Proactive Investors - Diageo PLC (LON:DGE) and other spirits manufacturers could be set to struggle in the UK as the beverage continues to lose market share ahead of government plans to increase tax on the drink.
In the last year, spirits in the UK saw their market share drop by 1.3 percentage points to 25%, according to new research from the CGA, whilst beer drinking was on the rise.
The hospitality data provider believes this is a consequence of the cost-of-living crisis, with drinkers shifting away from expensive cocktails and mixed drinks towards cheaper alternatives like beer.
“Younger consumers, who are more likely to be affected by the cost-of-living crisis, have over-indexed for this transition,” said the CGA.
In the twelve months to May, beer lifted its market share to 41.9%, a jump of one percentage point.
Throughout 2023, drinks like beer, wine and soft drinks have recovered consistently.
In the last week of June, all beverage categories were up by over 4% apart from spirits which dropped by 2% year-on-year.
New legislation in the alcoholic drinks industry, set to come into place in August, will increase the tax companies will have to pay per litre of alcohol.
Under the new rules, drinks will no longer be taxed on category but instead by alcohol content.
The changes prompted brewers like Carlsberg (CSE:CARLa) and Heineken to weaken some of their beers.
Miles Beale, chief executive of the Wine and Spirit Trade Association, said: “For spirits you can expect at least a £1 increase on a bottle of gin or vodka and a leap of £1 per bottle of wine when duty is increased by 20%.
“There is no quick fix, and there are too many tax and cost increases and too few options… reducing ABV simply isn’t realistic.”