Tuesday, 27 April 2010

Inflating your pint

I remember the first time I bought a pint of bitter – when slightly underage – in 1976. It cost 21p. Now, obviously there has been a great deal of inflation since then, so it’s not surprising that the equivalent pint is now around £2.40, or more than ten times more. But how does that compare with the general movements in prices?

I recently came across an interesting website called Measuring Worth, which allows you to input a monetary value from any time in the past and find out what the equivalent is in present-day terms. And, it turns out that the 21p in 1976 was, in 2008, worth £1.13 in terms of the Retail Prices Index, and £1.79 in terms of average earnings. So, by whatever measure you choose, a pint of beer in the pub is actually considerably dearer than it once was.

Now, over time, you would expect the prices of things with a strong component of service (such as meals and drinks in pubs and restaurants) to increase more quickly than those in shops, because as living standards rise, wage costs rise more quickly than the cost of goods. But, even so, it is clear that the prices of drinks in pubs have risen more quickly even than average earnings, and this must have played a part in the relative decline of the on-trade against the off-trade. It could be said that the pub trade as a whole has been short-sighted in constantly pushing through year-on-year above inflation price increases and not realising that the short-term fix of increased revenues was in the long term undermining their business.

In contrast, drinks prices in the off-trade have probably risen roughly in line with price inflation. But it’s not that alcohol is underpriced in the off-trade, but overpriced in the on-trade.

12 comments:

  1. 21p? Sure it wasn't 21d, harpenny and thrippence tuppany bob? Oldtimer.

    You're not wrong though. The price of a pint has doubled since I started boozing, most other things haven't. Burger, chips & a coke from the clown is 50p more.

    Pubs represent pretty poor value.

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  2. Decimalisation was in 1971 - even I couldn't legally drink then! Tandleman, on the other hand...

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  3. Not quite Mudgie. I was still at school.

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  4. OMG, I'm older than the Curmudgeon. 11p in 1972, I think.

    It might be more instructive to measure the price of a pint against property prices as pub takings appear to go to meet repayments for pubs bought in droves by pubcos at the top of the market.

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  5. Apologies, Tandy, as you had mentioned you were retired I had got the impression you were perhaps a little older.

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  6. Lets get down to the nitty gritty.
    Draught beer in a pub is one allmighty rip off. Full stop.
    You dont need a calculator.
    Pub, John Smiths £18.40 a gallon
    Garage nearby Petrol £5.48 a gallon
    The tax differentials are cancelled out by the production costs.
    For the simple minded or state school educated , theres something
    very seriously out of plonk.
    Who do we blame,Labour,the breweries,the pubcos,the supermarkets,the landlords maybe the EU. No NO No,, the brain dead
    numpties who carry on paying the
    rip off prices. If the fresh air ale fans joined the smokers and shunned the pubs,just watch the prices tumble.


    Ex 7x5 pints a week

    Cheers

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  7. Yes, it's a fair point that booze is not underpriced in the off-trade, but over priced in the on-trade. It's no secret that pub prices have spiralled up out of all context. Problem is I can't see them coming down to off-trade levels anytime soon.

    With £1.79 being the average Spoons price, does that mean that they are the only ones selling beer at today's real price?

    As for Tandles, he was an uncivil servant-they don't work till they drop. In fact, he was still in short trousers when he retired.

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  8. The pub trade in general does seem over the years to have complacently put through slightly-above-inflation price rises without stopping to think what they were doing to their business over the long term. There's no single cause for the decline of pubs, but I'm sure that if bitter was generally £1.50 a pint (as it still is in Sam Smith's pubs) they would have more customers.

    Wetherspoon's are the only pub operator who really seem to understand how to use pricing to drive custom. The degree to which pub customers are price-conscious is often underestimated. It may not drive people away in the short term, but a perception that a pub is expensive may harm repeat business.

    Pubs could take a leaf out of the supermarkets' book and give the impression of offering lower prices without actually losing much revenue (for example by having a discounted Beer of the Week).

    Petrol stations are not a fair comparison, though, as in a petrol station there is no service element and customers are not in effect renting space.

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  9. "So, by whatever measure you choose, a pint of beer in the pub is actually considerably dearer than it once was."

    Well, no, that's not true. If you take the base date as 1971, when beer was 13p a pint (and yes, I was drinking legally then, so I win the "old git" stakes) the equivalent 'average earnings' price in 2008 was £2.45: so by this measure a pint of beer in the pub costs exactly the same as it once did.

    What you HAVE all missed is that these figures do knock on the head the argument often put forward by the neo-prohibitionists that alcohol is now relatively cheaper than it once was. Clearly it isn't, in general.

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  10. Your 13p in 1971 comes to 26p in 1976 in RPI terms and 29p in terms of average earnings, so in relative terms it's rather more expensive than my 21p pint.

    But, however you look at it, there's no doubt that beer in the pub is more expensive in terms of the RPI.

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  11. I'm sure 21p bought a pint of Pedigree in early 1976 in the Whitworth Hotel, Rusholme. Boddingtons in a scruffy boozer would have been a little less. Back then, off selling was far less sophisticated. Perhaps you should be looking at corner shop prices now? People expect more comfort in pubs. Remember some of the toilets? Also we are now in a vicious upward price spiral. The smoking ban means far fewer serious drinkers, so less revenue and so raised prices to maintain profits etc. The only way out has been to become a familiy friendly seller of meals, which, my accountant sister tells me account for 60% of a typical food pub's profits. If prices were lowered substantially there would need to be a huge increase, maybe a doubling of customers. Do they exist. I smoke, so I wouldn't go in a pub even if the beer were free. These days, most people can afford to to spens a lot on leisure. For whatever reason, they choose not to go in pubs.

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  12. Martin, Cambridge2 May 2010 at 08:51

    I well remember on my first trip to Manchester during Euro 96 paying £1 for a great pint of Holts in the Old Monkey. Looks like Holts prices have risen far faster than inflation in the 14 years since. I'm sure I paid about £1.20 in Sinclairs, suggesting Sam Smiths have kept the lid on prices (less repeated refurbishments ?).

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