Price isn’t everything

“They’re selling Carlsberg at 30p a bottle at the supermarket down the road,” an aggrieved licensee complained to me. “How can I hope to compete with that?” You can understand her concern, and of course she can’t come close to competing on price terms, but in reality she doesn’t have to.

Throughout my drinking career, alcohol in the off-trade has been cheaper than that bought in pubs. The gap may have widened a bit over the years, but it has always been there. A licensee has to pay business rates, utility bills and staff wages, none of which you include when thinking how much the can or bottle you’ve just got out of the fridge has cost. The overheads a pub has to carry mean that it is always going to be dearer than just sitting at home, and surely all pubgoers realise that.

Nobody claims that restaurants are suffering because you can buy ready meals at Tesco for a third of the price of dishes on the menu, so the idea that pubs are suffering because cans of Stella are dirt-cheap doesn’t really stack up. People don’t sit down and make a calculated economic choice between going out to the pub and staying in with a few cans. If they want to go out, they will go out, and going to the pub should be as much about socialising as simply drinking alcohol. Many pub visits happen when people are out of the house anyway, at work, on holiday or shopping, so the option of drinking at home is not available to them. Obviously, if intoxication is the sole objective, the most cost-effective way of doing it is with cheap cider or spirits from the off-licence, but should pubs be targeting people who just want to get drunk?

Of course price can have an impact on the margins, maybe leading people to go out a little less often, or to tilt the balance a little from on to off-trade consumption. I’m not saying it has no effect at all. But I don’t believe that relative price is even the biggest single factor leading people to drink less in pubs – see my earlier post on the other factors at work. Lifestyles have changed and society has moved on. And the idea that simply raising the price of alcohol in the off-trade will do anything to encourage people to visit pubs is totally misplaced. It’s funny how you never heard all this bleating about supermarket prices killing pubs before the smoking ban and the recession.

In Continental countries such as France and Germany, off-trade prices are considerably lower than ours, and the gap between on- and off-trade greater, but they do not have the same problems associated with off-trade consumption as we supposedly do, and their bars aren’t necessarily suffering either. This suggests that the root causes are in social factors rather than simply price levels as such.