- by Andrew Jefford
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Jefford on Monday: Mind Games
The key data is hidden away in the Wine and Spirit Trade Association’s Market Report for the second quarter of 2012. This, remember, was the same quarter during which Britain was confirmed as being in double-dip recession, as the economy shrank for the second quarter in a row. March 2012 saw the duty rate rise to £1.90 on a bottle of wine (defined as being between 5.5% and 15% abv) whereas it stood at £1.57 just three years earlier. During the same period, the standard rate of VAT rose colossally, from 15 per cent to 20 per cent. The effect of these fiscal torpedoes has been to scuttle the comfortable security of the old price points, and especially any sense that a decent bottle of wine could be had for £4.99.
When times are hard, as they undoubtedly are, you’d expect a flight towards cheap wine. Cheap (sub-£5) wine is still on the shelves, and cheap wine still accounts for 68 per cent by volume of what was sold in the UK in the year to April 2012. But compare those figures with the equivalent set for a year earlier, and what is happening is eye-popping.
In the year to April 2011, the equivalent figure was 75 per cent at under £5. Since then, wine under £3 has lost 63 per cent of its volume, and wine under £4 has lost 19 per cent of its volume. The £4 to £5 category is flat, while £5 to £6 wine has surged by 32 per cent, £6 to £7 wine has grown by 15 per cent, £7 to £8 wine has also surged by 30 per cent, £8 to £9 has moved forward 15 per cent, £9 to £10 has raced forward 22 per cent, and wine at over £10 has made a third surge, to 32 per cent. All of this within an overall decline of the wine market by two per cent within the same twelve-month period.
To some extent, the flight from under £3 towards £5 or perhaps £6 is predictable: even Britain’s most battle-hardened, chisel-nosed supermarket buyers can’t source wine which costs almost nothing and can still be drunk with pleasure. The conditions of overproduction which prevailed a year or two ago, moreover, are rapidly ebbing (when I was in Australia’s Riverina in May, Gallo had reputedly just been through on a $A13 million Chardonnay shopping spree).
The astonishing growth in the higher-priced categories, by contrast, makes no sense at all outside prosperous years, and in the recessionary swamps through which we are all wading is an enigma. Economically speaking, that is. It only begins to make sense when you bring psychology into the frame.
A price point is a landmark in our mental landscapes. No matter how rich or poor we are, no matter where we live, we all cherish them. They are emotionally felt as much as intellectually perceived, by which I mean that we tend to overlook absolute value as we hierarchize and personalize our relationships with price points. The cost of flour or bread or nails or copy paper is irrelevant to most of us, yet we feel a sense of outrage if the price of a regularly used item suddenly rises by 30p or 50p, and we may even boycott a retailer or switch brands as a result. We barely notice, by contrast, if the price of a visit to the hairdresser or a football match rises by five times that amount. The potential loss is five times greater, but the emotional investment in the purchase is so different that we swiftly silence our internal accountant.
The fiscal changes of the last three years have washed a wave through all of wine’s British price-point landmarks, and my guess is that UK consumers now feel lost and disorientated. They are re-establishing new landmarks. For many, I’d guess, £8.99 or £9.99 is the new £4.99, and maybe £14.99 is the new £7.99 or £8.99. That’s where the Chablis or the Basket-Pressed Shiraz they felt happy with has either gone, or is heading. At the same time, some consumers are in reality less wealthy than they were, and all consumers feel less wealthy than they did. These are, moreover, big leaps in cost. The result is that consumers are opting to drink a little less wine overall.
Wine, though, is a strongly emotional purchase, since it alters our perception of the world and, if sagely used, brings us a sense of well-being, of closeness and of solace. You need that in a double-dip recession, under ever-darkening financial skies. Abandon it we won’t.