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Online Drinks Retailing - UK - April 2010

This is a new UK report looking at the growing market and consumer demand for buying alcoholic drinks online. This has been particularly popular for wine, and has the potential to take off for other drinks.

  • The investment potential of the online drinks market is highlighted by the market having doubled in size over the past five years, going from a niche £370 million in 2005 to £745 million in 2009.
  • As with the in-store market, online supermarkets benefit from the convenience of consumers being able to purchase alcohol as part of their overall grocery shop, meaning supermarkets account for two thirds of all alcohol sales made online.
  • However, online offers a much-needed growth opportunity for the struggling off-license/drinks specialist sector, which has been unable to compete with supermarket stores on location and convenience.
  • To continue its rapid growth, this market needs to win over the hearts and minds of 20 million UK adults who claim to have no intention of shopping for food/drink online. That, only 3 million of them have actually ever tried it, shows that it is their perception more than actual negative experience which is putting them off.
  • This prejudice is particularly apparent in the heavier drinking over-45 population, but those who trial it show more appreciation of its benefits than their younger counterparts, especially not having to carry heavy bags and that the whole experience being more hassle-free.
  • The main barrier to people buying alcohol online is a preference to handle the drinks they buy, with over half citing this as something which puts them off. This illustrates what an emotional attachment people have to in-store shopping as rationally you can tell little from the quality of wine by holding it, unlike fresh goods such as fruit and vegetables.

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Table of contents

  1. Issues in the Market

      • Definition
        • Consumer research
          • Advertising data
            • Focus groups
              • Abbreviations
              • Future Opportunities

                • Edutainment can deepen the consumer-brand relationship
                  • Using theatre to make online retail brands come alive
                  • Market in Brief

                    • While the market is growing fast, it has yet to come of age
                      • A below-par conversion rate of online shoppers to drinkers
                        • Over-45s who try it, love it!
                          • Men keener than women
                          • The Growth of E-commerce

                            • Key points
                              • 25 million people use the internet every day
                                • Figure 1: Trends in usage and frequency of internet usage, 2005-09
                              • Increased online purchasing presents supermarkets with a problem
                                • Figure 2: Type of websites purchased from in last three months, 2009
                              • Online users make an attractive consumer target
                                • Figure 3: Internet usage in past year, by gender, age and socio-economic group, 2009
                              • AB 35-44s are most likely to spend online
                                • Figure 4: Purchased from any website in the last three months, by gender, age and socio-economic group, October 2009
                              • Online shopping takes retail location out of the equation
                                • Figure 5: Factors considered the most important when grocery shopping, July 2008
                              • Online portability is expanding retail opportunities
                                • Figure 6: Trends in ways of accessing internet, 2005-09
                              • Mistrust remains an issue for online purchasing
                                • Figure 7: Trends in attitudes towards the internet, 2005-09
                            • Internal Market Drivers Affecting the Alcohol Market

                              • Key points
                                • Alcohol consumption in decline…
                                  • Figure 8: Trends in consumption of alcohol, 2005-09
                                • …but there is heightened concern about binge drinking
                                  • In-home drinking now drives the market…
                                    • Figure 9: Trends in consumption of alcohol, in home versus out of home (past 12 months), 2005-09
                                  • ...something the recession has exacerbated
                                    • Figure 10: Items consumers have cut back on during the recession, February 2009
                                  • The decline of the high street off-licence
                                    • Value lies in ‘middle aged’ drinkers
                                        • Figure 11: Volume importance index (VII)* of alcohol consumption in home, by gender, age and socio-economic group, 2009
                                    • Broader Market Environment

                                      • Key points
                                        • Tough economic outlook for 2010
                                          • Figure 12: Trends for GDP, PDI and consumer expenditure, at real (2009) prices, 2004-14
                                        • Punitive taxation to continue
                                          • Figure 13: Trends in levels of alcohol duty, 2004-10
                                        • Implications of the mandatory alcohol code
                                          • Britain goes upmarket
                                            • Figure 14: Forecast adult population trends, by socio-economic group, 2004-14
                                          • Sharp growth among 25-34 ‘online generation’
                                            • Figure 15: Total adult population and forecast, by age group, 2004-14
                                        • Competitive Context

                                          • Key points
                                            • Wine dominates in-home drinking occasions…
                                              • Figure 16: Drinkers of different drink types for in-home occasions, 2009
                                            • …but beer and cider are matching it for online sales
                                              • Figure 17: Buyers of different drink types by online grocery shoppers in the past 12 months, January 2010
                                            • Tesco.com dominates the online multiple market
                                              • Figure 18: Average unique users per month for online supermarkets, June 2008-February 2010
                                            • Laithwaites.co.uk is the most visited specialist drink site…
                                              • Figure 19: Average unique users per month for specialist online drink sites, June 2008-February 2010
                                            • …but Virgin is holding people’s attention
                                              • Figure 20: Average minutes per visit for specialist online drink sites, June 2008-February 2010
                                            • Laithwaites capitalises on festive season
                                              • Figure 21: Trends for unique users per month for specialist online drink sites, June 2008-February 2010
                                          • Strengths and Weaknesses in the Market

                                            • Strengths
                                              • Weaknesses
                                              • Who’s Innovating?

