No independent joy in DIGI report

“The Drinks Industry Group of Ireland believes the gravity of the situation calls for a Government action plan to protect and preserve the Irish pub and the independent off-licence sector” – DIGI Chairman Peter O’Brien.
“The Drinks Industry Group of Ireland believes the gravity of the situation calls for a Government action plan to protect and preserve the Irish pub and the independent off-licence sector” – DIGI Chairman Peter O’Brien.

On-trade sales of alcohol continued to decline by a further 6% in volume in 2012 according to the Drinks Industry Group of Ireland’s recently-published Drinks Market Performance Report .

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28 May 2013

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The continued decline of the on-licence and independent off-licence sector, which both lost sales to the multiples, discounters and symbol groups, was the main feature of drinks industry dynamics in 2012. These developments had consequent negative effects on employment and VAT, continuing the depressing pattern of recent years.

“The independent specialist off-licences continue to experience closures and substantial volume decline and this negative performance will continue in 2013,”  predicts the DIGI’s latest report on the Drinks Market Performance by Anthony Foley of Dublin City University Buiness School.

A 6% decline in on-trade alcohol volumes means that the past five years’ sales have witnessed a decline of 32.7%, significantly impacting jobs in this employment-intensive sector where over 6,000 bar jobs have gone since 2009. The specialist off-licence sector has also suffered substantial job losses since the economic collapse.

60% of alcohol now via off-trade
Almost 60% of alcohol consumed in Ireland is now sold by the off-trade. But despite a 3% increase in off-licence sales volumes last year, the report notes that multiples, discounters and symbol operators have absorbed this growth to the detriment of independent, specialist off-licences as the latter continue to experience closures and substantial volume declines.
One independent off-licence has closed on average each month since 2012.

On-trade consumption has therefore dropped to just 40% of all alcohol consumption as the Central Bank predicts that the volume of consumer expenditure will decline by a further 0.2% this year.

Taxation & economic weakness
The report finds that the VAT increase from 21% to 23% in January 2012 combined with a large excise increase in Budet 2013 (which took effect in December 2012) resulted in a 22% increase in beer excise, an 18% increase in spirits excise and a 41% increase in wine excise. These increases have therefore worsened an already very poor situation.

Under the weight of continued economic weakness, severe taxation increases and changing consumer behaviour, bar sales volumes fell 5.0% while values fell 3.8%.

“The weak on-licence performance was offset by an increase in off-licence sales volume of about 3% so that the volume of total alcohol consumption as measured by Revenue Clearances decreased slightly by 0.7% in 2012.”

The huge wine excise increase has had a particularly negative impact on the already hard-pressed restaurant sector, counteracting any benefit from the introduction of a lower tourism VAT rate, states the DIGI.

Value
The value of the alcohol market decreased in 2012 by 0.2% to €6.39 billion inclusive of VAT and excise. When indirect tax is excluded, a larger 0.9% decline in market value took place.

Sectoral breakdown
Per adult alcohol consmpution decreased by 0.5% last year to 11.68 Litres, some 19% down on 2001 levels. Cider volumes decreased by 3.4%, beer by 0.9% and wine by 1.9%. Spirits volumes increased by 2.4%.

Beer continues to have the largest share of the overall alcohol market at 46.6% (down from 46.7% in 2011) while wine has 26.1% (2011: 26.4%), spirits 19.7% (19.1% in 2011) and cider 7.6% (2011: 7.8%).

Off-licence prices declined by 1.1% in 2012 while on-licence prices increased by 1.7%, matching the Consumer Price Index and increaseing alcohol prices generally by 0.9% over 2011.

Bar sales volumes
According to the report, “Bar sales volumes, which includes food sales, soft drinks and off-licence as well as bar sales of alcohol, decreased by 5.0% in 2012 following the large declines of earlier years”.

The volume decrease in bar sales was 6.9% in 2008, 10% in 2009, 10.4% in 2010 and 5.5% in 2011 such that the 2011 volume of bar sales was only 67% of the 2007 level.

“The value decline is smaller than the volume decline because of the increase in bar prices in 2012 which were mainly due to indirect tax increases and also supplier price increases.”

Conclusion

Based on the overall expected economic situation the report concludes, “The alcohol market will decline slightly due to reduced consumption and loss of consumers through emigration. The on-licensed sector will continue to decline but at a lower rate than in 2012 and off-licence sales will increase in the multiple/symbol sector but the independent and specialist off-licence sectors face continuing decline and severe pressure”.

DIGI Chairperson and Diageo’s European Corporate Relations Director Peter O’Brien summed up the report, stating, “The figures in this report are stark – the Irish pub and independent off-licence sectors are in crisis and that crisis is being exacerbated by the huge tax hikes the sector has had to shoulder in the last 18 months. The impact of that crisis is devastating, not just for the business owners, but for their staff and the communities they serve.

“Bars and independent off-licences – employment-intensive operations – are closing on a daily basis and we have already seen 6,000 people lose bar jobs since 2009. Small communities are losing valuable meeting places and the potential negative impact for the tourism sector is huge. The Irish pub remains one of the top draws for foreign visitors and if the current trend continues, the presence of the Irish pub in our tourist offering will be severely diminished.

“The Drinks Industry Group of Ireland believes the gravity of the situation calls for a Government action plan to protect and preserve the Irish pub and the independent off-licence sector. But as a first measure the Government must commit to halting and reversing the cycle of punitive excise and VAT increases.”

Author of the report Anthony Foley predicts no immediate improvement. “Unfortunately the early indicators for 2013 for bar sales from the Retail Sales Index are disappointing. In January 2013 bar sales volume dropped by 6.9% compared with January 2012 and in February the drop was 3.1% compared with February 2012.

“The overall market will be hit by the very large increases in excise levels in Budget 2013,” he gloomily predicts.

At a glance
 

  •     Of the four alcohol drinks categories, beer, wine and cider had volume declines while spirits increased. The cider decline was 3.4 % while beer declined in volume terms by 0.9 % and wine decreased by 1.9 %.  Spirits increased by 2.4 %.
  •    The individual product market volume shares in 2012 were:
  •     Wine 26.1%
  •     Beer 46.6 %
  •     Spirits 19.7%  
  •     Cider 7.6 %
  •     Alcohol prices increased by 0.9% in 2012 compared with 2011 based on yearly averages. Off-licence prices declined by 1.1% in 2012.  On-licence prices increased by 1.7% in 2012.
  •    The value of the alcohol market decreased slightly by 0.2% to €6.39 billion in 2012 (inclusive of excise and VAT). When indirect tax is excluded there was a larger decline in market value.

“The Drinks Industry Group of Ireland believes the gravity of the situation calls for a Government action plan to protect and preserve the Irish pub and the independent off-licence sector” – DIGI Chairman Peter O’Brien.

“The Drinks Industry Group of Ireland believes the gravity of the situation calls for a Government action plan to protect and preserve the Irish pub and the independent off-licence sector” – DIGI Chairman Peter O’Brien.

 

 

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