Can anything stop the decline of sherry?

Sales of sherry, the Spanish fortified wine, dropped by 2.6 per cent last year, with every market apart from the UK showing declines. But the decline is nothing new - sales have been falling little by little each year since the start of the 1990s, with the marketing efforts of all the major producers appearing to have little effect on changing the increasingly outdated image of the drink.

The latest figures from the sherry Consejo Regulador (the regulator and promoter of the fortified wine) make depressing reading. Total sales reached 91.8 million bottles, down from 94.3 million in the previous year, the latest decline in a market whose sales have dropped 22 per cent in the last six years alone.

The only glimmer of hope is a steady increase in sales in what has traditionally been the largest market for sherry, the UK. Britain is by far the largest international market for sherry, and most producers have concentrated their marketing efforts there in recent years (the relaunch of Gonzalez Byass' Tio Pepe brand as a 'very dry white wine', for example, was managed entirely by the UK distributor, First Drinks Brands). This concentration appears to have paid off, with sales in the UK rising 4 per cent in 2002 to 28.4 million bottles.

Even the domestic market suffered a decline in sales, albeit slight in comparison to those registered elsewhere. Sherry sales in Spain were down 200,000 bottles to 18.2 million bottles in 2002.

In the rest of Europe, however, the picture is far more depressing. For example, Dutch sales plummeted by more than 1 million bottles to 24.1 million en 2001, while Germany imported 14 per cent fewer bottles with just 10 million.

While the economic troubles in some European countries is certainly to blame for some of last year's decline, the Consejo Regulador said that the long-term reason for sliding sales was sherry's continued inability to appeal to young drinkers.

Even the success of Tio Pepe's bold revamp in the UK - the sherry is now packaged to look like a white wine, with a new advertising campaign encouraging consumers to think again about sherry - has failed to persuade other major players to follow suit. In fact, most of the leading sherry producers are focusing on other products to offset the loss of sherry revenues - in particular Spanish brandy or other stronger spirit brands such as whisky or gin.

So is this really the beginning of the end for sherry, at least outside the UK? Well, all the indications would suggest that the answer to that question is, sadly, yes. Tio Pepe has clearly managed to reinvent itself, but it had a very strong image in the UK market on which to build, and it is hard to see similar revamps being as successful in other markets, or indeed for other brands.

While a number of sherry brands have changed hands in recent years the sellers have generally been the major players with the large marketing budgets, meaning that any promotional effort behind sherry has come from smaller companies. Diageo has sold all its sherry business (Croft), while the Sandeman port and sherry business which was part of Seagram was not even included in the deal which saw the UK group and Pernod Ricard carve up the Canadian drinks empire between them.

Even Allied Domecq, the world's number two drinks group which owes its very name to the Domecq sherry group (acquired by Allied Lyons in the mid 1990s) has done virtually nothing to promote the sale of sherry since it acquired the brands.

With this lack of interest so clearly evident on the part of the major players, declines in sherry sales are likely to be the order of the day for the next decade at least.