What should have been a typical Thursday morning for Tesco three weeks ago turned out to be an impromptu rush hour.
Stores were besieged by hordes of shoppers intent on clearing the shelves of one specific item. Crates of 18 Carlsberg Export bottles were on offer at just £5-a-pop, reduced from £14.99 - that's from 83p per 275ml bottle to 28p. Chaos ensued, with stores selling up to 100 crates an hour. By 11am some were completely sold out.
How things have changed in a decade. Back in the 1990s, supermarkets were lambasted for their extortionate prices on beers and wines, with tabloid newspapers throwing France-for-£1 tokens at their readers to enable them to shop in Calais.
Now the same newspapers are attacking the same retailers for selling alcohol too cheaply. Their argument? That the supermarkets have created an out-of-control monster responsible for binge drinking and the social ills associated with it.
Needless to say, the supermarkets haven't been slow to respond. Just this week, Project 10 - a pan-industry five-year marketing campaign to reinforce the message about responsible drinking - was launched. But how did booze become so cheap in the first place? And will such initiatives be enough to quash the calls for minimum pricing?
Realising there was no prospect of serious duty cuts, retailers started to do everything in their power to keep prices competitive. To add a little spice to proceedings, the grocery market began to consolidate and the leading retail players soon realised crowd-pleasing deals on alcohol were an effective way of driving footfall and increasing market share.
So how were prices kept low? Efficiencies, clever buying, 'persuasive' supplier negotiations and the availability of decent-quality bulk wine have all been part of the process. Increasingly, supermarkets have been prepared to throw their own money at drinks promotions and in some cases loss-led, just to get shoppers through their doors. In the same week as the Tesco Carlsberg giveaway, for instance, Asda was selling four cans of Skol for 90p, which at 51p a litre was 46p cheaper than Evian water.
These tactics have earned supermarkets some powerful enemies, not least within the embattled pub trade, where alcohol consumption is falling thanks to the smoking ban and an escalating cost base. With 30 pubs closing each week, the on-trade cannot afford to let its pricing differential with supermarkets continue to widen .
"The supermarkets' buying power is so fantastic that the public are buying alcohol cheaper at the checkout than the pubs can buy it from the supplier," says Nick Bish, chief executive of the Association of Licensed Multiple Retailers, which represents 15,000 pubs. "Supermarkets have argued their priority is to offer good value to customers across the board. This is a cynical and disingenuous position that fails to recognise alcohol is a special case."
Bish wants the Government to ban below-cost selling. "In its current review of responsible alcohol sales practice, the Government really must consider the pricing of alcohol in supermarkets, and ban below-cost selling. This can easily be incorporated into its proposed statutory code of practice on responsible selling, which must be applied to both the on and off-trade."
The ALMR's position was supported by Conservative MP Nigel Evans in an Early Day Motion to ban deep discounting, tabled in the same week as the Tesco and Asda giveaways. Evans is vice chairman of the 400-member All-Party Parliamentary Beer Group, which last week called for an investigation into the price difference between supermarkets and the pub trade.
Speaking at a health forum in Westminster last week, Asda public affairs manager Guy Mason claimed discounting was "deep in the company's DNA", and that Asda's customers were overwhelmingly opposed to action on pricing.
They will be even more so in the wake of Asda's three-for-£10 wine deal. Suppliers may not like it, but it's a mechanic that is unquestionably helping to shift volume - Asda grew its wine category 49% year-on-year in the month to 7 September [TNS] .
"Our guiding principle is to offer simplicity, value and quality, with our strategy focused on customers and their needs," says a spokeswoman. "The three-for-£10 deal has been remarkably successful and we remain committed to it - so much so that dedicated bays have been introduced as part of our recent wine range change."
Paul Letheren is a director of Off-Piste Wines, which supplies Australia's most successful wine, Yellow Tail, in the UK market. The brand has built its reputation around the world with full-price sales, but in the 2008 UK retail marketplace, Letheren recognises that supermarkets will often have a different agenda. "Cheap is where it's at," he says bluntly. "Premium is almost a swear word. I wouldn't be surprised if this year the price of wine actually went down, despite the fact that duty has gone up.
