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Wine trade expects five more years of downturn before UK economy improves

Published:  26 September, 2012

The wine trade fully expects to have to deal with five more years of economic pressures in the UK before things start improving.

The wine trade fully expects to have to deal with five more years of economic pressures in the UK before things start improving.

Speaking at the WSTA conference this morning at Bafta in London, economist Sir Howard Davies said the "endgame" for the UK's "unexciting" economic landscape would not come into sight for four to five years. Instead he predicted the economy would "move gently sideways for a while". Davies also said the currency market will remain challenging, suspecting that the Australian and New Zealand dollars will stay strong.

"It's hard to forecast what will happen with the Euro, if it stays together the likelihood is it will remain a bit weak as southern European problems dominate," said Davies.

Key figures in the wine trade shared Davies' somewhat pessimistic views, but said that there were still opportunities out there.

Alison Levett, Enotria's chief executive, said: "You have to plan on business not improving for a while."

She said that Davies' point about emerging economies recovering faster than mature ones was having an effect on the UK wine market. "The UK is looking progressively less attractive" than other areas, said Levett. Previously "one of the leading wine import markets" she said it was a shame it could not offer better opportunities for producers.

"Producers are saying that they still want to be in the UK but they're not going to invest."

Levett added that a combination of "fresh talent" from other consumer goods industries and supplier consolidation could have a profoundly positive effect on the wine trade.

Simon Doyle, commercial director at CyT UK agreed with Davies' message, saying trading in the UK was about "getting back to basics right now". "There's not enough margin to go into marketing overdrive."

"It's about trying to hold a steady course as much as we're able and do the basics properly."

As for the predictions on currency, Doyle said New World commodity-based currencies, such as the Chilean peso, had "established new lows". "We're beginning to come to terms with what's happening. The strength of the domestic currency is not good for exports."

Michael Saunders, managing director of Bibendum, said "business is tough". He hoped that Davies' five-year forecast of a continued stalled economy proved true, as he worried it could be longer.

He added that Bibendum's view on weathering the downturn was "that although being good at wine was essential, it was not enough". With that in mind the firm has invested heavily in consumer profiling and demographics. "For the industry it's tough, but for Bibendum I'm quite optimistic," he added.

Dan Bolton, managing director of Louis Latour Agencies, told Harpers that while Davies' predictions were tough they weren't surprising. "There are still opportunities, you've just got to be quicker to grab them."

He said the real issue for suppliers this year was cost increases. "We've been sitting on them for the last couple of years but things are coming to a head now." He said the short European harvests were bringing the issue to the forefront more quickly.

"I'm pessimistic about the economy but optimistic about my business. We have eopportunities to outperform the market, but ut's not easy."