Prices, and when to put them up - the big issue in the trade
The latest European Court opinion on the price of alcohol and the ongoing debate about wage costs have put price firmly on the agenda.
The very fact that Whitbread's announcement that the price of our morning coffee may have to go up as a result of the National Living Wage led drivetime radio news bulletins is a sign that price remains a sensitive issue for consumers. It was part of the normal round of results and should never have made it off the business pages. The fact that it was front page is telling.
Followed in quick succession by Next and other retailers it - and references to 'operational efficiencies' - is a frank admission of the commercial facts of life. But the fact that discussions about whether and how to put up prices are still so sensitive and generate that sort of media reaction is a sign of how fragile consumer confidence remains. It should give politicians pause for thought as well.
Higher wages can be good for the economy, stimulating demand and, as prices increase, so will inflation, which may also be no bad thing - or so the political theory goes. But if wage increases simply replace tax credits, then disposable incomes will not not receive a boost and could actually be eroded by that same dose of inflation. Operators could find their margins squeezed and then how will they continue the level of job creation, community and high street investment, apprenticeship and training commitments local and national government has come to not only expect but rely on our sector to deliver in spades?
All of which throws the legal debate about alcohol pricing and MUP into sharp relief. When both sides in a polarised debate claim a legal opinion vindicates their position then the only thing you can say with certainty is that it is far from clear what the final outcome will be!
What the Advocate General said was that a minimum price is a restraint on trade and as such illegal under EU rules unless justified by other public policy concerns such as health. This test would need to be applied by the national courts, but he concluded that if the Scottish Government could demonstrate that this was the case and that other measures - notably higher rates of excise duty - could not deliver a better outcome, then MUP may be permissible.
That sounds to me like the archetypal rock and a hard place for retailers - higher taxes or minimum prices, either way it hands the ability to set prices to the Government. And what Whitbread's announcement makes clear is that price is a very sensitive issue and, in a sector characterised by low net margins, is one of the few points of commercial flexibility and competitive advantage we have left.
We give that away at our peril.
Kate Nicholls is chief executive of the Association of Licensed Multiple Retailers
