The UK Wine Market and Consumer Behaviour
The research report presented here looks into the UK wine industry in general and the competition which has emerged since the entry of New World countries into the wine market in particular. The UK is one of the most lucrative markets for wine imports. The UK wine market has witnessed huge growth from wines originating in the US, South Africa, Australia and South America. The report covers the behavioural and attitudinal perception towards wine consumption, particularly in the age group 18–25 years. The report consists of the findings of primary research undertaken on the target age group. The report also contains findings from secondary research, particularly the Mintel report “Wine – UK” dated January 2005. Firstly we have focused on the qualitative research methodology which gives a broad descriptive analysis of behavioural and attitudinal aspects of the target group.
Secondly we undertook comparative analysis between the findings of the primary research and the statistical results of the Mintel report. The last part of the report contains critical analysis, a conclusion and a forecast on the basis of the research undertaken.
PRIMARY RESEARCH METHODOLOGY:
Primary research is that information which has been collected first hand. The primary data is collected by a programme of observation research, qualitative research and quantitative research, either in combination or separately.
- Observation research: This is a data gathering approach where information is collected on the behaviour of people, objects and organisations without any questions being asked of the participants (Wilson, 2003).
- Qualitative research: Qualitative research uses an unstructured research approach with a small number of carefully selected individuals to produce non-quantifiable insights into behaviour, motivations and attitudes (Wilson, 2003).
- Quantitative research: Quantitative research uses a structured approach with a sample of the population to produce quantifiable insights into behaviour, motivations and attitudes (Wilson, 2003).
Since we were studying the perceptions of the specific age group in a particular market and looking into their buying behaviour, the qualitative research approach was adopted.
Qualitative research aims to give insights into perception, motivation and attitudes to answer: What? Why? How? The essence of qualitative research is that it is diagnostic; it explores certain kinds of behaviour. It is subjective for its findings which cannot be supported by rigorous statistical tests. But, as the Market Research Society noted in 1979, qualitative research provides the constant conceptual link between consumers and decision makers in marketing and advertising developments.
The structured, standardised techniques of quantitative research result in highly useful sets of statistics on consumption but they fail to provide answers of more subtlety and sophistication. Qualitative research is unstructured, flexible, and oblique; it is a term rather freely used to describe several specific kinds of marketing research, such as explanatory research, in-depth interviewing, opinion research and so on.
In-depth interviews are used to determine an individual’s perceptions, opinions and behaviour. They relate to the respondent’s actual experiences and help in exploring topics in more depth. The technique is completely different from structured interviewing where closed ended questions are used. We conducted some quality in-depth interviews in the selected age group. All the interviews were carried out on a one-to-one basis and lasted on average for 25–35 minutes. As some of the respondents resisted the recording of their responses on tape recorder at the first stage, we decided to conduct the interview with the help of a sample open-ended questionnaire and noted down word for word the whole transcript of the interview. We then sat together to arrange the transcript and to analyse the response.
We decided to do in-depth interviews rather than going for group discussions with the sample group within the target age group because of time and resource constraints.
Group discussions normally require a group of respondents which has to be arranged according to the convenience of all the participants. It involves many aspects such as selecting a venue, scheduling the time and creation of the discussion guide, which was almost unfeasible for us with the time and the resources available. Considering all these factors we decided to do in-depth interviews.
In-depth interviews are one of the principal methods of qualitative research. Basically, they are non-directive, informal interviews – more conversational in nature than traditional interviews. We did in-depth interviews to gauge the consumers’ behaviour about wine.
The main advantages of in-depth interviews are:
- Flexibility: In-depth interviews offer scope for probing, unlike the questionnaire type interviews, which helps to collect data on a variety of topics not just subjective but behavioural patterns of attitude, motivation and feelings and those reported behaviours.
- Evolutionary Nature: In-depth interviews are highly evolutionary in nature as the contents and the topics raised can change over a period of time while conducting the interview.
- Longer interviews are sometimes tolerated, particularly with in-home interviews that have been arranged in advance. People may be willing to talk longer face-to-face than to someone on the phone.
- Observation of non-verbal expressions of respondents.
The few disadvantages of this approach are:
- In-depth interviews are costly compared to other interview methods. These interviews usually cost more per interview than other methods.
- It is also difficult to generalise results and sometimes reliability is questionable as it is highly dependent on the interviewer’s skills.
Sampling and categorisation of respondents
We selected a sample size of 10–15 respondents for the in-depth interviews to be conducted by our team. The transcript of the interview was then analysed and compared with the findings from the Mintel report. The length of each interview was between 20 and 35 minutes, which was very appropriate and gave ample time to discuss freely their perceptions and respective buying behaviour.
All of the respondents selected for the sample group were between the ages of 18 and 25 and included both genders.
