Decline Continues In The Pub And Independent Off-Licence Sectors
The Drinks Industry Group of Ireland (DIGI) has published its annual Drinks Market Performance Report by Anthony Foley of DCU Business School, examining the consumption, product mix, price, and the value, volume and distribution of alcohol sales in bars and off-licences in Ireland. The report found that the alcohol market continues to decline as it is being hit by continued economic weakness, severe taxation increases and changing consumer behaviour. According to the report, there was a continuing large decline in pub business, which although partly offset by an increase in off licence sales, still resulted in an overall volume decline. The report also found that independent off-licences have been severely hit and that they will continue to experience closures and substantial volume decline in 2013. The recent VAT and excise increases have worsened an already very poor situation.
The report found that the volume of bar sales of alcohol continued to decline by a further 6% in 2012. The total decline in the volume of bar sales of alcohol over the past 5 years is now 32.7%. This decline is having a significant impact on jobs in this employment-intensive sector, where over 6,000 bar jobs alone have been lost since 2009. The specialist off licence sector has also suffered substantial job losses since the economic collapse.
The VAT increase from 21% to 23% in January 2012 and the large excise increases in Budget 2013 which took effect in December 2012 resulted in beer excise increasing by 22%, spirits by 18% and wine by 41%. The huge wine excise has had a particularly negative impact on the already hard pressed restaurant sector, and has counteracted any benefit from the introduction of a lower tourism VAT rate.
Almost 60 per cent of alcohol consumed in Ireland last year was sold by the off-trade. However, despite a 3% increase in off-licence sales volumes last year, the report notes that multiples, discounters and symbol operators are absorbing this growth to the detriment of the independent, specialist off-licences, and that the latter continues to experience closures and substantial volume declines. Since 2012, one independent off-licence has closed on average each month.
Average per adult consumption in 2012, as measured by the Revenue clearances indicator, was found to be 11.681 lpa. This represents a per adult consumption decrease of 0.5% in the past year and 19% fall in consumption levels since 2001.
The Chairperson of DIGI and Diageo's European Corporate Relations Director, Peter O'Brien said: 'The figures in this report are stark - the Irish pub and independent off-licence sectors are in crisis, and that crisis is being exacerbated by the huge tax hikes the sector has had to shoulder in the last 18 months. The impact of that crisis is devastating, not just for the business owners, but for their staff and the communities they serve. Bars and independent off-licences - employment-intensive operations - are closing on a daily basis and we have already seen 6,000 people lose bar jobs since 2009. Small communities are losing valuable meeting places, and the potential negative impact for the tourism sector is huge. The Irish pub remains one of the top draws for foreign visitors, and if the current trend continues, the presence of the Irish pub in our tourist offering will be severely diminished.
'The Drinks Industry Group of Ireland believes the gravity of the situation calls for a Government action plan to protect and preserve the Irish pub and the independent off-license sector. But as a first measure the Government must commit to halting and reversing the cycle of punitive excise and VAT increases.'
Author of the report, Anthony Foley from DCU's Business School does not predict an improvement in 2013: 'Unfortunately the early indicators for 2013 for bar sales from the Retail Sales Index are disappointing. In January 2013 bar sales volume dropped by 6.9% compared with January 2012 and in February the drop was 3.1% compared with February 2012. The overall market will be hit by the very large increases in excise levels in Budget 2013 and will decline slightly due to reduced average consumption and loss of consumers through emigration. The on-licensed sector will continue to decline, and off licence sales will increase in the multiple/symbol sector, but the independent and specialist off- licence sectors face continuing decline and severe pressure.'
Other figures from the Drinks Market Performance Report:
- Of the four alcohol drinks categories, beer, wine and cider had volume declines and spirits increased. The cider decline was 3.4 %. Beer declined in volume terms by 0.9 %. Wine decreased by 1.9 %. Spirits increased by 2.4 %.
- The individual product market volume shares in 2012 were wine 26.1%, beer 46.6 %, spirits 19.7% and cider 7.6 %.
- Alcohol prices increased by 0.9% in 2012 compared with 2011 based on yearly averages. Off-licence prices declined by 1.1% in 2012. On-licence prices increased by 1.7% in 2012.
- The value of the alcohol market decreased slightly by 0.2% to €6.390 billion in 2012, inclusive of excise and VAT. When indirect tax is excluded there was a larger decline in market value.