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On-trade v off trade

Are bottle shops a bigger threat than supermarkets for pubs?

By Oli Gross , 18-Mar-2016
Last updated on 30-Mar-2016 at 11:48 GMT2016-03-30T11:48:29Z

Are bottle shops a bigger threat than supermarkets for pubs?

Craft beer shops are drifting further onto pub territory, with many featuring bars serving tasters and pints to be consumed on site. Oli Gross investigates whether the evolution of the bottle shop poses a threat to the industry.

Craft beer continues to grow in popularity. Latest research by Mintel indicates 38% of drinkers drank a craft beer towards the end of last year.

The rise is largely viewed as a positive for the industry, due to the growing consumer enthusiasm for beer and willingness to pay premium prices.

But now hybrid on and off-licensed craft beer shops are becoming more common, and licensees are concerned about their impact on pubs.

Brewery shop

The Red Squirrel Brewery Shop, one of four shops owned by the brewery, opened less than a year ago in Berkhampstead.

The shop, which originally focusses on take-away sales, has expanded to serve pints on-site.

Greg Blesson insisted the venue is not a pub despite serving draught beers and tasters, as well as take-away growlers and bottles.

Nick Pembroke, licensee of The Gatsby, Berkhamstead, claimed the venue “wiping the floor” with nearby pubs.

He said: “Because they’re a shop they can sell it way cheaper than me, it’s ruining the pubs around here.”

Pembroke has spoken to other licensees in the area who said they’re struggling against the competition, and trade is at risk of being ‘destroyed’.

He continued: “They’re selling a bottle of Prosecco at £9, when I have to charge £30. It’s cheaper than Wetherspoon’s.

“It sets a precedent. Anyone in any town can take a shop and think they can turn it into a bar as well.”

Red Squirrel explained a bottle of Prosecco costs £10 at the shop.

Licence

Pembroke was suspicious that the shop may not have an on-trade licence, but Dacorum Council confirmed to the PMA that the venue’s on and off-trade licences were granted in February last year.

Red Squirrel’s owner said: “The vast majority are pleased we’re here. As we’re a small brewery we sell our products at a competitive price, but with other products we’re the same as everyone else.”

And Blesson doesn’t consider the Red Squirrel Brewey Shop as a direct competitor to pubs.

“We don’t open at the same hours, and are more interested in take-out sales,” he explained.

Bigger threat?

Distinct Pub Company’s James Penlington, who runs free houses the Russel Arms, Butlers Cross and The Bell Stoke Mandeville, both in Buckinghamshire, echoed the concerns of the shop’s neighbouring licensees, and argued that bottle shops are even more of a threat to pubs than supermarkets.

“Every pub can compete with the customer experience of a trip to the supermarket for 24 tins of beer to be enjoyed at home,” he said.

“This isn’t the case with bottle shops or brewery shops who offer a much improved experience and product, with some now boasting high street style bars including external seating areas and fully serviced toilet facilities. Not bad for a ‘shop.’”

He explained there are many “excellent” small brewery shops in Buckinghamshire which serve free tasters, with a retail price 40-50% cheaper than pubs, as cheap as £2.25 a pint.

The shops can still retain a high profit margin despite value prices due to gaining profits though take-away sales.

“Visit any of these fabulous businesses and you will often find them heaving with beer drinkers enjoying a social pint before taking a box or a growler home,” Penlington added.

Bison

Craft shop Bison Beer opened in Brighton last year. The venue sells 1.9l beer growlers which residents often drink on the neighbouring beach.

Since opening Bison has secured a seafront venue and plans to open the Bison Arms pub this summer.

While the pub and shop will stock similar products, the owners don’t see the two sites as competitors.

Co-founder Jack Cregan said: “I don’t think we would have decided to open a pub if we thought it was in direct competition with the shop.

“People come into our shop and ask for recommendations of pubs that sell good beer, it’s a different market even at shops where it’s drank at the shop.”

Cregan said anything that offers customers choice is a good thing.

“It’s part of the whole movement for better beer, anyone serving great beer is good for the industry,” he added

Johnathan Smith, partner at licensing specialist law firm Poppleston Allen, said shops that serve beer on site are operating ‘entirely within the law’ as long as they gain a licence, but warned that those without permission could face stiff punishments.

He explained: “If they do not and only have a licence for the sale of alcohol off the premises then the operator could face an unlimited fine, time in prison, a review of any licence they hold and closure.”