April 2013

Pricing Drinkers Back into the Pub?

It is delusional to believe that minimum alcohol pricing will do anything to help the pub trade

SOME PEOPLE in the drinks trade such as Greene King boss Rooney Anand seem to have got the idea that minimum alcohol pricing would be a way of redressing the balance between on- and off-trade consumption and encouraging people back into pubs. However, Tim Martin of Wetherspoon’s was closer to the mark when he described minimum pricing as “utter bollocks, basically.”

In practice it’s hard to see how it would generate a single extra customer for pubs. For a start, it’s fairly obvious that if you increase the price of A, but leave B the same, it doesn’t make B any cheaper, or give people any more money to spend on it. Perhaps it might lead the odd person to go back to B because A is no longer such an irresistible bargain, but on the other hand it will increase costs overall and potentially lead people to cut back on B. It certainly won’t put any more money in anyone’s pocket apart from brewers and retailers.

In a survey carried out by YouGov [1], 39% of respondents said that minimum pricing would lead to them drinking less in pubs and bars, while fewer than 1% said they would drink more. Another poll by ComRes [2] showed below 20% support for the plan amongst the population as a whole, so it can’t exactly be said to command broad popular support.

Much of the rhetoric surrounding minimum pricing concerns problem drinkers downing dirt-cheap white cider, super lagers, budget vodka and the like. While it would undoubtedly raise the price of their favoured tipple, is it really going to persuade them to start using pubs instead? And would the pubs want them anyway? On the other hand, before discounting, the price of most mainstream branded alcoholic drinks is already 45p or more a unit, so it will make no difference whatsoever. Obviously it would affect the price of some products that are being discounted, but even so they would still be markedly cheaper than the equivalent in pubs. No doubt it would to a small extent cut overall consumption, but people aren’t suddenly going to stop “pre-loading” because the price of a bottle of cheap vodka has gone up from £10 to £12.

The reasons for the long-term decline of the on-trade relative to the off-trade lie in a variety of social changes over the years that go well beyond price alone. If you want a drink, it isn’t a simple either-or choice as to whether to have it at home or in the pub – you need an actual occasion to prompt you to visit the pub. Even if beer was a pound a pint, pubs wouldn’t be doing anything like the trade they were thirty years ago, especially at lunchtimes.

It is also suggested that this change in the marketplace is something that has been brought about as part of a deliberate policy by the major supermarkets. However, in reality, while they may be able to tweak customer preferences to a limited extent, supermarkets can only sell what people want to buy. They are, by and large, responding to consumer demand, not creating it out of thin air. If they really could manipulate the market to the extent that is claimed, then they would have discovered the Holy Grail of business.

Minimum pricing would also set a precedent for government regulation of drink prices that it would be na├»ve to assume would never be extended in some way to pubs. It is short-sighted in the extreme for one section of the drinks trade to seek a temporary advantage from what is essentially an anti-drink measure. In the words of Winston Churchill, “an appeaser is one who feeds the crocodile hoping it will eat him last.” Anyone with an interest in alcoholic drinks as producer, retailer or consumer who feels any sneaking sympathy with minimum pricing should reflect long and hard on that proposition.


References:

[1] http://www.sabmiller.com/index.asp?pageid=149&newsid=2109

[2] http://www.morningadvertiser.co.uk/General-News/Fewer-than-one-in-five-people-support-minimum-pricing

2 comments:

  1. The weirdie beardy clubs needs to decide whether it is a campaign to influence or coerce people.

    The former sits comfortably in a society of free choices. The latter looks a bunch of weird twats that want to stop people enjoying a cheap bottle of vino on the sofa because the only responsible way adults can drink is if they drink wholesome real ale under supervision in an approved pub.

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  2. Substitution effect says yes it will because the relative cost of drinking in a pub as opposed to at home will be cheaper, making it a more attractive option; income effect says no it won't, as putting up the price in the off trade will just leave people with less money in their pocket to go to the pub with.

    Which will be stronger? Depends to the extent you think at-home drinking and pub going are complements or substitutes, or quite possibly completely unrelated.

    There are numerous reasons other than price that people don't go to the pub but choose to have a drink at home instead; wider beer choice, there's something they want to watch on the telly, they don't want to drink and drive, can't be bothered getting changed out of their dressing gowns, whatever.

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