Protz: Supermarket beer prices study reveals bombshell findings that threaten the pub trade

07-Oct-2012 - Last updated on 08-Oct-2012 at 09:35 GMT

Beer deals: some of the dirt-cheap offers in supermarkets

This column is about supermarket beer prices and how they undermine the pub. Don’t yawn, say “I’ve heard that all before” and turn the page, because this is new information and it’s devastating stuff.

Head of Steam pub owner Tony Brookes has accused high-street retailers of cutting the price of beer after the duty increase in the Budget in March. He says they are guilty of irresponsible pricing policies that are the major cause of binge drinking, alcohol-related health problems and the closure of pubs.

Brookes owns nine pubs, mainly in north-east England. He conducted a survey of supermarket prices before and after the Budget and again in June and September, choosing a Tesco store in Hexham, Northumberland.

He says that, before the Budget, most bottled beers, mainly 550ml, were sold at £1.99 or £6 for any four bottles — making the notional price of a case of 12 bottles £18, or £15 excluding VAT.

“In the Budget, duty increased from £18.57 to £19.51 per hectolitre — equating, for example, to 2.068p for a bottle of 4% ABV beer.

You would expect everyone’s prices to go up — but not Tesco. On 13 April, the deals had got even better. The same products were being offered at four for £5.50 — less than before the duty rise. These prices made the notional price of a case of 12 bottles £16.50, or £13.75 excluding VAT. The price check on 26 June revealed the deal had gone back to four bottles for £6.

“Tesco was selling many beers after the Budget for less than they were selling before the Budget — and three months after the Budget they were selling them at pre-Budget prices. The question has to be asked: did Tesco refuse to accept the duty rises that the brewers would have attempted to pass on to it or did it absorb the increase itself?”

On 25 September, Brookes returned to the Hexham store and discovered that the price of the vast majority of the British beers stocked had been reduced to £5 for any four bottles.

“This price is absolutely ludicrous,” he says. “It works out at £12.50, excluding VAT, for a case of 12 bottles. That is much cheaper than our company can buy at a discount from industry trade suppliers. The alcohol market is massively out of balance. It would be far cheaper for most pubs to buy stock from supermarkets.”

Brookes found Robinson’s Old Tom (8.5% ABV) in 33cl bottles was being sold at £1.25 a bottle. The duty on a bottle is 69.1p, VAT is 20.83p. This means taxes on a bottle are 89.93p out of the selling price of £1.25. The price of a case of 12 bottles excluding VAT is £12.50 — but the trade price is around £19 a case.”

“It’s absolutely impossible for pubs to compete with supermarkets when their prices are so low,” Brookes adds. “£1.25 a 50cl bottle equates to £304.80 per brewer’s barrel of 288 pints, excluding VAT. Most pub operators could not buy Taylor’s Landlord, for example,
for that price.

“The question arises: why are Britain’s brewers selling their beers so cheaply to supermarkets so they can be sold for a lower price than a pub operator can buy them for? Where does their allegiance lie — with the pub operator or the supermarket?

“The Government must act to stop the supermarkets’ irresponsible abuse of the market, which is driving pubs out of business.”

brookestony — Brookes: “It’s absolutely impossible for pubs to compete with supermarkets when their prices are so low”

Once again the ball is back in the Government’s court. It claims to be “pub-friendly” but it keeps in place the pernicious duty escalator that increased the tax on beer by 42% between 2008 and 2012. Over the same period, 4,500 pubs closed — and there’s a powerful link between the two figures. As a result, beer duty and prices are crippling the pub.

Brookes believes minimum prices in supermarkets would help the beleaguered pub.

Other pub-trade people are not convinced.

Last month I interviewed Tim Martin, the boss of pub chain JD Wetherspoon (JDW), and he feels strongly that VAT, not beer duty, should be the target.

“We need tax equality between supermarkets and pubs — including slashing VAT on pub food and drink,” Martin says. “That would give pubs a shot in the arm — not minimum pricing.”
He describes minimum pricing as “displacement activity” and feels the high-street giants would merely offset losses on alcohol by cutting prices on other products. “Closing the gap with minimum pricing is an illusion. A pint of Abbot at £1.25 in a supermarket won’t make a huge difference.”

Martin says supermarkets pay no VAT on food, while pubs pay the full amount. “Every transaction in a JDW pub includes 60p VAT compared to 15p in a supermarket.”

The jury may be out on minimum pricing but, to use a phrase popular with politicians, “something needs to be done”.

And it needs to be done quick before the shutters come down on even more great British pubs.