The latest Statistical Handbook of the British Beer & Pub Association (BBPA) reveals that, in 2014, beer sales through the off-trade exceeded beer sales in the on-trade. This was, perhaps, inevitable. The long-term trend has been clear for some time. In 1980, when the BBPA’s figures start, 88% of beer was sold in the on-trade.
Social historians will point to the decline in heavy industry, workers no longer slaking their thirsts with what now seems a foolhardy, if not unfeasible, number of pints.
Competition from alternative leisure venues is, perhaps, not so novel. The golden years of the silver screen, when there were half-a-dozen cinemas on every high street, came between the wars.
Today, the challenge comes from casual-dining restaurants, coffee shops and, above all, the home, no longer so dull and draughty that a few hours down the pub seemed a necessary comfort.
Widescreen TVs, broadband and ready meals branded as ‘gastropub’ meals pin people to the settee, while inviting friends round for dinner is a good way of making sure someone knows how much you’ve spent on home improvements.
In recent years, though, it’s the widening price gap between on-trade and off-trade drinking that’s clinched it for many.
According to the BBPA’s stats, since 2000, the price of beer in the pub rose by 58% (faster than RPI inflation at 50%), while the increase was a mere 6% in the off-licence. By 2014, a pint of beer in the pub was an average £3.28 compared to £1.23 for the equivalent at the supermarket.
The duty escalator drove up tax on beer by 42% during four years. But the three consecutive duty cuts that have followed, along with falling materials and distribution costs to brewers, have not made pub beer any cheaper. Between 2013 and 2015, ale has increased by 3% while lager is up 4.5%.
Some pub operators believe they are being made to pay for the low prices demanded from brewers by the supermarkets. One anonymous licensee detects “a growing anger out there”.
“People are twigging that the on-trade is bearing the brunt as the brewers in-fill lost revenues in the off-trade, which only creates a vicious circle as trade moves ever more to the off-trade. I guess it has been ignored for years because inflationary rises were seen as just that, but now we have low inflation, when we know cost of production has gone down, we still see rises and people are feeling a little fleeced,” he says.
“It’s having a huge impact on the on-trade. Beer sales, as a proportion of total sales, are falling and above-inflation increases year-on-year do nothing to help this.”
Neither the BBPA nor the Society of Independent Brewers (SIBA) would comment on what is a matter of market forces and commercial decision-making.
And there are sections of the trade who would question whether the price of beer is, in any case, the most important factor.
Match the standards
The traditional tenanted estate at Frederic Robinson has felt the downturn in beer sales and marketing director David Bremner says he’s not surprised to see the balance tip towards the off-trade. Yet he insists that “price is not a factor for us”.
“The average price of a pint of Carling in our pubs is currently £3.54, but I know that if we drop it, that won’t have a dramatic effect at all.”
For Bremner, the fact that Robinsons beer sales have begun to outperform the market in the past year or so is down to “service standards” and heavy investment in the estate, with an average £150,000 spent per pub on some 40 cap-ex schemes.
“That’s just to keep our beer volumes static by attracting a new clientele. We won’t reverse the trend as an industry, but we can still make a difference at a local level,” he explains. “There are more reasons for people to stay indoors, so you’ve got to give them something they can’t have at home, and you have to match the standards there. When the pub’s good, as a place to watch the rugby for instance, it’s really good.”
He thinks the trend will “bottom-out at around 60/40 in favour of the off”. He adds: “Pubs will always have certain advantages. I’m not without hope.”
That the on-off split has reached its tipping point comes as no surprise to BBPA chief executive Brigid Simmonds.
“It’s something that’s been on the cards for a very long time. If anything, the decline in on-trade share has slowed a little, and beer’s share of alcoholic drinks sales in pubs is still remarkably high, at about 70%, so it’s still very much true that beer is the drink of the pub.”
Short-term shocks such as the duty escalator, the smoking ban and other regulatory burdens have hit the on-trade more heavily than the off, combining with longer-term trends to move people towards drinking at home, Simmonds says.
“We’re also emerging from a long period of falling or stagnating incomes. Recession tends to hit the hospitality industry hard because people cut down on their discretionary spending.”
The trend towards off sales will continue, she adds, and that reinforces the BBPA campaign messages that pubs need further support.
