Industry Trend Analysis - Young Consumers Uncorking Low-Alcohol Wine Demand - FEB 2018

BMI View: The growing trend of health-consciousness has led to the growth in demand for offshoot alcohol categories, like low-alcohol wine. Tesco is the latest retailer to have launched its own range of low-alcohol wine through its stores in the UK to capitalize of the growing consumer demand especially among young adults for low or no alcohol drink options.

Tesco, the UK's leading grocery chain, has launched a new range of low-alcohol wines in the UK on the back of growing preference for low or alcohol-free drinks. Tesco has partnered with international wine producer, Felix Solis, which uses a new innovative spinning cone technique that gently removes the alcohol, without sacrificing the aroma, quality and flavour of the wine. Sold across 700 stores in the UK at GBP3.0, the wines all have an alcohol content of less than 0.5% and come in five flavours- a Cabernet Tempranillo, a Grenacha-Rose, a Sauvignon Blanc and two sparkling wines.

The demand for low-alcohol drinks in developed markets comes on the back of growing health-consciousness amongst consumers and greater awareness of the risks associated with heavy alcohol consumption. Low-alcohol drinks also have lower calories than conventional alcoholic drinks, further boosting its demand. The demand for low-alcohol content in drinks is growing not only in the wine segment but also for beer, with producers like Heineken, AB InBev and Carlsberg launching their own non-alcoholic beer offerings ( see ' Consumers Embracing Non- Alcoholic Beer', August 10, 2017).

We forecast wine consumption to fall by an average of 0.2% per annum over 2017 and 2021, compared to five years ago (2012-2016) when wine consumption grew by an average of 1.6% per annum. This dip in wine consumption comes on the back of the healthification trend in the UK, as developed markets in Europe have become more well-informed about the food and drinks they consume.

Slow Projected Growth For Wine
Wine, litres mn, %y-o-y
e/f= BMI estimate/ forecast. Source: BMI Research/WHO

We also note that there is a rising trend of teetotalism in the UK, which is pushing down alcoholic drink sales. According to the Office of National Statistics, the proportion of adults (over the age of 16 years old) who have had a drink in the past week has dropped from 64.2% in 2005 to 56.9% in 2016, record low levels. Particularly, young adults are more likely to be teetotal than their older counterparts, with more than a quarter of 16-24 year olds not drinking, compared to a fifth of the broader population. As such, we forecast the growing demand for low or no alcohol drinks to be driven by the young adult population in the UK, which is already the target group for retailers.

Tesco is not the first retailer to respond to the growing demand for low-alcohol wines. In December 2016, Lidl unveiled its low-alcohol wine offerings with its New Year Wine Cellar selection, of which five of the 14 wines released would have an alcohol content of less than 12%. Aldi joined the retailers offering low-alcohol wines by launching its Featherweight collection, with four new wines with alcohol content of 5.5% in August 2017. Marks & Spencer is also scheduled to launch low-alcohol wines in January 2018.