                                                • Key points
                                                  • The launch of iPhone apps
                                                    • Laithwaites upgrades website
                                                    • Market Size and Segmentation

                                                      • Key points
                                                        • Online alcohol market builds momentum…
                                                          • …but it has yet to reach its full potential
                                                            • Expect steady growth over the next five years
                                                              • Figure 22: Forecast of value sales of the online alcoholic drinks retailing market, 2005-15
                                                            • Drinks specialists competing against multiples – for the moment
                                                              • Figure 23: Segmentation of the online alcoholic drinks market betweeen supermarket multiples and specialists, by value, 2009
                                                            • Factors used in the forecast
                                                            • Companies and Products

                                                              • Key points
                                                                • Asda.co.uk
                                                                  • Recent activity
                                                                    • Direct Wines Ltd
                                                                      • Recent activity
                                                                        • Majestic.co.uk
                                                                          • Recent activity
                                                                            • Ocado.com
                                                                              • Recent activity
                                                                                • Sainsburys.co.uk
                                                                                  • Recent activity
                                                                                    • Tesco.com
                                                                                      • Recent activity
                                                                                        • Thedrinkshop.com
                                                                                          • Recent activity
                                                                                          • Brand Communication and Promotion

                                                                                            • Key points
                                                                                              • Above-the-line spend remains niche
                                                                                                • Figure 24: Annual spend on above-the-line advertising for the whole category, 2005-09
                                                                                              • Oddbins is the top-spending alcohol specialist
                                                                                                • Figure 25: Top-spending advertisers, 2007-09
                                                                                              • Lay & Wheeler sees brand investment
                                                                                                • Figure 26: Top-spending brands, 2007-09
                                                                                            • Consumer Usage – Online Grocery Shoppers

                                                                                              • Key points
                                                                                                • A hardcore of 1.5 million shop for food and drink solely online…
                                                                                                  • …but the majority are indifferent…
                                                                                                    • Figure 27: Frequency of shopping online for groceries, January 2010
                                                                                                  • …although for only a minority is this based on actual experience
                                                                                                      • Figure 28: Proportion of online shoppers who have tried and rejected online grocery shopping, January 2010
                                                                                                    • Much more normal for the younger ‘online generation’
                                                                                                        • Figure 29: An index of regular online grocery shoppers, by gender, age and socio-economic group, January 2010
                                                                                                      • A poor conversion rate from online grocery shopping to buying alcohol
                                                                                                          • Figure 30: Step-by-step conversion of adult population into online drink buyers, January 2010
                                                                                                      • Consumer Usage – Online Drink Shoppers

                                                                                                        • Key points
                                                                                                          • Online alcohol retailers missing out on a third of potential buyers
                                                                                                            • Figure 31: Alcohol purchasing habits among online grocery shoppers, January 2010
                                                                                                          • Female and over-45s online grocery buyers are eschewing alcohol
                                                                                                              • Figure 32: Comparison of online alcohol buyers and non-online alcohol buyers in the past 12 months, by gender, age and socio-economic group, January 2010
                                                                                                            • Online beer sales benefit from young online profile
                                                                                                                • Figure 33: Types of alcohol purchased online in the past 12 months, January 2010
                                                                                                            • Consumer Attitudes – Benefits of Buying Drinks Online

                                                                                                              • Key points
                                                                                                                • Key benefit is avoiding heavy lifting…
                                                                                                                    • Figure 34: Factors influencing consumers to buy alcoholic drinks online instead of in-store, January 2010
                                                                                                                  • …particularly among women and over-45s
                                                                                                                    • Figure 35: Net difference* between influencers of online drinks buying, by gender, January 2010
                                                                                                                    • Figure 36: Net difference* between influencers of online drinks buying for over-45s compared to under-45s, January 2010
                                                                                                                  • However, price needs to become the major influencer
                                                                                                                    • When they try it, women and over-45s love the cost savings
                                                                                                                      • Taking on the multiples
                                                                                                                        • Figure 37: The least influential factors motivating consumers to buy alcoholic drinks online instead of in-store, January 2010
                                                                                                                      • Specialists must utilise the advantages of e-commerce over other media
                                                                                                                        • The green ‘halo effect’
                                                                                                                          • More help for the customer (at less cost to the retailer)
                                                                                                                            • Direct to the source
                                                                                                                              • More choice for the customer
                                                                                                                              • Consumer Attitudes – Barriers to Buying Drinks Online