Designing the questions for in-depth interviews:
The factors which were taken into consideration while designing the questions for the interviews:
- Price: While conducting the interview for the target audience of 18–25-year-olds the price factor was one of the major considerations. The average income of the respondents from this age group was more likely to be in the low to medium bracket thus the cost factor certainly has a major role to play in their buying behaviour.
- Frequency of consumption: How often one drinks wine is a determinant of the overall consumption of wine. This was the reason for framing a question around the frequency of usage. Also according to the Mintel report wine consumption is on the increase and may overtake beer as the favourite alcoholic drink in the UK.
- Location: Wine consumption is sometimes termed “dine drinking”. From the secondary research done prior to the interviews it was quite evident that people like to drink wine while having a meal. This is one of the reasons off-trade market sales for wine are seeing double digit growth. Thus we decided to ask the respondents about their preference of location while having wine. Location and other concepts like home entertainment seemed to have a significant influence on the sale of wine (by volume).
- Preferences: Different people have different preferences about a commodity. We decided to ask respondents about their particular likes and dislikes about wine, such as what is the most important factor which tempts them towards wine in comparison to other alcoholic drinks, whether it is price, taste, flavour or richness.
- Average income: The average income in the target age group is very important in determining their consumption of drinks. According to the Mintel report, one factor which has played a major role in increased consumption of wine is the steady increase in the average income. We tried to gauge the effect of average household income on the consumption of wine by asking questions about their average income, average household income and how much they spent on wines per week.
- Gender: We tried to balance the interviews between male and female respondents equally, as women according to the Mintel report contribute significantly in consumption of wine.
Limitations and Critical Analysis of the methodology used:
The methodology which we adopted to conduct this qualitative research was in-depth interviews. The four limitations which we came across while doing primary research can be summarised below:
- Locating the respondents who fit into the particular age group criteria.
- Convincing them to agree to take part in in-depth interviews.
- To get valid and reliable responses without any biases.
- To note down the responses correctly and reliably so that they could be used for analysis later on.
The success of in-depth interviews is very much dependent on the skills and manners of the interviewers. We tried to probe the respondents to gauge their perception towards wine and make them feel comfortable so that the responses were more accurate and reliable.
The questions asked at interview were not very specific in relation to the different types of wines – we did frame questions about wine in general. The target group which was selected had a varied choice of alcoholic drinks. Some of the respondents at the first stage did not agree to their responses being taped, thus we decided to make notes of the in-depth interview and put them in a proper format later on.
COMPARATIVE ANALYSIS – Secondary Research
Secondary Data: In today’s marketing research environment, secondary research tasks are applied more often to specific marketing problems than are primary techniques due to the relative speed and cost-effectiveness of gathering secondary data (Marketing Research, 2000). The Mintel report of January 2005 proved very helpful in getting an overall understanding of the wine market in the UK. The Mintel report had investigated the current state of market in some depth, including market drivers, segmentation, supply structure and distribution. The Mintel report looks into the wine market of the UK from a very general point of view, including consumers from every segment and every age group. But for our report we only focused on the factors which affect wine consumption in the age group 18–25 years.
From the Mintel report the rise in wine consumption is quite evident. Globalisation and opening up of markets have played a major role in this unprecedented growth. To remain at the number one position as favourite alcoholic drink beer marketers have to change their marketing strategies by focusing primarily on advertising. The market is now flooded with wines from all over the world facing cut-throat competition between New and Old World wines in order to maximise their respective market share. The way wine is branded and marketed is also seeing great changes.
The Mintel report took into consideration only one type of wine – still wine not exceeding 15% ABV excluding other types of wines like Champagne, fortified wines, Lambrini, British wines etc.
The market size is calculated by considering both types of sales: on-market sales as well as off-market sales.
The demographics were split into four main categories:
|% of population
|< 45, not parents
|At least 1 child < 16
|45-64, no children <16
|> 65, no children <16
The Mintel report aimed to typify consumer habits and to do so created Special Groups of consumers. The ACORN demographic classification (based on the type of residential area in which consumers live) was also used.
Findings of Mintel Report – January 2005 – Analysis with Primary Research.
- Increase in consumption due to continual rise in personal income. The age group between 18 and 25 which was the chosen target showed the same trend as for the majority of the respondents from other age groups. According to the Mintel report the sale by value grew by 31% between 1999 and 2004.
(Source: Mintel Report, 2005)
- Rise in Volume greater than Value: According to the Mintel report 80% of the total volume of wine sold is off-trade, the main reason being the tough competition between retailers which drives prices down. The on-trade has also shown some increase in sales. Most of the respondents favoured buying wines from off-licence shops and supermarkets.
