Friday, 12 October 2012

Below cost challenge

It’s almost an item of faith amongst people who subscribe to the “supermarkets are killing pubs” hypothesis that the supermarkets are routinely selling alcoholic drinks below cost, and indeed often below the aggregate of duty and VAT on duty.

However, Tesco and ASDA aren’t stupid, and they’re not realistically going to be selling what is probably the biggest single item in most people’s shop at a loss. Yes, they often have very keen prices, but the key factor behind that is driving a hard bargain with their suppliers.

As stated by Chris Snowdon here:

This blog has always maintained that supermarkets selling alcohol below cost-price is a myth dreamt up by the temperance lobby to feed the tabloid hysteria over binge-drinking. I have looked far and wide for examples of below-cost selling happening in practice and—aside from a few products being discounted because they're approaching their 'best before' date—have never found any.
He goes on to quote Richard Dodd of the British Retail Consortium saying:
“if you just stop and think about it for a minute, no business could survive - let alone thrive - if it was routinely selling large amounts of product at less than it was actually paying for it.”
So, here’s a challenge. If you believe that supermarkets really do sell alcohol below the cost of duty and VAT, find me a real-world example in one of your local stores.

For reference, the price for a 440ml can of Carling is 41p, for a 70cl bottle of 37.5% vodka £8.45.

Interestingly, the other day I spotted a “special offer” in my local Tesco - four cans of Carling for £3.50. That’s about 50p per unit. So the supermarkets are flogging dirt-cheap alcohol, are they?

8 comments:

  1. The Mandy Rice-Davies response applies to Richard Dodd's comment.

    I don't believe that supermarkets routinely sell alcohol at a loss, but we've all heard of loss leaders, and I'd be very surprised if alcohol had never been one. But how can you calculate cost? Production, tax, VAT, transport by the producer, transport by the supermarket, storage, advertising, a percentage of the fuel costs and business rates for the shop, wages of shelf stackers and checkout staff? There are probably more costs I haven’t thought of, but my point is that ‘cost’ is not as straightforward to define as some may think. I doubt a supermarket manager could give an accurate cost, which in view of the factors I've listed above would be rather more than what they actually paid the supplier.

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  2. I can, and do, buy from Bargin Booze 4x440mls Bavaria pilsner for £3.
    Not quite sure how to calculate it, does it qualify?

    I dont look to see what the Carlings etc. cost in there though.

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  3. Assuming it's 5% ABV, duty + VAT is 51.5p, so still a long way short.

    Standard beer duty is £19.51 per hectolitre per percentage of alcohol.

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  4. Do I win a grog related prize for finding one?

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  5. Of course, Cookie, I'll buy you the drink in question - but you have to be there at the supermarket for me to present it to you.

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  6. How about a handy table that lets me know the duty per measure per abv? VAT is easy to work out.

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  7. That link is pretty interesting. I've found nowt on My Supermarket I can spot as flogging below cost. So you might have won. I'll have another look at xmas as that might be a time for loss leading.

    It makes no sense to loss lead anything but regular decayable stables that encourage people into the store frequently. Giving people a months supply of lout achieves the opposite. Worth checking come party season, though.

    ReplyDelete

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