MyShout - John Grogan

The critical issue of off-trade pricing is galvanising the entire industry,

says John Grogan

For the first time in a generation, the supermarkets are on the defensive. The long-running campaign led by the Association of Convenience Stores to try to bring Tesco, ASDA, Sainsbury's and Morrisons to public account looked like a classic David-versus-Goliath struggle. But now the big four retailers are themselves in the middle of a Competition Commission inquiry and they face a year of shareholder anxiety before the final report is issued in October 2007.

The mere existence of the inquiry appears to have galvanised critics of the supermarkets. For the first time, brewers have joined pub companies, farmers, small shops and environmentalists in making critical submissions to the Commission. Essentially, all are united in the complaint that the supermarkets, while offering superb choice and quality to consumers, are also abusing their power at some considerable social and economic cost.

Scottish and Newcastle UK has led the way among brewers by highlighting the fact that the cost of a unit of alcohol in supermarkets is a third of the average in the on-trade (30p compared to £1.02). Given the market power of the supermarkets, it took some courage and perhaps years of frustration for Scottish and Newcastle to say boldly: "We view with concern the willingness of major multiples to invest in relatively cheap beer and cider prices to drive footfall within this sector. We strongly believe that the sale of alcoholic drinks at low cost, used primarily to drive footfall into stores, is not consistent with the promotion of responsible drinking"

The football-related promotions of beer in supermarkets are beginning to be perceived to be as notorious as the £10 nightclub entry fee allowing customers to drink as much as they wanted. Some industry analysts question whether offers such as Sainsbury's pack of 20 cans of Stella Artois for £9.99 are loss-leaders. Of course, the difference between the on-trade and the off-trade is that whilst the former are signed up to a robust code outlawing irresponsible price promotions, the latter refuse to confront the issue.

Last week Tesco announced its intention to team up with Diageo to promote responsible drinking via in-house adverts. That is unlikely to be enough to make the issue go away in a political climate where the Health Secretary is calling on the Chancellor to increase excise duty. There is no evidence that the Treasury is likely to change its long-standing position that alcohol taxes are primarily revenue-raisers, rather than health promoters. Nevertheless, there is a real imperative now for brewers and pub companies to follow Scottish and Newcastle's lead and speak their minds in relation to the supermarkets' promotions.

As things stand, the smoking ban can only increase the comparative advantage of the off-trade.

There is no more decisive current issue concerning the future viability of pubs than the debate concerning the big retailers' pricing policy.