Recently, I had cause to look at the differential in beer duty between the on and off-trade, something that I know exists now.
Several Budgets have made small adjustments favouring draught over packaged and I recall being grateful that the issue was acknowledged albeit with only small changes.
No Government ever makes dramatic changes, nor should we expect them to, it’s a long game of acknowledging an issue and then taking small steps in the right direction.
These small steps mean that, currently, the off-trade pays 13.9% more beer duty than the on-trade. Yes, you read that right nearly 14% difference, that, my friends, is not insignificant by any measure. So why are the supermarkets not screaming at the Government for duty reductions because the on-trade appears to do annually? Where are the graphs showing the relative tax rate in supermarkets across Europe? Why does an industry with such strong and powerful lobbies seem mute on this point?
Has the on-trade found some secret power, some ability to box the supermarkets into a corner – what is actually happening?
Cuts not passed on
I have written before about the absurdity of the brewers sponsoring ‘cut the duty’ campaigns when, in reality, any such cut is not passed to the licensee and therefore the consumer. However, the nefarious relationship between the off-trade and our beloved brewers, driven by huge volumes, is deeper than that.
In the past three years, I have not seen a rise in the wholesale selling price (WSP) of packaged products from the big brewers, in fact, they have even proclaimed that by not raising these prices they are supporting the on-trade.
The unique selling point of pubs is draught beer, how does increasing the price of that and not packaged products help us in the on-trade? I have even written to on-trade directors to seek an answer in previous years, none has been forthcoming.
Every price in the country flows from the brewers’ WSP, whether you are on or off-trade, tied or free-of-tie your discounts/rebates/deals all relate back to the WSP and any movement in this is reflected in your end price.
Can you see where this is going? While the Government has been slowing ratcheting up the difference in duty to the advantage of the on-trade, the brewers have been reversing this by ratcheting up the WSP on draught only.
A quick check shows that the best case WSP increase on draught Cruzcampo this year (including duty) is 29.5p per litre based on 100-litre keg (no surcharge) while, on packaged, it is 0.035p so the increase to the on-trade is 84% more than the off-trade.
Take time to think
So when the brewers send you the posters and beermats for the ‘cut the duty’ campaign, when they prime you with comparisons to shout from the rooftops and declare that duty is killing the trade, take time to think.
Before you let them make you look stupid campaigning for a cut that will benefit nobody but the brewers, before you engage in their distraction tactics, take a moment.
The clever people, the seasoned campaigners and lobbyists haven’t been vocal, haven’t been public, they haven’t even been noticed yet they have secured enormous concessions on their products pricing year in, year out.
As a trade, we need to offer real solutions and rational arguments to beleaguered Governments, not follow blindly along with misconceptions and historical arguments.
Our argument should not be with the duty but why the brewers are being allowed to reverse the Governments intentions by swinging the pricing balance back to packaged products.
