Brewers charge more for less

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Protz: How can the big brewers justify a 5p a pint increase?
Protz: How can the big brewers justify a 5p a pint increase?
The decision to raise beer prices and reduce ABV will save the global brewers money, but squeeze our pubs, argues Roger Protz.

The recession is biting, people are feeling the financial squeeze, benefits are being cruelly withdrawn and trips to the pub are no longer a regular pleasure but an occasional luxury. What is the response of the global giants who dominate brewing and beer retailing in Britain?

To increase beer prices.

The result doesn’t need to be spelt out. More people will be driven away from pubs and into the arms of the supermarkets. And more pubs will go out of business as a result.

Beer, of course, will not increase by the same amount in supermarkets. Tesco and company will tell their suppliers to absorb the increase and the brewers will fall meekly into line. They make marginal profit from supermarket sales, but those sales keep brewing vessels full and ticking over. Even just a penny a pint profit adds up to a lot of cash when you’re selling several million barrels a year to high-street retailers.

And the pub trade effectively subsidises the supermarkets by having to pay top dollar for their beer from the same brewers who are selling at cost or with deep discounts to the mega stores.

However, the global brewers aren’t content with merely increasing the price of a pub pint. There’s also a cunning piece of sleight of hand involved. Heineken, which now owns the former Scottish & Newcastle brands and breweries, announced last month that not only was it increasing the price of a pint of John Smith’s Extra Smooth by 2.5p but at the same time it was reducing the strength of the beer from 3.8% ABV to 3.6% ABV.

In other words, you will pay more money for weaker beer.

Heineken says consumers will not notice any change in the character of the beer. However, it doesn’t excuse the company for charging a higher price for a weaker product. And the brewer is less concerned about the taste of the beer than the enormous savings it will make as a result of paying less duty on the brand.

Sit down, pour yourself a stiff brandy and I will tell you what the savings amount to: it’s £6.5m a year.

Heineken is not alone in playing the less-beer-for-more-money game. Last year the strength of Carlsberg Export, Beck’s, Budweiser, Cobra and Stella Artois were reduced from 5% to 4.8%. As these beers are considerably stronger than John Smith’s, they occupy a higher duty band.

If the savings on duty on each beer is in the region of £10m a year, it means the global brewers in total are paying around £60m a year less to the Exchequer.

Where the price of a pint of beer is involved, the brewers are on dodgy ground. They claim the 2.5p on a pint increase is necessary as a result of their rising costs. However, the argument just doesn’t stand up to examination.

It takes a lot of fuel to transport beer around the country. But the chancellor came to the rescue last year, twice abandoning increases in fuel duty. So the ‘rising cost of fuel’ argument doesn’t wash.

I’m told by Warminster Maltings, a major supplier of barley malt to the brewing industry, that as a result of last year’s wet summer the price of malt did go up in January. But, says Warminster, it shouldn’t mean more than a penny on the price of a pint. And the British Hop Association tells me the price of hops has not gone up.

So fuel prices are frozen, barley malt has gone up in price marginally and hop prices have not risen. So how can the big brewers justify their price increases?

It used to be known as ‘charging what the market will bear’. But the market — in the shape of the poor, battered, beleaguered pub — can no longer bear it. Eighteen pubs a week are closing and the rate will not decline as the big brewers increase prices, allowing the gap between pub and supermarket to grow ever greater.

Duty on beer increased by 42% between 2008 and 2012, thanks to the iniquitous duty escalator brought in by the last Government and continued by the current one. Between them, Government and global brewers are destroying the pub trade and the pleasure of millions who enjoy a trip to the local.

I get so tired of pontificating politicians on television talking about what their constituents are discussing “in the Dog & Duck”. Haven’t they noticed? The Dog & Duck closed last week.

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