                                                                                                                                • Key points
                                                                                                                                  • Desire to handle drinks is major barrier
                                                                                                                                    • Figure 38: Reasons for not grocery shopping/buying alcohol online in the past 12 months, January 2010
                                                                                                                                    • Figure 39: Net difference* between reasons not to buy alcohol online for over-45s compared to under-45s, January 2010
                                                                                                                                  • What a difference a trial makes
                                                                                                                                      • Figure 40: Major differences between over-45s who have and have not bought alcoholic drinks online, January 2010
                                                                                                                                    • Men less savvy than women about money-saving potential
                                                                                                                                      • Figure 41: Net difference* between why women and men do not want to buy alcoholic drinks online, January 2010
                                                                                                                                    • Online drinks retailers need to target the female ‘top of mind’
                                                                                                                                      • How online can never compete for spontaneous drinks purchases
                                                                                                                                        • Difficulties in persuading consumers to buy in bulk
                                                                                                                                          • Consumers are not keen on a subscription model
                                                                                                                                          • Appendix – The Growth of E-commerce

                                                                                                                                              • Figure 42: Trends in places to access internet, 2007-09
                                                                                                                                          • Appendix – Internal Market Drivers Affecting the Alcohol Market

                                                                                                                                              • Figure 43: Drinking alcohol in home versus out of home, by gender, age and socio-economic group, 2009
                                                                                                                                          • Appendix – Competitive Analysis

                                                                                                                                              • Figure 44: Average minutes per visit for online supermarkets, June 2008-February 2010
                                                                                                                                          • Appendix – Consumer Usage – Online Grocery Shoppers

                                                                                                                                              • Figure 45: Frequency of shopping online for groceries, by demographics, January 2010
                                                                                                                                              • Figure 46: Frequency of broad groups of online grocery shoppers, by demographics, January 2010
                                                                                                                                          • Appendix – Consumer Usage – Online Drinks Shoppers

                                                                                                                                              • Figure 47: Most popular types of alcohol purchased online in the past 12 months, by demographics, January 2010
                                                                                                                                          • Appendix – Consumer Attitudes – Benefits of Buying Drinks Online

                                                                                                                                              • Figure 48: Reasons to buy alcoholic drinks online instead of in-store, by demographics, January 2010
                                                                                                                                              • Figure 49: Reasons to buy alcoholic drinks online instead of in-store, by demographics, January 2010 (continued)
                                                                                                                                              • Figure 50: Reasons to buy alcoholic drinks online instead of in-store, by demographics, January 2010 (continued)
                                                                                                                                          • Appendix – Consumer Attitudes – Barriers to Buying Drinks Online

                                                                                                                                              • Figure 51: Reasons for not shopping online or buying alcohol online in the past 12 months, by demographics, January 2010
                                                                                                                                              • Figure 52: Reasons for not shopping online or buying alcohol online in the past 12 months, by demographics, January 2010 (continued)

                                                                                                                                          Companies Covered

                                                                                                                                          • Asda Group Ltd
                                                                                                                                          • Berry Bros and Rudd Ltd
                                                                                                                                          • British Beer and Pub Association
                                                                                                                                          • British Market Research Bureau (BMRB)
                                                                                                                                          • British Sky Broadcasting Group plc (BSkyB)
                                                                                                                                          • Co-operative Group
                                                                                                                                          • Daily Express
                                                                                                                                          • Daily Mail
                                                                                                                                          • Diageo UK
                                                                                                                                          • First Direct
                                                                                                                                          • Government Actuary's Department (GAD)
                                                                                                                                          • HM Revenue & Customs
                                                                                                                                          • HSBC Private Bank (UK) Limited
                                                                                                                                          • J. Sainsbury
                                                                                                                                          • Lay & Wheeler Group Ltd
                                                                                                                                          • Lidl (UK)
                                                                                                                                          • LOVEFiLM International Ltd
                                                                                                                                          • Majestic Wine Warehouse Ltd
                                                                                                                                          • Oddbins Ltd
                                                                                                                                          • Outdoor Advertising Association of Great Britain
                                                                                                                                          • Selfridges Retail Ltd
                                                                                                                                          • T-Mobile (UK) Ltd
                                                                                                                                          • Tesco Plc
                                                                                                                                          • Virgin Media Ltd
                                                                                                                                          • Virgin Mobile
                                                                                                                                          • Virgin Wine Online Ltd
                                                                                                                                          • Vodafone Group Plc (UK)
                                                                                                                                          • Waitrose
                                                                                                                                          • Wm Morrison Supermarkets

                                                                                                                                          Online Drinks Retailing - UK - April 2010

                                                                                                                                          £1,995.00 (Excl.Tax)