UK Vodka Market Attractiveness for Polish Exporters

Introduction

This report discusses the market attractiveness of the United Kingdom, with a particular focus on the vodka segment of the spirits industry. The industry has experienced tremendous growth in recent years and remains one of the fastest-growing segments in the market. It also employs thousands of people across the UK. The report found that most of the vodka sold in the UK is produced in Scotland.

The United Kingdom also has a solid economy and excellent infrastructure, including a technologically advanced national and international communications system, as well as an efficient transportation network encompassing railways, highways, airports, and ports. These factors, combined with the growth of the vodka segment, make the United Kingdom an attractive market.

The Spirits Market in the UK

The recommendation of this report is that the Polish company focus on the vodka segment of the spirits industry. The target market is primarily composed of people between the ages of 18 and 24, with women representing the majority of vodka consumers. The marketing strategy must include advertisements utilizing radio, television, and the internet. The report also recommends that the company position its products in the most populous regions of the United Kingdom to effectively reach the target market and compete with established brands.

Vodka is an extremely popular drink in the United Kingdom, and its sales have had a tremendous effect on the economy and government revenue. The purpose of this report is to assess the attractiveness of the UK market as a potential export destination for a Polish manufacturer of premium vodka. The report begins by describing the spirits market in the UK, then discusses the demographics of vodka consumers. Upon completion of the assessment, it offers segmentation, targeting, and positioning strategies for the Polish manufacturer to implement as the firm enters the UK market.

According to the Gin and Vodka Association (2003), sales of vodka in the United Kingdom are increasing faster than any other segment of the spirits market. From 1997 to 1998, vodka sales in the UK rose by 3%. The alcohol consumption league reports that the UK ranks 19th in the world in alcohol consumption, at 7.6 liters of alcohol per person.

The Gin and Vodka Association also reports that the UK spirits industry leads the world in sales and production. According to the industry's annual report:

"Gin and vodka together are now the largest sector by value in the UK spirits market at £1.59 billion. This is up from £1.51 billion a year ago, and accounts for approximately one third of the industry by volume. The Association represents approximately 95% of UK gin and vodka production — almost 70 million liters of pure alcohol (LPA)." (Annual Report, 2000)

Vodka production in the UK grew tremendously over the ten-year period from 1988 to 1998. Much of the vodka sold in the UK is produced in Scotland. According to the annual report, the UK has recently made efforts to consolidate and relocate facilities to Scotland:

"The last twelve months have been marked by the completion of a major relocation of facilities to Scotland. In consequence, some 75% of UK gin and vodka now comes off the bottling lines in Scotland. Consolidation has been caused by the need to cut costs and reduce overheads in order to achieve returns comparable with our competitors. But the room for further cost cutting is limited, and achieving growth in the UK spirits sector is becoming more and more difficult." (Annual Report, 2000)

The spirits market in the UK is also essential to the economy and the workforce. It is estimated that more than one million people in the UK are employed by the spirits industry. The gin and vodka segment alone currently employs approximately 10,000 individuals. In addition to providing employment, the gin and vodka industries produce an estimated £660 million per year in VAT and excise revenue for the UK economy. It is also estimated that between 65% and 75% of the retail price of vodka is attributable to excise tax. The production of gin and vodka is critical for the rural economy as well, since large amounts of arable land are used to grow the crops required for white spirit production. A significant volume of gin and vodka is also exported from the UK.

Demographics of UK Vodka Consumers

The majority of vodka drinkers in the UK are women. In 1997, it was estimated that 51% of vodka drinkers in the UK were women. The Gin and Vodka Association reports: "The 18–24 age group is the largest vodka-drinking age group in the UK. This has consistently been at 36–37% of total vodka drinkers since 1989. The 25–34 age group accounts for 24–25% of all vodka drinkers. Vodka drinkers are spread across the whole UK population." (Consumer Profiles)

The current population of the United Kingdom is approximately 59,778,002. According to the CIA World Factbook, 65% of the population is between the ages of 15 and 64, with the majority in that range being male. Approximately 18% of the population is composed of individuals aged 0 to 14.

In general, the United Kingdom has an excellent economy and is one of the leading economies in the western world. The government has sought to reduce public ownership and social welfare programs in recent years. The largest portion of the nation's GDP is attributable to insurance, banking, and business services. Interest rates and unemployment in the United Kingdom are extremely low. At the time of this report, the government was considering joining the European Economic and Monetary Union (EMU). The prime minister vowed to only join the EMU if it would improve the UK's employment, investment, and overall economic growth.

Conclusion

Consumer Profiles. (2003). Gin and Vodka Association. Retrieved May 23, 2003, from

Revenue Taken by the UK Government. (2003). Gin and Vodka Association. Retrieved May 23, 2003, from

United Kingdom. (2002). CIA World Factbook. Retrieved May 23, 2003, from