"It's about retailers looking after what the consumer wants."
Asda and the other multiples remain defiant about their pricing strategies in the face of mounting pressure. Scotland was first to seize the initiative and implement the smoking ban and if the SNP gets its way, it will be the first to impose minimum pricing. In a bid to tackle binge drinking, the Scottish Government tabled a motion in July to ban cheap drink promotions, set minimum prices for alcohol and raise the legal age of alcohol purchase to 21 in the off-trade.
Despite heated debate, the detail behind the proposals is still unclear, although some supporters believe a 50p-per-unit minimum is feasible. Skol would therefore have to be at least 72p a can in Asda, compared with a low of £1.15 a pint in a pub.
"The proponents of minimum pricing say it will curb alcohol misuse, but there's no evidence to suggest it will affect the people for whom this is a problem. It would raise prices for ordinary consumers at a time when everyone is feeling the pinch. "
Asda agrees and cites a report by the Centre for Economic & Business Research that concluded a 50% increase in alcohol duty would be required to deliver a 2% reduction in demand. "More importantly, it found heavy drinkers displayed no statistically significant response to changes in the price of alcohol," says the spokeswoman. "Setting minimum prices for alcohol would be ineffective in reducing consumption among those groups highlighted by the Government. The danger of falsely inflating prices is that the vast majority of people are forced to pay more for their groceries, even though they drink alcohol safely and in moderation."
While the SNP wrestles with the administrative and legal issues thrown up by minimum pricing, observers in Westminster are watching with interest. According to sources, officials in the Treasury and Department for Business, Enterprise & Regulatory Reform are convinced imposing minimum pricing is legally impossible - though their counterparts in the Department of Health are more optimistic .
The debate is now set to intensify in England and Wales. Tories have declared their opposition to below-cost sales. The party's Alcohol Policy Group has been asked to draw up proposals and has promised to consult retailers and the wider industry.
The Liberal Democrats are even more forthright. "As a rule, I don't believe governments should set prices, but when retailers are deliberately distorting the market we need to take action," says leader Nick Clegg. "That is why we should look to the example of Ontario in Canada, where a socially responsible minimum price for alcohol has been successfully implemented."
Supermarkets insist they are responsible retailers. Asda and Morrisons point out that they operate Challenge 25 schemes when the accepted standard is to ask for ID when customers appear under 21, and most industry marketing material references the Drinkaware website.
As well as Project 10, alcohol retailers have subscribed to a host of anti-binge drinking initiatives. Asda is investing £1m in youth projects aimed at reducing under-age consumption and has voluntarily stopped selling alcohol in town-centre branches between midnight and 6am. Sainsbury's has adopted detailed labelling, including explanations of alcohol units on its labels, and has increased its range of smaller bottles and lower-alcohol wines. Tesco, meanwhile, surprised critics earlier this year by claiming that, while it would not unilaterally raise drinks prices, it would be happy to participate in a Government-sponsored debate about how this might happen across the industry.
Will any of this be enough? With the health groups having found an unlikely ally over minimum pricing in the pub trade, maybe not . But the supermarkets have arguably the most powerful ally of all - the shopping public. With low prices now the order of the day, the booze monster could be around for a while yet. n
Stores were besieged by hordes of shoppers intent on clearing the shelves of one specific item. Crates of 18 Carlsberg Export bottles were on offer at just £5-a-pop, reduced from £14.99 - that's from 83p per 275ml bottle to 28p. Chaos ensued, with stores selling up to 100 crates an hour. By 11am some were completely sold out.
How things have changed in a decade. Back in the 1990s, supermarkets were lambasted for their extortionate prices on beers and wines, with tabloid newspapers throwing France-for-£1 tokens at their readers to enable them to shop in Calais.
Now the same newspapers are attacking the same retailers for selling alcohol too cheaply. Their argument? That the supermarkets have created an out-of-control monster responsible for binge drinking and the social ills associated with it.
