Has the worm finally turned?

03 September, 2010

Suppliers may keep telling us they don’t have anything to do with retailers’ prices, but a time comes when one has to accept that if they really didn’t want their brands sold at knock-down prices, they might be able to do something about it.

Now it looks like that is finally starting to happen.

Pernod has sacrificed Absolut volumes by pulling out of deep discounts and trying to push value back into the brand – and it is not the only one. Gallo and Foster’s have let wine sales slip in a bid to protect margins, as has Heineken UK with its beers.

It is a brave move – especially in the current climate. But as well as chiming well with the responsible drinking lobby, these could be clever strategies. If spirits producers are to be believed, consumers are trading up, drinking more at home because they are going out less, and making that big night in a little bit bigger.

The boom in independent wine shops making a specialism out of a subject that has become a generality in too many retailers would tend to bear that out. And a trend towards smaller packs suggests there is a growing interest in finer drinking.

There is a general belief in the trade that education and premiumisation will go hand in hand to bring profits back, defeat binge-drinking and get the government off our backs.

At the moment, retailers are still focusing strongly on promotions, and it’s unlikely a Christmas price war can be avoided. Some commentators are talking about two-for-£20 offers on litre-bottles of spirits – which would mean 40% abv drinks being sold at exactly half the proposed minimum price of 50p per unit.

These deep discounts are damaging for the whole trade, and it is courageous of the big names to take a step away. It may not be quite the cure-all the industry needs, but it is a good start.

Have your say while you still canNew plans for how to tackle problem drinking and alcohol taxes seem to hit the OLN inboxes every day. This week it has been the Scottish Labour Party’s proposals and Diageo’s suggestion to tax alcohol by strength rather than type.

While Diageo’s recommendations could create a fairer platform for drinks taxes, most of the plans are worrying for the trade.

Among other things, the SLP has proposed a ban on below-cost selling based on production costs, duty and VAT – which could mean prohibitive red tape for producers and retailers.

But the most pressing concern remains the Home Office’s plan to overhaul the Licensing Act (see Analysis, page 12). Powers that could turn local authorities into prosecutor, judge, jury and executioner could have frightening effects on your businesses.

There are still five days to go before the consultation closes on September 8. We urge you to make yourselves heard before it is too late.

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