Wednesday, 3 February 2010

Soft thinking

A recent survey by Mintel has shown that many people resent paying high prices for soft drinks in pubs:

Three in five adults said they resented paying so much for soft drinks in pubs when they know they can get it much cheaper in shops. Over-45s were particularly critical on this issue – and the report says the “grey pound” will become increasingly important for pubs.
But do people reasonably expect to buy alcoholic drinks in pubs for the same price as in Tesco? Or meals? So why should it be any different for soft drinks? The naïve notion that everything has a “fair” price based on its purchase cost, and that pricing should take no account of customers’ willingness to pay, remains very prevalent in society.

In reality, soft drinks in pubs are usually something of a distress purchase, and the demand is not highly sensitive to price. And it must be extremely unusual for anyone to make a decision as to which pub to visit based on its range of soft drinks.

But there is a point that pubs, especially those that make a point of a high-quality food and beer offering, should make more effort to stock something distinctive on the soft drink front rather than just relying on the default well-known brands. This is certainly something Woolpack Dave has done. “Crisps, chocolate and coffee; lager, fizzy drinks and fruit juices all have to be quality products,” he says.

It is also often suggested that high soft drink prices act as an encouragement to drink-driving. This is the kind of pious notion which is initially credible, but when you examine it more closely is revealed as a complete canard. I would be amazed if there has ever been a single case where someone has been convicted after deciding to stay on beer because he reckoned the lemonade was too dear. In real life, nobody’s decision as to how much alcohol to drink before driving is going to be swayed by a a few pence one way or the other on the price of orange juice, and I suspect even if pubs offered some soft drinks for free it would make no difference to the amount of drink-drive offending.

21 comments:

  1. Aren’t we led to believe that a large portion of the price of a beer is duty with VAT on top? A soft drink will be taxed at VAT only. Hence to be charged the same price for a pint of orange cordial than a pint of beer seems a rip off. A price comparison to supermarkets or off trade may not be relevant as there is an acceptance that the food and drink in a restaurant is more expensive because time and effort is required in preparation but comparison to cafes is relevant. Many pubs offer meals as cheap as cafes. Fish and chips is cheaper in the pub near work as the local fish and chip shop cafe, though the food in the cafe is far nicer (not nuked). A coke in the cafe is 70p, the pub charges £2. Customers are right to feel stung. As I have little desire to drink at lunchtime I frequent the cafe semi regularly, I cannot remember the last time I walked into the pub. Stinging punters isn’t a business model.

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  2. But you're falling into the "price must be relative to cost" fallacy there.

    And a chip shop café is not a fair comparison with pubs. In sit-down chain restaurants of the Pizza Hut/Nando's type, and Indians and Chinese, soft drinks are a similar price to pubs.

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  3. If you believe price ought to be relative to what people are willing to pay then why quote a survey that says people are not willing to pay extortionate soft drink prices?

    As for comparing pubs to other establishments, I fear we have a different opinion in regard to the quality of pubs. By comparing it to a cafe I was being nice to pubs.

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  4. PC I have to in a way slightly disagree with you on this one. I once drove over the limit and never done again, which backs you up that the price does not encourage alcohol drinking.

    However, while on the one hand I expect to pay a premium for a soft drink in a bar, I think when a pint of orange juice and lemonade or a pint of tomato juice is £2.50 to £3.00 albeit in London, someone is taking advantage.

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  5. As a teetotaller who frequents pubs regularly with beer drinking mates, I too resent the price of soft drinks. And I would say that soft drinks are not just a 'distress purchase'. More and more people go to pubs and don't drink alcohol - I go out on a regular night out with friends, and none of us drink any alcohol as we are all driving.

    I would like to know what the profit margin is on a pint of ale or lager vs the profit margin on a pint of soft drink. My suspicion is that the pub makes more out of my drink than my beer drinking mates.

    Oh, and another thing - filling the glass with ice before putting the drink in means you are over charging the punter even more. If I want a pint of Coke, I want a pint of Coke. Not a half and a load of expensive ice.

