Industry sector: Retail and wholesale

Off-licence: Sector trends


What has been happening in the off-licence sector

In recent years there has been:

  • a general increase in demand for take-home drinks as a result of a trend towards drinking in the home instead of going out - this was boosted by the introduction of smoking bans throughout the UK and also by the economic downturn which began during the late 2000s and persisted into the first half of the 2010s. The economy recovered from 2013 until the first half of 2015 but slowed again in the second half and into 2016, with more uncertainty about the future caused by the vote in June 2016 to leave the EU. Although consumer spending held up well during 2016, it declined in 2017 as confidence in the economic outlook fell and inflation increased. Consumers expected to reduce their expenditure in 2017 and for the following two years
  • a long term fall in volume sales of alcohol while the value of sales continued to grow
  • a significant rise in the number of outlets licensed to sell alcoholic drink for consumption away from the premises (although this trend now appears to have come to an end - and after the collapse of sales and margins during the recession, and increased competition from convenience stores and express supermarkets when the economy started to improve, many off-licences have been forced to close)
  • a relaxation in the licensing laws, permitting longer opening hours across much of the UK
  • subsequent efforts to 're-balance' licensing legislation by tightening it up - although much of this effort has been focused on the licensed trade and has had more impact on pubs and clubs
  • a huge increase in supermarkets' share of the take-home drinks market - intense competition from the supermarkets led to the demise of former market leader Thresher in the late 2000s
  • a general trend in drinkers' preferences away from beer consumption and in favour of wine (although the recent rise in popularity of craft beers and sweeter beers have bucked this trend somewhat) - and a trend towards buying less product but better quality
  • growth in the popularity of online wine retailers and apps, such as the Dial-a-drink app, which tap into the existing off-licence network, sending 'Bevy Butlers' to collect and deliver orders
  • energetic new product development by the drinks industry - recent new product categories to emerge include fruit-flavoured ciders and low alcohol wines
  • increased sales of cans of beer and cider linked to sporting events, for example the Football and Rugby World Cup games and the Olympics
  • increased sales of Prosecco and Champagne as they have become more everyday drinks
  • a huge increase in the sales of gin in the 2010s, which looks set to continue
  • the increasing popularity of Merlot and Shiraz red wines and of Sauvignon Blanc at the expense of Pinot Grigio and Chardonnay
  • an increasing number of youngsters drinking less alcohol than previous generations
  • a report in September 2017 by the Wine and Spirits Trade Association which noted that the fall in the value of the pound following the Brexit vote, rising inflation and duty increases in the March 2017 Budget had led to a substantial increase in the price of wine and that there had been a fall in the total volume sales of alcohol across both the on and off trade for the fourth quarter in a row

Considerable efforts have been made by the government and the industry to clamp down on underage and binge drinking, and to improve the nation's health by cutting smoking and getting people to drink more responsibly. As a result, overall alcohol consumption in the UK is declining as many people choose to drink smaller quantities of better quality products.

Licensing laws

2005 saw the phasing-in of a revised alcohol licensing regime in England and Wales, with the transition completed by the end of November. Off-licences can apply to stay open for up to 24 hours a day. More information about alcohol licensing in England and Wales is available on the Gov.uk website.

Mandatory licensing conditions were subsequently brought in to give local authorities greater powers to regulate the sale of alcohol and to ban irresponsible alcohol promotions. The conditions also cover age verification and minimum pricing (see below).

Not all the recent changes have resulted in the law being tightened however - the requirement for personal licences to be renewed every ten years was scrapped in April 2015, meaning personal licences no longer have a set expiry date.

Scotland's licensing laws were revised in 2009. Some of the changes were similar to those made previously in England and Wales, but the new laws only provide for 24 hour licensing in 'exceptional circumstances' and do not permit it at all for off-licences.

In Northern Ireland a different system of licensing exists. There are a set number of licences available for pub, club and off-licence premises, and new licences are not currently issued for these types of business. A new business would have to buy one of the existing licences from someone who is prepared to give up their licence. Changes to the licensing system in Northern Ireland were announced in 2014, but these did not include any change to the so-called 'surrender principle'. Although the changes relaxed licensing hours for pubs slightly by enabling them to apply for more extensions, they included measures to restrict advertising of alcohol in off-licences and supermarkets.

Safer consumption initiatives

Rising concern about binge drinking, anti-social behaviour and underage consumption has led the government and the industry to work together on initiatives aimed at promoting sensible drinking. The mid 2000s saw the introduction of a number of initiatives, including the Challenge 21 age identification scheme for retailers, public information advertising campaigns, and health information labels and advice on sensible drinking printed on labels.

The late 2000s and early 2010s saw real concern about binge and underage drinking, particularly in Scotland. The government and local authorities began looking at and introducing a range of measures to combat the problem, including tougher regulatory powers for licensing authorities and harsher penalties for retailers who break the law. In 2011 the Scottish Government introduced a ban on quantity-based discount promotions such as 'buy one, get one free' deals.

In recent years there has been much talk of introducing minimum pricing for alcohol. Scotland is currently trying to introduce minimum pricing, despite considerable opposition from the drinks industry and from some EU countries. However, in 2015 the Advocate General of the EU Court of Justice found that this could only be justified under EU law if alternative ways of reducing consumption - such as raising taxes - were not suitable. In England statutory minimum per-unit pricing remains under consideration although the government seems to have sidelined it for the moment. 2013 did see the introduction of a legal ban on selling alcohol in England and Wales below the combined cost of the duty and VAT (the 'minimum permitted price').

At the end of 2014 the drink-driving limit in Scotland was reduced by over 35%.

In 2007 the government raised the minimum age for buying tobacco products to 18 as part of a package of anti-smoking measures following the introduction of smoking bans in enclosed public places throughout the UK. The government has also clamped down further on the sale and marketing of tobacco products with the introduction of a ban on retail displays. Plain packaging for tobacco products was introduced in 2016.

Anti-smuggling measures

Illegal alcohol and tobacco products smuggled into the UK from other countries remain a major source of competition for the off-licence trade, and the government has made considerable efforts to clamp down on them over the years. A compulsory registration scheme for alcohol wholesalers applies from the start of 2016, and from April 2017 all businesses that purchase alcoholic drinks must make sure that their wholesalers are registered.

Keeping up to date with the off-licence sector

Joining a trade association is an excellent way of staying up to date with developments in your industry. There are several trade associations representing the drinks and off-licence industries, including the British Beer and Pub Association, the Wine and Spirit Trade Association (WSTA) and the Association of Convenience Stores (ACS).

Hospitality Ulster is the trade association for Northern Ireland's licensees, including off-licences.

Subscribing to a trade journal is another good way of staying in touch with your industry. Off-licence News, for example, contains features, articles and news for the industry.

Trade Shows

You can get a lot of useful information by visiting a trade show or exhibition for the drinks sector, for example the London Wine Fair. Information about forthcoming trade shows is available on the Exhibitions UK website.