Trade encouraged by Asda 'below cost' ban

Asda's move to ban below cost sales of alcohol is encouraging but there is still a long way to go, according to trade figures.

Asda chief executive Andy Clarke has written to Home Secretary Theresa May outlining the group's new policy on alcohol sales.

However, it has come under fire for defining below cost sales as the cost of duty and VAT — and crucially failing to include the cost of production.

In his letter, Clarke said: "We accept that the way in which alcohol is sold to the public needs to change and I welcome the high priority given by the new coalition Government to tackling alcohol misuse by working with business.

"I am writing to you to call for the establishment of a floor price for alcohol below which it would be illegal to sell.

"But words count for nothing without actions to back them up, so from today (July 20 2010) it will be Asda's policy in all our stores not to sell alcohol to the public below the cost of duty plus VAT.

"I see this as a small but important first step in the process towards creating a new way of selling alcohol in the UK."

Clarke said a bottle of Smirnoff vodka would never cost less than £10.49 and a pack of 20 Carling lagers will not be priced below £7.17.

He added: "I believe that a ban on selling below a floor price of duty plus VAT would raise the price of the cheapest alcohol deals and promotions and give Government the lever to ensure that increases in tax are passed on to consumers.

"It would not penalise the vast majority of customers who drink responsibly. Importantly in the current economic climate the beneficiary of higher prices would be the public purse with funds available to tackle alcohol misuse rather than accruing to the drinks industry as would be the case with minimum pricing."

Chink of light​

Association of Licensed Multiple Retailers chief executive Nick Bish slammed the definition of below cost as "complete nonsense" but said he was encouraged by the move. "Nobody makes beer for free," he said.

"But this is a chink of light as the supermarkets appear to be coming out of denial. They used to deny responsibility for anything beyond the checkout but people who pre-load on cheap supermarket alcohol end up on the high street outside our pubs and bars making a nuisance of themselves.

"The supermarkets are starting to get it."

Smokescreen​

Michael Kheng of the Kurnia Group slammed the policy as a "smokescreen" for Government. He said: "They are still using alcohol as a loss leader as they are not incorporating the production cost in their calculation.

"The problem is Tesco and everyone else will then follow suit and the Home Office will think they have done a good job but in reality nothing will change."

But, the British Beer and Pub Association praised the move. "It is a clear signal that it recognises what it has done in the past is no longer acceptable and it needs to change," said director of communications Mark Hastings.

"They deserve praise for that."

The Government plans to act on below cost sales​ before November 2011.