Thursday, 26 March 2009

Minimum price, maximum confusion

Reading this interview with the Liberal Democrat leader Nick Clegg, it struck me that he had fallen into the common trap of confusing minimum pricing with banning below-cost selling. In reality, the two are completely different concepts. The vast majority of the alcohol sold below 50p a unit, and even below 30p a unit, is not sold below the cost price, whereas it wouldn’t be difficult to sell fine wine and malt whiskies below cost and yet still come in well above 50p a unit.

The supermarkets are often accused of below-cost selling, but in reality those low prices they offer on multibuys are likely to be the result of driving eye-watering bargains with brewers. I’d be amazed if even half a percent of the alcohol units sold by the typical supermarket were sold below cost.

And, while banning below-cost selling may seem a no-brainer to many, it could easily end up having the unintended consequence of preventing retailers (and pub licensees) selling off short-dated stock, or the end of a barrel, at a reduced price, and stopping them providing tasting samples or even the occasional free pint for a valued customer.

2 comments:

  1. Tasters are something that bothers me when considering minimum pricing. Tasters are a powerful way of ensuring the customer is happy with his purchase.

    ReplyDelete
  2. Good points. Do you think Wetherspoons can really buy their IPA for less than 99p a pint though ?

    ReplyDelete

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