At what price?

Isn't it time supermarkets cleaned up their act too? Adam Withrington looks at a summer of drinks discounting.

Over the summer months The Publican Newspaper ran a "Price Watch" series in the drinks section, highlighting the side of drinks retailing that is so often ignored by the many police chiefs, doctors and national newspapers that look to criticise the pub trade: supermarkets.

Each week we published the latest example of their quite incredible pricing policy for alcoholic drinks. Pubs get the blame for the violent scenes in town centres but is it any wonder that people get so drunk when they have the opportunity to buy drink as cheaply as this:

How low did they go?​

• May 30​ Bottle of Vina Maipo Chilea wine - £2.99 - Sainsbury's
• June 6​ Any three bottles of Blossom Hill Sauvignon Blanc/Red Zinfandel - £10 - Somerfield
• June 13​ 24 cans of Stella Artois - £13.99 - Morrisons
• June 20​ 24 cans of Carlsberg - £9.98 - Tesco
• June 27​ 20 330ml bottles of Stella Artois - £9.48 - Asda
• July 4​ 18 cans of Strongbow - £9.99 - Sainsbury's
• July 11​ 20 440ml cans of Carling and 20 330ml bottles of Stella Artois - £14 - Somerfield
• July 18​ 24 250ml bottles of Castlemaine XXXX - £8.08 - Asda
• July 25​ 12 bottles Smirnoff Ice - £10 - Asda
• August 1​ 18 cans 440ml cans of Strongbow - £8.88 - Sainsbury's
• August 29​ 18 cans Dry Blackthorn cider - £9.99 - Tesco

We have got into a situation where supermarkets are using alcohol as a loss leader.

In the July 23 issue of The Times magazine journalist Carol Midgley wrote: "Alcohol has replaced baked beans and tinned tomatoes as the new loss leader… this week I nipped into Tesco to buy four bottles of lager and minutes later came staggering out with 32," she reported gleefully.

While consumers may be happy, the pricing policy in supermarkets is not good for drinks brand owners.

"The value has just been wiped out of the market," says Glenn Payne, sales director at the Meantime Brewery in Greenwich, and former beer buyer for Safeway.

"That goes for the big brand lagers and even speciality beers. I was doing some research and found that a 75cl bottle of Hoegaarden costs £2.48 in Asda and Tesco - people are selling it for £4 in pubs. Brewers have a problem. There is overcapacity in the market and brewers are finding it harder and harder to make money from it."

Not only are brand owners losing out in the off-trade but with the ever-growing price differential between on and off-trade, licensees are increasingly going to supermarkets to buy their bottled beers and RTDs and use them to stock up their back-bar fridges.

Now while this may work for the licensee, for the brand owner it's a big issue as they are losing out on an on-trade sale from a wholesaler or pub company, which is considerably more valuable than an off-trade sale.

So can the brand owners stand up to the supermarkets?

Interbrew made noises along this line back in June when then chief executive Steve Cahillane said the company would not indulge in any more deep discounting of its brands in the off-trade.

However, this is easier said than done. The rules seem to be on the supermarkets' side. Any sign of brewers trying to dictate terms will lead to accusations of price-fixing from the retailers, and if brewers and drinks companies did get together to force the supermarkets' hand they could be accused of trying to form a cartel.

"If there is margin to give away supermarkets will do it. They are in control," Mr Payne says. "The brewers are competing in a market where there is a surplus of product. Retailers can work them off against each other."

Maybe the best thing to do is to follow the example of what is going on in Scotland, where the retailer response to licensing reform has been for the on and off-trades to work together.

Last month, the Scottish Beer & Pub Association and the Scottish Grocer's Federation sent a letter to Scottish Executive licensing minister, George Lyon MSP, outlining their concerns on the transference existing opening hours to the new regime.

That kind of partnership is sadly lacking in England - if similar organisations got together in England to work towards the future then perhaps we could look to a time where value is added back into the beer market.

Things cannot continue the way they are, as Mr Payne explains: "Someone will have to pay for it in the end. The pressure is not going to let up from supermarkets and if anyone shows any signs of wilting then they will just increase the pressure."