- New World wines: The New World wines from Australia, South America and the US have gained a major market share at the cost of the Old World’s share. The respondents whom we questioned showed the same tendency as a majority of consumers cited in the Mintel report, showing a liking for New World wine from Australia and the US, the main reason being the price and trend. From the tabular data presented below it can be seen that the New World wines from New Zealand, Australia and the US have seen a very steep growth in UK wine imports while Old World European countries have not witnessed such growth, with some countries like Hungry and Cyprus facing negative growth. The overall import of wine into the UK grew at a rate of almost 34% between 1999 and 2003.
- Home drinking habit: The primary research done for the target age group of 18–25 showed a trend towards drinking wine while having dinner at home. Also, according to the Mintel report, more than 80% of wine volume in 2004 was off-trade. Wine has become an important part of home entertainment, which has a great influence on off-trade wine consumption.
- Consumption of wine by women: The growth in wine consumption according to Mintel can be attributed to women, who now drink about 55% of all wine. The female respondents whom we interviewed also supported this finding as almost all of the female respondents showed a liking for wine compared to male respondents. The number of women in employment is growing very fast which has a huge influential impact on wine consumption.
- Consumption base: 88.9% of the population above the age of 18 consume alcohol which represents a huge market, according to the Mintel report. Wine is now the UK’s favourite alcoholic drink for in-home consumption.
- Excise duty affecting the price and consumption: The UK excise duty on wine has raised more compared to other drinks in the last five years. The excise duty in Britain is highest of the European countries, hence other countries are campaigning hard to get it down to EU levels, which will again boost wine consumption as this will help to drive down the price of wine further.
- Health factors: Many research reports and medical journals have suggested that moderate consumption of red wine is good for the heart and also useful for avoiding cancer. Another factor which appeals to the consumer is the comparatively lower calorie content in wine. According to the Mintel report these factors have also contributed towards the rise in wine consumption.
- Market size and trends: Price has always been a major factor in determining the consumer’s buying pattern. The falling average wine bottle price due to competition and economies of scale has greatly contributed to increasing wine consumption, particularly in the age group 18–25. Although the falling price according to Mintel poses a threat for the wine trade, it is one of the main factors for the rise in consumption, especially between the ages of 18 and 25. The way wines are now being branded has improved the quality and reliability of wines within the mid to lower price segment and hence customers who lack the knowledge and experience of choosing wines by the type of grape find it comfortable to stick to a particular brand.
- Traditional vs New World wines: New World wines, which are generally priced lower than traditional wines, enjoy higher consumption, particularly in the age group 18–25 and also in the mass market. Popular French wines are continuously losing out in the market to New World wines.
Conclusion and Forecast:
The report presented here after analysing many perspectives of the wine market strongly supports the view that the wine market in the UK will continue to see growth in coming years. This growth in wine consumption comes at the cost of beer losing its share and preference to wine as more and more people now want to drink wine because of factors like price, changing demographics and entry of many new players into the industry especially from New World countries. The rise in wine consumption was forecast to be 31 % by value by 2009, taking 2004 as the base year. The preference shift from beer and other alcoholic drinks to wine in the age group 18–25 is also quite evident from the primary research. As personal disposable incomes (PDI) continue to increase the wine market will certainly benefit as more and more consumers can afford the luxury of wine in the future. Also to be taken into consideration is the decline in the average price of wine due to increased import of wines from New World countries. The way the wine marketing is shaping up with the help of branding methodology will help to bring wine to the masses where lack of product knowledge will not adversely affect its sale. The medicinal and health value attached to wines is also playing a prominent role in the rising popularity of wine consumption. New World countries are constantly trying to focus on low calorie wines, which are appealing to customers from every age group especially health conscious customers. From the secondary and primary research undertaken it can be concluded that there has been a huge shift in preference towards New World wines from traditional wines. According to data presented by Mintel, 30.6% of adults consumed Australian wines in 2004 from a previous figure of 13.9 % in 1999. Old World wines have seen a consistent reduction in consumption in last five years and the trend seems set to continue in future. The fall in the price of wine due to increased competition between retailers and wine producers has contributed significantly in increasing the popularity of wine among all alcoholic drinks. The majority of the respondents placed price as the most important criterion determining their purchasing behaviour, and with the increased competition and constantly falling average price due to the entry of New World wines into UK markets, the price is going to remain the most important factor in coming years in determining wine consumption. Also from the Mintel report, 32% of the population tends to buy wine with a certain price range in mind. The price promotional concept of advertising in which consumers are tempted to buy a large amount of wine from retailers has also contributed significantly as a majority of respondents agreed that they usually buy wines in supermarkets or off-licence stores for home drinking. This is one of the reasons for the falling budget of media advertising in the wine industry, according to Mintel. From the primary and secondary research conducted to complete this report it can be concluded that the wine market in the UK will continue to grow and will witness cut-throat competition between the New World wines and Old World wines, only to benefit the consumer who will enjoy a variety of options at a very affordable cost.
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