Coalition policy: Alcohol loss leaders ban proposed

Tesco backs minimum price for alcohol sales.

So we are in a new era of consensus politics… maybe, maybe not, but that is not the point here, I try and avoid political comment in this blog, but politics and licensing are intrinsically linked and with any new government comes new ideas and a new mandate to govern; this tends to mean ‘change’.

We await the ‘big ideas’ on licensing, but even within a couple of weeks we can already see the start of this process. The new government has promised to ‘overhaul the licensing act to give police and local authorities more powers to deal with premises which are causing problems’.

Dealing with problem premises will be welcome in most quarters; they do the sector irreparable harm and are the ones who bring on restrictive expensive legislation to the vast majority of responsible retailers. I take some comfort from the statement that they will “review pricing to tackle binge drinking without unfairly penalising responsible drinkers, pubs and local industries”.

They have also promised to target supermarkets selling alcohol as a ‘loss-leader’.

Tesco have leapt on this statement with the speed of a leopard pouncing on its pray; or in this case a large retailer desperate to secure price fixing by the front door.

There is a common misconception that minimum pricing is linked to taxation, this has never been the case; taxation, as obscenely high on alcohol as it is, would not be affected. The minimum price would only increase the profits of the retailers and Tesco with its vast and very successful business would reap the rewards of increased profitability without loss of its competitive edge.

How significant the sale of alcohol as a ‘loss-leader’ is, we will never quite know. Tesco, Waitrose, Asda etc. are never going to reveal their competitive pricing structures with suppliers, who would? But that is not really the important aspect of this story; I just went into my local Tesco and there was a buy-one-get-one-free on cases of brand name beer for £16.

The importance alcohol has in attracting customers is significant, the very fact that the beer is sold in cases of 18 bottles should tell us something about the importance of the perception that a case of beer can cost £8 (and yes you will find it cheaper elsewhere). If you go to any supermarket, where are the alcohol deals on display? Pride of place in the entrance where you can’t possibly miss them.

So who are the winners and losers?

Supermarkets – stand to increase profit margins considerably, even with lower volumes, I would guess that their net profit on alcohol will be higher.

Off-licences / small licensed shops – They may see an increase in sales as a result of a slightly more level playing field, but they will still find it difficult to compete. Many small retailers buy their stock directly from the supermarket promotions, because they can’t get these competitive prices from their own suppliers, they will lose out; so a mixed bag for them.

Pub / clubs – This is an area where these developments should be welcomed. Any minimum price is unlikely to affect them. If ‘pre-loading’ is reduced in the longer term, it should lead to more alcohol being consumed in these controlled establishments and less trouble (and therefore cost) to deal with as a result of customers arriving drunk.

The drinks industry – The big losers will be the drinks manufacturers. Any dip in consumption naturally affects them. 

The government – They have a duty to tackle alcohol related crime and disorder and we have always said this is not a one solution problem. Minimum pricing will have an effect, but excessive alcohol consumption is a cultural problem and price is just one part of that culture. The impact of licensing act proves that there is no magic wand. Don’t get me wrong I think the act was a good step and properly enforced could work; but it is not going to happen over 5 years, cultural changes take a generation. In the 20 years I have been in the industry there has been massive change and in another 20 year there will again have been massive change, you need to stick with things and see them through to effect cultural change.

Oh… and the government will lose tax revenue…

The consumer - At the lowest end of the alcohol market minimum pricing will mean more cost, I don’t however think the responsible drinker will feel too much difference. Those who primarily drink out will not be hit and if you look at the proposed minimum pricing, it is low end high alcohol volume products which will be affected. There must be an issue when a can of beer and a can of coke cost the same….

I’m not saying that I am an advocate of minimum pricing. In an ideal world, I would like to think that responsible drinkers can continue to drink responsibly and those who misuse alcohol and commit alcohol related crime can be dealt with effectively within existing laws. But alcohol misuse is a problem and it is a problem which costs the tax payer billions of pounds. I would love to think that we could reduce the impact of alcohol and pass on a little of that tax money back to tax-payers to afford the slightly more expensive alcohol… in an ideal world…

I could write a 20 page essay about the pros and cons. The lobbies for each group will argue in a one dimensional format. With everything that has gone on in the last few years you would have thought that it was time for people to wake up to consensus and compromise. It has not yet worked when one side or the other can’t see past their own specific interest. Everyone has to acknowledge the problems and give a little so we can reach a compromise which deals with the problem without anyone claiming victory; if we maintain the status quo, everyone will end up losing.


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Date – 20th May 2010