Tuesday, 7 May 2013

Counting the cost

The Morning Advertiser reports (slightly late) on CAMRA’s U-turn over minimum alcohol pricing, mentioning the proposer of the motion (otherwise known as Tandleman) by name. Jonathan Mail, head of public affairs at CAMRA, told the paper “We’re in the process of formulating a new position on below-cost alcohol sales”.

While it’s easy to declare yourself against below-cost selling, in practice it’s very hard to define, as I explained here. Any attempt to set a notional “cost of production” is in effect minimum pricing by the back door, and to subject supplier invoicing to audit would be unbelievably bureaucratic and time-consuming. The only robust and intellectually credible position is to define cost simply as duty and the VAT on duty.

It’s also a complete myth - although a convenient one for those who want to point the finger at the evil supermarkets - that below-cost selling occurs to any significant extent anyway, as it would simply be bad business. It makes no sense whatsoever for supermarkets to sell any substantial proportion of products at a loss, although of course they drive a hard bargain with their suppliers. Loss-leading only works on products such as milk and bread which represent a small proportion of overall spend and which can be easily compared between different retailers.

7 comments:

  1. The classic reaction of an executive that doesn’t like what the members think. All 3 established political parties have on many occasions been faced with the unwanted motion at conference where the members pass something the executive do not want. What follows is an entertaining method of ignoring it.

    A wiser course of action is to heed it. Here, however is the more classic and wrongheaded approach. Rather than accept both the letter and spirit of what was passed, which is that the members do not want government dictating prices, they have interpreted it as a refinement rather than rejection of previous policy. You are correct that below cost pricing bans are nonsense with cost being company confidential and there being no legal requirement to calculate it, numerous accounting methods for its calculation should a company wish to, and different across multiple supply chains if end cost of delivery to customer is what you want. It ultimately comes down to duty +vat or about 23p a unit, or 40p for a can of 4% lager and affects no products currently on sale.

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  2. I think we have to wait and see. The Government is no longer up for it, so there is wriggle room, though it could be argued that the NE squeezed their original policy through on the back of fears about below cost selling.

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  3. @Tand, I think so long as there are those that peddle the "supermarkets are killing pubs" trope there will be a willingness and desire to support anything that limits the ability of supermarkets to trade alcohol.

    That belief transcends CAMRA, from reading the morning advertiser it is common among landlords.

    It exists beyond beer geekery, supermarkets are also killing butchers, greengrocers, post offices, clothes shops, the highstreet if you believe some people. When the supermarkets are not killing these things the internet is.

    I don't dismiss what you achieved, I still applaud you for it, but for some you haven't stopped the anti Tesco campaigning, you have removed a weapon in it.

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  4. It could be argued that the supermarkets have killed the stand-alone chain off-licence far more effectively than they have killed pubs.

    I would say that even if you brought in all the favoured measures in the anti-drink toolkit - minimum pricing, no multibuy discounts, separate alcohol counters etc. - it wouldn't make much difference to the overall attractiveness of on vs off-trade as it's largely driven by wider social factors, not simply price.

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  5. Which is why supermarkets are no more killing pubs as they are killing restaurants, Mudge. The choice to stay in rather than go out, drink or not drink if staying in, pub or cinema or restaurant if going out has got bugger all to do with the price of a pint in the Spoons compared to a can of beer in Tesco. But you know that, not all do.

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  6. Given the generally rude health of the eating-out market, Timbo's frequent rant about the VAT disparity between restaurant meals and supermarkets strikes me as one of his more bonkers utterances. And he conveniently ignores the fact that a meal in Spoons contains a substantial element for labour and general overheads - the actual ingredients are probably no dearer than the equivalent from Tesco.

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  7. Timbos logic is flawed but his intent isn't to scupper supermarkets but reduce his own VAT. He's not arguing for higher prices for others but asking the government to cut his own prices. Looking at the effect of VAT cuts in France on bistros, it's a fair guess it would help pubs.

    Also if you are concerned about the disparity between pub & supermarket beer prices, it is VAT and not duty where the pub customer is more heavily taxed. Arguing for scrapping VAT on beer, making it up with a one off duty rise and the tax paid on a pint becomes the same in on and off trade and it is impossible to argue that is unfair. Wherever you like to drink, why should the tax paid be different?

    I think Timbo needs to rethink his tack, but what he is asking for isn't totally mad.

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