Unity is strength

25 June, 2010

When Tesco broke rank from the Wine & Spirit Trade Association and declared its support for minimum pricing of alcohol, it was only saying what dozens of independent wine merchants have been arguing for years.

Their motives may be different: cynics would say Tesco is simply looking for good PR, and a lighter touch from the new administration. Independents just want to see a more level playing field. But the WSTA remains implacably opposed to a government-imposed minimum price per unit.

Differences of opinion within trade organisations are nothing new, but with the Westminster coalition apparently determined to tackle the nation’s alcohol excesses head-on, it’s never been more crucial for the drinks industry to speak with a united voice.

Below-cost selling represents another problem. In a remarkably short space of time, almost everyone in the industry seems to have fallen into line in agreeing the government is right to seek a ban on such deals (leaving aside for one moment the small detail that Tesco has recently been selling beer for 6p a litre less than the combined cost of duty and VAT).

But there is disagreement about what “cost” should mean. The Federation of Wholesale Distributors, and the British Beer & Pub Association, say it should take into account duty, VAT and at least some of the production costs. The WSTA’s line is that cost should be defined purely by the tax that’s payable.

Tom Innes, owner of Fingal-Rock wine merchants in Monmouth, is a WSTA member and agrees with its opposition to minimum pricing, which he believes is “hare-brained and unenforceable”.

But he also remains unconvinced that a ban on below-cost sales is what independents need.

“What about distressed stock – if somebody has to sell stock to stay in business?” he asks. “What about bin-ends when you get a little bit of stock left over and you just want to get rid of it? What about auctions? There are some items where it’s not very good PR to let it go through the shop and you let it disappear. An auction is the obvious route. I won’t necessarily get the money I paid for the wine but I would rather have the cash.”?Cambridgeshire wine merchant Philip Amps never sells anything below cost – with the exception of one bottle so affected by tartrates that it was not worth what he’d bought it for. But he fails to see how a below-cost ban could be enforced.

“How do you prove something is below cost? Knowing how supermarkets buy, they have a price, and then promotional periods and promotional monies. When you add that all together is it below cost or just a very good price?” he says.

Amps “complained bitterly” to Champagne suppliers about the give-away deals he saw in the multiple grocers at Christmas. “I was told by suppliers that supermarkets threatened to sue them if they said they were selling below cost. If that’s true, everything that’s coming out of supermarkets is a blatant lie.”?Amps, who is also a WSTA member, believes any cost calculation needs to take account of the value of the wine itself, as well as the VAT and duty elements. Even so, he believes a ban on below-cost sales is “completely unworkable” thanks to supermarket buying power and the sector’s hold over its suppliers.

The WSTA has a diverse membership, ranging from major retailers such as Tesco and Sainsbury’s right the way down to small independents; suppliers range from the mighty Diageo to small importers. Wholesalers and convenience groups are also among its ranks.

Isn’t representing the views of all these players an impossible task? “I don’t think it’s as difficult as all that,” says communications chief Gavin Partington. “The truth is that in some areas of policy there’s bound to be differences of opinion within the membership of a trade association.

“No trade association would be doing its job properly if it wasn’t continually consulting members and getting a balanced set of views.

“Where I think we’ve found a remarkable level of agreement is around below cost. We’ve had that debate for some time. A clear and workable definition of below cost is duty plus VAT. Clearly some people would say you need to take into account some element of cost of production on top of that. OK – but how is that going to be calculated? By all means let’s have the debate but we say it’s not simple to come up with that additional element.”?Is it not regrettable that the FWD and BBPA have a different definition of cost? “In terms of dealing with government, there’s no doubt it would assist the drinks industry if it expressed one set of views. But, as in a lot of areas in life, there are differences of opinion,” Partington says.

“People made a lot out of the Tesco announcement on minimum pricing, but, in actual fact, there’s a remarkable amount of agreement about a ban on below-cost selling. Any support for minimum pricing is, of course, slightly notional in the sense that the current political administration is not proposing minimum pricing.”?Partington approaches the next phase of the industry’s dealings with government with some optimism, especially if it will lead to a means for debating price without falling foul of competition law.

“I think there’s much more agreement now about some of these things than there has been for some time,” he says. “We recognise price is an area of concern and would like to find a way of talking about it.”

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