ScotCo promises new era of price openess
by John Harrington
Scottish Courage has announced a new "fairer" system for increasing the wholesale prices of its brands and promises a new era of openness in the price review procedure.
From 4 April, the wholesale prices of all ScotCo brandswill rise in line with the RetailPrice Index (RPI) of 3.2%. This increase will be added to the cost of the product, exclusive of duty, so the cost for the licensee would be less.
For example, the cost of a brewer's barrel (288 pints) of Foster's will go up by £7.40 to £327.96. This is a rise of 3.2% on the duty-exclusive price of £231.25, not the duty-inclusive cost of £320.56 meaning the wholesale price increase for the licensee is just 2.3%.
ScotCo promised to have just one rise per year, using a "reasonable" system for increasing each time. The company might not use the RPI measurement every year, but it promised to take a judgement each time on what system was the fairest.
However, one brewery boss expressed misgivings about the lack of long-term commitment to increase prices by the RPI.
"If there's a commitmentto do this [increase at the RPI exclusive of duty] for one year only, then really one has to treat it with a degree of scepticism," he said.
Last month Stuart Ross, chief executive of Scottish brewer Belhaven, criticised Coors and Carlsberg UK for increasing some of their prices above the level of inflation.
ScotCo sales managing director Willie Crawshay said: "We've come to the conclusion, in the last six months or so, that to continue to batter the independent on-trade with price increases ahead of inflation is not sustainable.
"The on-trade beer market has been in decline for 30 years and yet for 30 years the brewers have been coming back with big price increases. The evidence is before us; it doesn't work, guys."
Crawshay said that ScotCo wanted to "de-mystify" price increases. He said brewers, including themselves, have been guilty of not being sufficiently clear about their policies in the past.
"It's fairly self-evident that there's been a degree of confusion whether deliberate or not it doesn't matter."
Coors and Carlsberg UK said their price rises, which ranged from 3.2% to 6.2%, were necessary because of the rising costs of fuel and energy. ScotCo said it experienced these extra costs too but had taken steps to improve efficiency and was prepared to absorb some of the extra costs.
A City analyst said: "What [ScotCo] appears to be doing is going that extra step to make their price increases crystal clear."
