Could the beer industry do more to help?

- Last updated on GMT

Related tags: Supermarkets, Price, Supermarket, Brewers

The Dump the Deals campaign has been running for four months now and in that time a lot of attention has been drawn to the issue of supermarket...

The Dump the Deals campaign has been running for four months now and in that time a lot of attention has been drawn to the issue of supermarket pricing of alcohol and cut-price deals.

The Publican has firmly got behind John Grogan MP's Early Day Motion on this issue - we have written letters to every MP in Parliament and helped the motion get 192 signatures.

Plus we have called on licensees to tell us about the effects of supermarket pricing of alcohol. Following responses from over 100 licensees we are now in the process of drafting our official submission to the Competition Commission's groceries inquiry.

However, there are several issues that remain unexamined - most of which focus on the big brewers.

How much are the big four brewers funding the deals offered by the supermarkets?

One aspect of the argument that has not really been tested so far is the part the big brewers play in all this. Certainly in inviting response from licensees as to the impact of supermarket pricing on their pubs, several suggested we were shooting at the wrong target.

Tony Brookes, who runs the Head of Steam pub chain, believes the national brewers are the ones to blame.

"The brewers are two-faced commercial entities," he says. "It has been interesting in the last month or two, when the supermarkets have been grilled so much, how little they have said about their role in this issue.

"They can control the price they sell at to the supermarkets. But because they are not willing to stand firm and sell at the right price the power has moved to the retailers."

Publicly the big four brewers - Scottish & Newcastle (S&N), Coors Brewers, Carlsberg and Inbev - have distanced themselves from suggestions that they play any role in the deep discounting that takes place in supermarkets.

Indeed last June S&N made a submission to the Competition Commission's groceries inquiry which was critical of the competition on price and retailers using cheap alcohol as a footfall driver:

"S&N UK's pricing policy, and indeed promotional activity, neither condones nor encourages the use of differential retail selling prices that may be used on a tactical basis by one business to undermine another.

"We strongly believe that the sale of alcoholic drinks at low cost, used primarily to drive 'footfall' into stores, is not consistent with the promotion of responsible drinking. For example, there is now firm anecdotal evidence that drinkers are consuming cheap alcohol at home prior to crossing over into the on-trade for a night out, and then topping up at pubs or bars."

Yet the suggestion of several insiders in the industry is that S&N and fellow big brewers Coors, Carlsberg and InBev do help fund some of many bargain basement deals - if anything just to help shed some volume from their very full mash tuns.

There were two representatives of the big four (S&N and Carlsberg) at the meeting in London two weeks ago between MPs and representatives of Tesco, Sainsbury's, Asda and Morrisons.

When given the opportunity to push the supermarkets on their behaviour, the S&N representative chose to strike a much more conciliatory tone than the one in the Competition Commission submission last year. No wonder, given that the fate of virtually all its off-trade beer sales lay in the hands of the four companies who sat before him.

The argument often put across by the brewers is 'why on earth would we want to sell our products at such low prices?' and 'suppliers have absolutely no control over pricing in supermarkets'.

But last Christmas there was a very interesting example of how this isn't necessarily always the case. For the previous two years Baileys had been discounted massively over Christmas - hardly surprising given the cream liqueur's popularity over the festive season.

Word has it that in 2006 Diageo refused to help fund any discounts in any supermarkets over Christmas. Surely that would not have mattered, as by the logic of the big four brewers' arguments the supermarkets would simply have discounted the brand anyway?

In reality, as a glance at any of the off-trade press would have shown you, prices remained steady for Baileys over the whole period - and while sales fell year-on-year, revenues grew, thanks to the higher retail price. Proof, then, that a supplier's refusal to fund discounts can have an effect.

Does selling below cost price take place?

At the Parliamentary meeting last month Nick Grant, head of legal affairs for Sainsbury's, said the issue of loss-leading was far too complicated and any attempt to police it would be "impossible" and an "accountancy nightmare".

This was a convenient answer - a well-executed example of misdirection. So often have the supermarkets been accused of below-cost selling with alcohol that you expect them to produce evidence to prove they don't - particularly given the enthusiasm with which they brandish evidence of their participation in Challenge 21 and the Drinkaware Trust. But they haven't.

If we in the on-trade are to believe that selling a pint of Carling for 47p (as happened in Tesco at Christmas) isn't below-cost selling then some serious evidence needs to be seen.

The issue has moved on since January - we have engaged the supermarkets and to a small extent they have responded. We received letters from three of the big four (Tesco's must have got lost in the post…), and they all attended the Parliamentary meeting. An improvement - but a solution needs to be found. A recent survey of just under 3,000 licensees by Preview magazine found one of the biggest issues for the trade over the next year was supermarket pricing - more than underage drinking and rising costs.

Solutions

1. Stop advertising on price

A solution that is being debated in the upper echelons of the pub industry is a ban on advertising prices outside any licensed premises.

So for supermarkets that would mean stopping advertising in all media, TV, print titles, billboards and also outside every store. By doing this licensed outlets, both on- and off-trade, are not using alcohol as a footfall driver.

Michael Turner, chief executive of Fuller's, explains further: "This idea is not exclusive to supermarkets in our eyes. If we want to retail alcohol responsibly then this is a simple solution that everyone [on and off-trade] can buy into. Selling alcohol on price is not responsible retailing."

2. Stop advertising where it is visible/audible to children

This has been a particular problem with early morning radio programmes on commercial radio stations.

There has been much anecdotal evidence that advertisements for cheap supermarket booze can be heard over the airwaves on breakfast shows and are therefore very liable to be heard by children before school or when being driven to school.

3. Prevent marketing at high visibility points in-store

One of the great talents of a good retailer is the ability to attract customers to promoted products you want them to see through clever planning. Often this comes through putting these products in 'hot spots', be that the entrance to the outlet or in the case of supermarkets on 'gondola ends' or 'end-of-aisle spots'.

Last week Baroness Finlay of Llandaff, former vice dean of the University of Wales School of Medicine, spoke up in the House of Lords against supermarkets selling alcohol in such 'hot spots'.

"This is not just a problem for government," she said. "Retailers have to play their part in supplying alcohol in a responsible way.

"I do not suggest retailers should sell less alcohol in a way that would damage profits. However, many retailers sell alcohol as loss-leaders, particularly at Christmas with end-of-aisle promotions."

Related topics: Beer

Property of the week

Follow us

Pub Trade Guides

View more