Minimum pricing signals brands war

Whether that’s from below-cost sales, potential minimum price, further use of the duty escalator, inevitable producer cost inflation and/or health lobby pressure to denormalise alcohol (and thus make it harder to use as a loss- leader), this activity will move prices north.

With all of this attention (and possibly legislation) focused on alcohol pricing and responsible retailing, the big value discounting mechanic will come under threat.

While deep discounting has never been desirable from a supplier with regard to brand value, it has been a welcome volume driver. If retailers stop (or are stopped from) using this mechanic, the very nature of the consumer decision-making process will alter dramatically.  Price would move from being the main factor driving a purchase and we’d see the decision shift to consideration of brand equity and perception.

In supermarkets, Mum typically purchases the brands for the family and therefore looks at the offers — 65% of beer is purchased on offer in supermarkets. If price is removed from the equation, the question “What beer should I pick up?” will ring round every household, putting the decision back in the hands of the primary consumer.

This is something that suppliers need to be aware of and start planning for today. While minimum pricing and/or legislation may be some way off, the war for brand equity needs to start now. The good news for us is that the on-trade will form the battleground.

The on-trade has long been seen as the place to build perception and establish brand credentials. The continued best practice of brand-positioning, pricing and engagement in the on-trade has been shown to build brand equity. In fact there is a double win to be had — a strong on-trade brand image will reinforce consumer support and thus influence the off-trade big-volume purchases.

That’s why suppliers need to start future planning now and taking a long hard look at the current positioning and support invested behind brands in our pubs and bars.  

When this is done correctly, brand profile and retailer profit can be reinforced, as consumers’ engagement is experience-based rather than just down to price.