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  6. For anyone still going into "pubs",
    the price of pop is the least of their problems. Only desperation
    or severe loneliness would drive sane people into todays pubs.
    Luckily the "pubs" are closing down at an ever inceasing rate
    which is precisely what they richly
    deserve. They were supported by
    their customers through good times and bad and then they expect the
    idiots to stand outside with a fag.

    "Ah but", the landlords whimper
    "its the Law you know"

    So said Judas Iscarriot and Adolph
    Eichman


    Hot Vimto

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  7. Surely any business is entitled to choose what mark-up it applies to the various products it sells. This will depend on various factors, one of which is how price-conscious buyers are and how likely they are to take their business elsewhere. If you looked at Tesco's accounts you would see a huge variation in mark-ups over their product range - and they probably mark up full-price branded soft drinks more than canned beer.

    Probably the pub does make a higher percentage mark-up on soft drinks than on draught beer. So what?

    There seems to be an unspoken assumption behind all this that consuming soft drinks is somehow more virtuous than consuming alcoholic ones and that virtue ought to be rewarded.

    And if you don't like the soft drink prices in a pub, you can always take your business elsewhere - I believe Wetherspoon's soft drink prices are as reasonable as their beer prices.

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  8. Supermarkets buy more than a pub can hence they get a better price per unit which they can pass on to the consumer. Pubs will unfortunately have to pay more per unit hence their charge to the customer. Weatherspoons however are on par with supermarkets as they have a mass buying power and can process high deliveries of soft drinks so they too get a low price per unit which they pass on again.

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  9. The trouble is most soft drinks customers sit for hours with their pint of coke. A good beer drinkers necks a few pints.

    It's all about spends per head. Like it or not alcohol is the core business of the pub. No pub would survive if it relied on soft drinks, regardless of price.

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  10. When you buy a drink in a pub, you are renting a space in addition to paying for a drink. That is why drinks cost more in fancy places which have high rental values. And that is why businesses think it is a cheek asking for tap water and then occupying a seat. I have no connection with the pub trade.

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  11. I think Mudgie, you’ve summed it up. We can take our business elsewhere and do so. Lunchtime drinking has fallen off a cliff and if pubs want mouse jockeys like me to punt up at lunchtime they have to expect I’m looking for a bit of lunch and a soft drink at comparable prices to the local cafe. A pub has no waiter service and does not compare with even the lower end of the restaurant scale. I want to be in and out in an hour and want quick service. A survey which intends to enlighten publicans in regard to how most customers think in regard to soft drink prices reveals unsurprisingly that punters feel stung. This survey is a useful tool for those publicans that want my lunchtime trade. As nice as Dave’s gaff is, he doesn’t want my trade. I’m not the type of punter he wants gracing his gaff. He wants beer snobs and people willing to be told they cannot have ketchup. No problem. I wish him luck. Many other establishments are happy to take my coin, and those that receive it offer me value. I shed no tears for pubs that go to the wall, they either offer me something I want or they don’t. I don’t want a £2 pint of coke.

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  12. Meanwhile, back in the real world, pubs really do not compete with greasy spoon cafés to any significant extent. If you think they do you must inhabit some bizarre time-warp bit of declining industrial Britain that bears no relation to the rest of the country.

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  13. Greasy spoons are nice these days. All ciabattas and lattes. You wanna go in a cafe, better than them rough pubs you go in.

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  14. Curmudgeon, I totally agree with everything you say in this post. I wish more of us thought along these lines.

    This statement basically sums up the stupidity of the masses: "The naïve notion that everything has a “fair” price based on its purchase cost, and that pricing should take no account of customers’ willingness to pay, remains very prevalent in society.
    " - I don't like capitalism, but as it is the only game in town at the moment I've learnt the rules and I've played by them.

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  15. But Paul, the survey is all about customers’ willingness to pay, and survey says "no thanks".

    But of course the masses are stupid aren't they? The customer is wrong.

    In your socialist utopia, people have to accept what they are given. The joy of capitalism is the choice to pick what I want. So the customer is usually right.

