Six clichés of uncertainty

The issue of minimum pricing understandably causes mixed feelings in the on-trade. And it’s much too simplistic to say that licensees want it and brewers don’t. Let’s look at the clichés…

There are those in favour who argue that minimum pricing will start to ‘level the playing field’ (1) between supermarkets and pubs, and discourage bulk buying and binge drinking.

Some say it is a ‘sledgehammer to crack a nut’ (2), and in any case fails to address the problem — like putting up the price of petrol to reducing speeding.

Others claim it is the ‘thin end of the wedge’ (3) — that once established, alcohol prices will ratchet quickly upwards under pressure from the health lobby.

There’s certainly uncertainty on the matter! No one is quite sure what either the cause or effect of minimum pricing will be.

We’ll start with the cause. The three options apparently under consideration for delivering minimum pricing include: setting a nominal minimum price; banning below-cost sales; or further use of the duty escalator (or some other tax mechanism).

The on-trade might at least accept the simplicity of the first; it should be suspicious about the sensible implementation of the second; and it has every right to be horrified at the thought of the third. Any more taxation would be hugely damaging to pubs and brewers and would inevitably cause more pub closures and job losses. This would be the worst of all outcomes.

With regards to the effect, various parties have made their own estimates.

Our colleagues at The Grocer have researched the impact of minimum pricing at 40p and 50p per unit within supermarkets. At the lower level, 9% of beer stock-keeping units (SKUs), 9% of spirits SKUs and 20% of cider SKUs would fall foul.

At the higher level, more than a third of all alcohol SKUs would have to go up in price. A three-litre bottle of 22.5-unit Frosty Jack’s cider, recently on offer at Tesco for £2.99, could not legally be sold for less than £11.25.

It’s relatively simple to work out the price equations, but much harder to estimate the effect on consumer behaviour. We might like to think it would send pre-loaders flocking to pubs. But it would seem more likely, generally, to depress demand for alcohol.

One Canadian scientific journal claimed that people drink 3.4% less alcohol for each 10% increase in price (an effect pubs have already witnessed with each tax increase).

It might have other, more surprising results. CGA considers that the end of deep discounting on beer, wines and spirits could see a greater consumer focus on product quality and brand equity, as consumers stop automatically buying on deals and actually consider what they’re purchasing and why.

The point is, nobody knows. Any initiative such as this is open to the ‘law of unintended consequences’ (4). And successive Governments have a poor record on legislating in our area (Licensing Act 2003, anyone?).

In the absence of clarity, I’ll end on two more clichés — ‘be careful what you wish for’ (5) and ‘the proof of the pudding is in the eating’ (6)!