“This is not to undermine off-trade sales in any way. We should, and do, celebrate the successes of off-trade beer, and there is still work to be done to ensure beer is sold in innovative and attractive ways when it comes to supermarket sales.
“However, there’s no doubt pub sales bring more, adding value in terms of supporting employment, our draught beer industry and local communities.
“This means tackling not just beer duty but over-regulation, business rates, and VAT. It’s unfair that a meal in the pub attracts VAT, but a ready meal in the supermarket does not.”
Tony Jerome, director of communications at SIBA, credits improvements in the range of beers and formats available in supermarkets with contributing to the shift. “Drinking beer at home no longer means drinking inferior beer, while drinking in pubs is perceived as being expensive.
“There is, of course, a wide price gap between on and off. But you get more than just a ‘beer’ when you buy a pint in the pub. Atmosphere, service, comfort and so on should make up for the difference.
“People are visiting pubs less but seeking out better experiences,” he adds. “There has been a premiumisation of pub-going.”
He is concerned about the numbers of pubs closing, up to 29 a week, net, in the latest figures, but he hopes that fewer will mean better.
“There is a risk that people who can no longer walk to the local will lose the habit. But new pubs are opening and micropubs are becoming a genuine growth trend, creating a whole new beer-based pub experience, and we’ll see more of this.”
As well as campaigning for duty cuts, licensees can drive pub sales through educating bar staff and drinkers, improving the quality of both beer and glassware and linking beer with food, he believes.
The craft beer boom also creates an opportunity, but it’s the resurgence of cask ale, a product unique to pubs, that encourages him to conclude that “beer and pubs will always be synonymous”.
Outperforming the market
Cask Marque’s latest Cask Report, put together by beer writer and PMA columnist Pete Brown, shows cask ale is now consistetly outperforming the beer market, and on course to make up 20% of pub beer sales by 2020. This is important because cask drinkers tend to lead other customers’ choices.
But Brown warns licensees that they need to up their game when it comes to training, quality and ranging — the current fashion for constantly rotating the choice on the handpumps is undermining customer loyalty, he believes.
Campaign for Real Ale (CAMRA) chief executive Tim Page detects signs of stabilisation in the slowing rate of on-trade decline.
“It’s also positive to see the reason the off-trade has overtaken the on-trade is a 3.7% growth in off-trade beer in 2014 rather than a big decline in pub sales.
“Of course, price is the principal issue,” he continues. “But people are preferring to stay at home or to socialise at friends’ houses, and fewer have a loyalty to their ‘local’.”
Whether the trend continues depends on how pubs adapt to this changing marketplace, he believes.
“JD Wetherspoon pubs provide one example of this, but they’re not alone in having developed an offer that chimes with customers. We see many examples of enterprising and entrepreneurial licensees turning around failing pubs.
“Some have diversified to appeal to a wider group of customers. Pubs need to consider what they can do to attract stay-at-home mums, people who have retired or are unable to work, and groups who for a variety of reasons need somewhere convivial to meet. If the trend continues, though, we fear many communities, urban, suburban and rural, will lose their local pub — indeed this has already happened in far too many places for our liking.”
CAMRA is urging people to persuade councils to list their local as an asset of community value to help protect them from developers, “but people also need to use pubs, or they will be lost for ever”.
Government could do more, too, Page says. “Why should we accept that the Government collects £1 in VAT and duty on every pint of beer drunk in a pub? Is it any surprise supermarkets can offer alcohol for sale at prices way below those in pubs?
“If the Government accepts responsibility for maintaining the fabric of society, it should support pubs by creating a more level playing field. It would not be hard to do: reducing the tax burden, providing greater rates relief for pubs and stimulating their sales by enabling them to compete with the off-trade.
Beer writer and PMA columnist Roger Protz agrees. “Our new cuddly, reach-out-to-ordinary-people Government can prove its credentials by coming to the aid of the pub, bringing in a special low rate of VAT and tackling the obscene practices of the supermarkets with minimum pricing.
“But pubs have to up their game as well. Pubs doing well are staging beer festivals, talks, tastings and food-matching events. With so many craft breweries now operating, a wide range of beer is essential, too, and pressure must be increased on the giant pubcos to allow tenants to have a choice beyond the obvious national brands.”