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How big is the alcohol industry?

UK market size and growth

The Institute of Alcohol Studies has estimated that the production and sale of alcohol was worth £46 billion to the UK economy in 2014, accounting for 2.5% of Gross Domestic Product and 3.7% of all consumer spending.[1] Figure 2 shows that this is split evenly between retailers and producers. It also shows that the vast majority of the economic value of alcohol production in the UK comes from two different activities: brewing beer for the domestic market (largely to be sold in the on-trade) and distilling spirits for export (predominantly Scotch whisky).

 

The domestic UK alcohol market has been stagnant for a number of years. Adjusting for inflation, spending declined by 5% between 2004 and 2014.[2]

 

 

Figure 4 shows how different trends have contributed to this decline, based on IAS analysis. It shows that inflation and population growth should have boosted the market by £13 billion in that period, but in actual fact, the market grew by only £8 billion: a real-terms (i.e. inflation-adjusted) decline. This is because of lower per capita consumption and the shift to the off-trade, which each contributed £4 billion to the decline. However, the industry has succeeded in mitigating these trends by increasing the price paid per litre of alcohol above the rate of inflation – both through ‘premiumisation’ (encouraging consumers to trade-up to more expensive drinks) and like-for-like price increases.

 

 

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[1] Bhattacharya, A. (2017), Splitting the bill: Alcohol's impact on the economy. London: Institute of Alcohol Studies, p. 9

[2] Bhattacharya (2017), op. cit., p. 11