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  16. But what matters is what people do, not what people say. In a similar survey, people would probably say the beer prices in pubs were excessive compared with supermarkets.

    This is similar to motorway service areas. Their prices are normally well above High Street outlets, and in surveys people regularly say they are a "rip-off", yet people still pay them because of their convenience that MSAs offer.

    As I said, many people have a naïve view of "fair value" which takes no account of the laws of supply and demand - which, incidentally, apply whether you have a capitalist or socialist economic system.

    And obviously if your sole aim was to drink vast quantities of Coke, you would buy it from Tesco rather than in pubs, just as you would if your sole aim was to drink vast quantities of beer.

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  17. I accept that my pint of coke will cost me more in pub, than buying it in a supermarket. Its just the level of that discrepancy that gets me.

    Sainsburys sell Stella at around £2-50 per litre or £1-45 per pint, if you buy it in cans. Your pint in the pub costs (round my way) over £3. A bit more than double.

    They also sell Coke in 2 litre bottles at 2 for £2-50 (and its often at 2 for £2) which is 63p litre or 35p per pint. Which is why I am not very happy to be asked to pay over £2 for that pint in a pub. A 'fair price', taking into account the pubs atmosphere, facilities etc etc would be £1. Three times the supermarket price.

    As someone else said, Wetherspoons charge less for soft drinks, and tea and coffee, and unsurprisingly are doing pretty well. Its no wonder 'traditional' pubs are dying a death with 'the customer is always wrong' attitude that is portrayed here.

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  18. Jim,

    As I said, businesses operating in a competitive market are entitled to charge whatever they want, and if you don't like it, take your business elsewhere.

    And, if you insist on talking about "fair" pricing, remember that pubs have a fixed overhead for every customer for rent, utilities, staffing etc, which will mean differential prices are not the same as in supermarkets.

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  19. Cooking Lager you are twisting my words. In my opinion not enough customers are ‘listened to’ by businesses but equally there is absolutely no connection between cost and selling prices, Joe Public might think there is but if they opened their eyes they would notice that in reality this rarely applies. I’m a pragmatist, and whilst I believe that Socialism is the purest form of democracy I don’t believe Jerusalem is about to be builded here, so I put up with what we have. I believe the laws of supply and demand to be universal and not reflective of any economic system.

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  20. Martin, Cambridge5 February 2010 at 22:41

    My irritation with soft drinks prices is more the disparity than the price itself (from £2.50 to £1 for a J20) - I agree that pubs could help themselves by stocking more interesting drinks, such as Pago or Looza juices, or Fentimans range, to justify the prices they need to charge to cover overheads.

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  21. 2010 has been a funny old year so far. I’m still recovering from finding myself in agreement with Raedwald the other week. And here I am about to agree with you on a matter of economics I admire your consistency on this issue-although I would expect no less. Of course there is no such thing as a “fair price”. This just seems to be driven by whingeing soft drink imbibers. And I say that as someone who does, unfortunately, drink a fair amount of the stuff in pubs.

    Would I like to pay less for my soft drink? Obviously, yes. But then I’d quite like a night with Angelina Jolie as well. Realism has to come into play at some point. Woolpack Dave has already explained the situation from the publican’s point of view. I can’t help but think that Cookie is being a little disingenuous with you. Comparing apples with oranges is his little bit of fun.

    After all, CL is a clever lad (hotly tipped for blogging world domination) and knows the same system that governs the price of soft drinks is also the one that allows him to stock up with cheap cooking fuel.

    CL
    Into every life a little rain must fall. It’s the circle of life, my friend. The circle of life. As a (non-sandal wearing, non-beardie) lefty weirdo, I chuckle when I hear the term “rip off” used to describe an aspect of market forces.

    As PC has pointed out, the laws of supply and demand are universal. You may as well tilt at windmills. We both know that it would take more than cheap cola to lure you into smelly pubs. Pity me. 365 days of it and some of those wasting money until to remain sober. At least you have you cheap cooking lager to comfort you.

    Remember, hakuna matata.

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