Needless to say, the supermarkets haven't been slow to respond. Just this week, Project 10 - a pan-industry five-year marketing campaign to reinforce the message about responsible drinking - was launched. But how did booze become so cheap in the first place? And will such initiatives be enough to quash the calls for minimum pricing?
Minimum Pricing: where we're at
The consultation period for the Scottish Government's "unashamedly radical" plans for alcohol reform - which include not only minimum pricing, but also increasing the legal purchasing age to 21, banning promotions and creating alcohol-only checkouts in larger stores - has now ended. The ruling SNP group is hopeful of including some or all of its proposals in the new Licensing Act, due to come into force on 1 September 2009, but faces stern opposition and potential legal hurdles.
In Westminster, the Government's proposed code of practice for drinks retailers stops short of imposing minimum pricing, or even banning below-cost pricing, according to a leaked document. A Government-commissioned study by Sheffield University into the effects of drinks promotions was expected in the early autumn, but is now not expected to appear until at least late November.
The road to cheap booze started, paradoxically, in the 'rip-off Britain' of the 90s. Supermarkets realised there was no prospect of obtaining serious duty cuts to bring UK duties - and therefore prices - into line with much of Continental Europe and France in particular (see box).The consultation period for the Scottish Government's "unashamedly radical" plans for alcohol reform - which include not only minimum pricing, but also increasing the legal purchasing age to 21, banning promotions and creating alcohol-only checkouts in larger stores - has now ended. The ruling SNP group is hopeful of including some or all of its proposals in the new Licensing Act, due to come into force on 1 September 2009, but faces stern opposition and potential legal hurdles.
In Westminster, the Government's proposed code of practice for drinks retailers stops short of imposing minimum pricing, or even banning below-cost pricing, according to a leaked document. A Government-commissioned study by Sheffield University into the effects of drinks promotions was expected in the early autumn, but is now not expected to appear until at least late November.
Realising there was no prospect of serious duty cuts, retailers started to do everything in their power to keep prices competitive. To add a little spice to proceedings, the grocery market began to consolidate and the leading retail players soon realised crowd-pleasing deals on alcohol were an effective way of driving footfall and increasing market share.
So how were prices kept low? Efficiencies, clever buying, 'persuasive' supplier negotiations and the availability of decent-quality bulk wine have all been part of the process. Increasingly, supermarkets have been prepared to throw their own money at drinks promotions and in some cases loss-led, just to get shoppers through their doors. In the same week as the Tesco Carlsberg giveaway, for instance, Asda was selling four cans of Skol for 90p, which at 51p a litre was 46p cheaper than Evian water.
These tactics have earned supermarkets some powerful enemies, not least within the embattled pub trade, where alcohol consumption is falling thanks to the smoking ban and an escalating cost base. With 30 pubs closing each week, the on-trade cannot afford to let its pricing differential with supermarkets continue to widen .
"The supermarkets' buying power is so fantastic that the public are buying alcohol cheaper at the checkout than the pubs can buy it from the supplier," says Nick Bish, chief executive of the Association of Licensed Multiple Retailers, which represents 15,000 pubs. "Supermarkets have argued their priority is to offer good value to customers across the board. This is a cynical and disingenuous position that fails to recognise alcohol is a special case."
Bish wants the Government to ban below-cost selling. "In its current review of responsible alcohol sales practice, the Government really must consider the pricing of alcohol in supermarkets, and ban below-cost selling. This can easily be incorporated into its proposed statutory code of practice on responsible selling, which must be applied to both the on and off-trade."
The ALMR's position was supported by Conservative MP Nigel Evans in an Early Day Motion to ban deep discounting, tabled in the same week as the Tesco and Asda giveaways. Evans is vice chairman of the 400-member All-Party Parliamentary Beer Group, which last week called for an investigation into the price difference between supermarkets and the pub trade.
Speaking at a health forum in Westminster last week, Asda public affairs manager Guy Mason claimed discounting was "deep in the company's DNA", and that Asda's customers were overwhelmingly opposed to action on pricing.
