail Prices Indices for Selected Drinks Categories (index 2001=100), June 2001-2004

BY MARKET SECTOR

Table 10: The Total UK Take-Home Drinks Market by Sector by Value at Current Prices (£m at rsp), 1999-2003

Alcoholic Drinks

Wine

Spirits and Liqueurs

Beer and Cider

Other Alcohol

Soft Drinks

3. Industry Background

RECENT HISTORY

NUMBER OF COMPANIES

Table 11: Number of UK VAT-Based Enterprises Engaged in the Retail Sale of Alcohol and Other Beverages by Turnover Sizeband (£000), 2001-2003

EMPLOYMENT

Table 12: Number of UK VAT-Based Local Units Engaged in the Retail Sale of Alcohol and Other Beverages by Employment Sizeband (number of employees and %), 2003

REGIONAL VARIATIONS IN THE MARKETPLACE

HOW ROBUST IS THE MARKET?

LEGISLATION

KEY TRADE ASSOCIATIONS

4. Competitor Analysis

THE MARKETPLACE

Table 13: Market Shares of the Take-Home Trade by Type of Retailer by Value (£bn and %), 2003

Specialists

Table 14: Leading Multiple Off-Licences and Wine Merchants by Number of UK Outlets, 1999 and 2004

Non-Specialists — Multiple Grocers/Convenience Stores

Leading Multiples

Table 15: Leading Multiple Grocers by Number of UK Outlets, 2004

Others

MARKET LEADERS

Bargain Booze Ltd

Company Structure