Get smart to beat discounts

28 May, 2010

Lager pricing is back in the news, with Asda’s recent £9-a-case deals on Stella Artois, Budweiser and other beer and cider brands making the red tops.

The move was followed by £10 cases of Foster’s and Carlsberg in Tesco and 15-packs of Foster’s and Carling for £9 in Sainsbury’s.

Such prices will come as no surprise to an industry that has seen big retailers using beer as a loss-leading footfall driver for several years.

But the return of the infamous “cheaper than water” line to the pages of the mass media shows the major multiples aren’t being persuaded away from tactical discounting by negative publicity and having their top PR people grilled by parliamentary committees.

The latest deals have been billed by some analysts as a defensive tactic, designed to retain current customers in the lead-up to a summer sales period that will be more important than ever because of the World Cup.

Avoiding Budget hikes?One beer company sales director says deals on Budweiser and Stella left the retailers concerned with only 4p a case profit after VAT and duty were taken into account. This threatens to undermine regular supply channels to the independent trade, with wholesale prices there normally around £14 a case.

“Some wholesalers are very concerned,” he says. “Stores have signs saying a maximum of three cases per customer, but people apparently go to customer services and pre-book more.”?Prices are so cheap – and sell-by dates within range – he says, that there is the real prospect of consumers stocking up for Christmas, especially with the possibility that a summer Budget could bring a further hike in duty.

The source adds: “There’s also the possibility that England could go out of the tournament early, which could lead to further discounts as supermarkets seek to offload stock, or of it being dumped on the grey market which could further affect wholesalers.” It all adds up to what could be the take-home lager market’s version of the perfect storm.

It leaves retailers further down the food chain with a dilemma. Should they frantically shop around to secure the best deal on alternative big brands in an attempt to match the supermarkets as closely as they can, or devise some other promotional strategy to attract consumers by giving them more value for their custom??Jason Wills, senior brand manager for world beers at Heineken UK, says there’s a major opportunity for smaller players to focus on brands that come from countries participating in the World Cup, that are frequently off the big multiples’ radar.

These might include his company’s own Moretti from Italy or Sagres from Portugal, and others such as Quilmes from Argentina or Cruzcampo from Spain.

“There will be a bulk opportunity on big brands, but more discerning consumers won’t stop buying imported brands just because there’s a World Cup on,” says Wills.

Both Quilmes and Cruzcampo are distributed by the independent drinks importer Morgenrot. Its senior national accounts manager Graham Archibald says cheap supermarket deals can actually be an opportunity rather than a threat for independent retailers.

“If multiples are selling cases of Stella for £9, it’s pointless trying to compete,” he says. “One of the things which independents have over the multiples is flexibility in what they stock,” he says.

“By keeping tabs on the tournament and stocking beers from countries still competing, retailers can keep their offering fresh, exciting and in tune with the tournament. Staff can also play a huge part by educating consumers on different brands’ taste profiles, as well as beer and food pairings to upsell premium lines.”?Wills at Heineken UK says the drinkwith-food angle is increasingly coming into play and is an area where smaller shops can be more flexible in their approach.

“There’s real evidence from the on-trade – with venues such as Wagamama with Tiger and Bella Italia with Moretti – that consumers like their meal to be accompanied by a beer from the place where the food originates.”?Winning opportunity?This opens up the possibility for retailers not only to fashion their own food and drink promotions, but also to link up with nearby takeaways for deals on relevant brands, mutually driving customers to each others businesses.

Wills argues that cheaper prices on in-home entertainment systems and satellite packages are reducing the power of the pub as a meeting place to watch football. He urges shops to steal some of the on-trade’s thunder by creating a buzz in stores around the tournament.

“There are a lot of negatives around going out to watch games, like not being able to get a drink at the bar. If it’s not an England game, often going out won’t be the preferred option,” he says.

“Doing a multibuy across world beers could persuade consumers to stock up on a selection to last the tournament.

“You could create the sense of participation you get in pubs by promoting the idea of adopting a second team to get them drinking that country’s beer or eating its food,” says Wills.

Creating a short-term buzz around beer might yet prove to be the easy bit for smaller stores, but the impact of the current round of discounting could be felt for the rest of the year.

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