They will be even more so in the wake of Asda's three-for-£10 wine deal. Suppliers may not like it, but it's a mechanic that is unquestionably helping to shift volume - Asda grew its wine category 49% year-on-year in the month to 7 September [TNS] .
"Our guiding principle is to offer simplicity, value and quality, with our strategy focused on customers and their needs," says a spokeswoman. "The three-for-£10 deal has been remarkably successful and we remain committed to it - so much so that dedicated bays have been introduced as part of our recent wine range change."
Paul Letheren is a director of Off-Piste Wines, which supplies Australia's most successful wine, Yellow Tail, in the UK market. The brand has built its reputation around the world with full-price sales, but in the 2008 UK retail marketplace, Letheren recognises that supermarkets will often have a different agenda. "Cheap is where it's at," he says bluntly. "Premium is almost a swear word. I wouldn't be surprised if this year the price of wine actually went down, despite the fact that duty has gone up.
"It's about retailers looking after what the consumer wants."
Asda and the other multiples remain defiant about their pricing strategies in the face of mounting pressure. Scotland was first to seize the initiative and implement the smoking ban and if the SNP gets its way, it will be the first to impose minimum pricing. In a bid to tackle binge drinking, the Scottish Government tabled a motion in July to ban cheap drink promotions, set minimum prices for alcohol and raise the legal age of alcohol purchase to 21 in the off-trade.
Despite heated debate, the detail behind the proposals is still unclear, although some supporters believe a 50p-per-unit minimum is feasible. Skol would therefore have to be at least 72p a can in Asda, compared with a low of £1.15 a pint in a pub.
Wine oversupply
One of the reasons wine can be sold so cheaply is oversupply - producers often have tanks they desperately need to empty. "There's always been a wine lake, but it was generally European and generally wine that was not that great," says one senior trade figure. "But in the past eight years there's been a huge oversupply of quite drinkable and, in some cases, quite premium wine from California and Australia."
Suppliers are generally keen to offload their oversupply, he says, even if it means taking a severe margin cut.
"I can remember in 2003 Sainsbury's telling me that somebody came to them with of whole lot of wine, which they did a bogof with, and made no money. They were then inundated with emails from wine suppliers who wanted to do the same thing - they couldn't believe it.
"The bogof movement was entirely supplier-led and the retailers couldn't believe their luck. And actually they didn't make as much of it as they should have done. For years retailers were making tiny margins - suppliers were just giving it away because they needed to move the stock."
"There is little doubt that the Scottish Government is determined to press ahead with proposals for minimum pricing," says Gavin Partington, head of communications at the Wine & Spirit Trade Association. "What is not yet clear is the mechanism by which they may introduce that measure and what piece of legislation they would deploy - and until that is clear it's very hard to say whether or not it will run into difficulties with competition authorities in the UK or Europe. They talk about using the Licensing Act, but I'm not sure what provision could be amended.One of the reasons wine can be sold so cheaply is oversupply - producers often have tanks they desperately need to empty. "There's always been a wine lake, but it was generally European and generally wine that was not that great," says one senior trade figure. "But in the past eight years there's been a huge oversupply of quite drinkable and, in some cases, quite premium wine from California and Australia."
Suppliers are generally keen to offload their oversupply, he says, even if it means taking a severe margin cut.
"I can remember in 2003 Sainsbury's telling me that somebody came to them with of whole lot of wine, which they did a bogof with, and made no money. They were then inundated with emails from wine suppliers who wanted to do the same thing - they couldn't believe it.
"The bogof movement was entirely supplier-led and the retailers couldn't believe their luck. And actually they didn't make as much of it as they should have done. For years retailers were making tiny margins - suppliers were just giving it away because they needed to move the stock."
"The proponents of minimum pricing say it will curb alcohol misuse, but there's no evidence to suggest it will affect the people for whom this is a problem. It would raise prices for ordinary consumers at a time when everyone is feeling the pinch. "
Asda agrees and cites a report by the Centre for Economic & Business Research that concluded a 50% increase in alcohol duty would be required to deliver a 2% reduction in demand. "More importantly, it found heavy drinkers displayed no statistically significant response to changes in the price of alcohol," says the spokeswoman. "Setting minimum prices for alcohol would be ineffective in reducing consumption among those groups highlighted by the Government. The danger of falsely inflating prices is that the vast majority of people are forced to pay more for their groceries, even though they drink alcohol safely and in moderation."
While the SNP wrestles with the administrative and legal issues thrown up by minimum pricing, observers in Westminster are watching with interest. According to sources, officials in the Treasury and Department for Business, Enterprise & Regulatory Reform are convinced imposing minimum pricing is legally impossible - though their counterparts in the Department of Health are more optimistic .
The debate is now set to intensify in England and Wales. Tories have declared their opposition to below-cost sales. The party's Alcohol Policy Group has been asked to draw up proposals and has promised to consult retailers and the wider industry.
The Liberal Democrats are even more forthright. "As a rule, I don't believe governments should set prices, but when retailers are deliberately distorting the market we need to take action," says leader Nick Clegg. "That is why we should look to the example of Ontario in Canada, where a socially responsible minimum price for alcohol has been successfully implemented."
Supermarkets insist they are responsible retailers. Asda and Morrisons point out that they operate Challenge 25 schemes when the accepted standard is to ask for ID when customers appear under 21, and most industry marketing material references the Drinkaware website.
As well as Project 10, alcohol retailers have subscribed to a host of anti-binge drinking initiatives. Asda is investing £1m in youth projects aimed at reducing under-age consumption and has voluntarily stopped selling alcohol in town-centre branches between midnight and 6am. Sainsbury's has adopted detailed labelling, including explanations of alcohol units on its labels, and has increased its range of smaller bottles and lower-alcohol wines. Tesco, meanwhile, surprised critics earlier this year by claiming that, while it would not unilaterally raise drinks prices, it would be happy to participate in a Government-sponsored debate about how this might happen across the industry.
Will any of this be enough? With the health groups having found an unlikely ally over minimum pricing in the pub trade, maybe not . But the supermarkets have arguably the most powerful ally of all - the shopping public. With low prices now the order of the day, the booze monster could be around for a while yet. n
How pricing works: the suppliers' perspective
Pricing is a thorny issue and a certain paranoia has set in since the tobacco and milk pricing scandals resulted in hefty fines for retailers. Buyers are now at pains to avoid written or verbal discussions about retail pricing. Here are some off-the-record views:
"I was in with one of the multiples two weeks ago talking about a concept, just to get their feedback. One of the things I mentioned was the sort of price it could sustain in the marketplace - they wouldn't discuss pricing at all." RTD supplier
"You can imply things, but I've been in a couple of meetings when they have said 'Can you please retract that'. I've sent emails suggesting £5.99 as a retail price and they've been sent straight to the lawyers. That's not how it used to be. It's only a recent change." Wine supplier
If you say 'We reckon the market will support £4.99 and we would like a promotional mechanic that takes it down £1.50' - these are quite normal conversations with buyers. There's no possibility of collusion between wine companies - we can hardly get ourselves together to work out our own strategies, let alone conspire with others." Senior trade figure
Pricing is a thorny issue and a certain paranoia has set in since the tobacco and milk pricing scandals resulted in hefty fines for retailers. Buyers are now at pains to avoid written or verbal discussions about retail pricing. Here are some off-the-record views:
"I was in with one of the multiples two weeks ago talking about a concept, just to get their feedback. One of the things I mentioned was the sort of price it could sustain in the marketplace - they wouldn't discuss pricing at all." RTD supplier
"You can imply things, but I've been in a couple of meetings when they have said 'Can you please retract that'. I've sent emails suggesting £5.99 as a retail price and they've been sent straight to the lawyers. That's not how it used to be. It's only a recent change." Wine supplier
If you say 'We reckon the market will support £4.99 and we would like a promotional mechanic that takes it down £1.50' - these are quite normal conversations with buyers. There's no possibility of collusion between wine companies - we can hardly get ourselves together to work out our own strategies, let alone conspire with others." Senior trade figure
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