I was recently discussing, in an entirely different context, how people in positions of authority greatly overestimate the effect that small changes in rules and regulations will have on people’s actual behaviour. The new beer tax regime introduced in October last year is a perfect example.
Basically this halved the duty for beers of 2.8% or below, and added an extra 25% duty for beers above 7.5%. Now, I have to say I was a bit sceptical at the time about how much difference this would make, but even I expected that, at the lower end, one of the major cooking lager brands would have a go with a 2.8% brand extension, and at the top end someone would try cutting the strength of some “tramp juice” to 7.5% to sell at a substantially lower price.
But neither of these things has happened. Yes, a few new 2.8% ales have been introduced, but none seem to have gained much traction. The biggest brand would appear to be Skol, which was cut from a whacking 3.0%. This despite the fact that the duty+VAT on a 440ml can at 2.8% is only 14.4p, so surely with the right marketing four cans at £1.79 or a 12-pack for a fiver could have been a successful proposition. Although Gold Label has had its strength reduced, all of the four main super lager brands remain defiantly at 9.0%, with their prices correspondingly increased.
This just serves to underline how wedded consumers are to existing habits – clearly no brewer thought it worthwhile to make a big effort to respond to these new market opportunities, although surely one or two had a good look at it.
And, ironically, minimum pricing would pretty much wipe out any effect from these changes anyway, at least in the off-trade. While a 2.8% beer will attract a lot less duty than a 4.0% one, you won’t be able to sell it any cheaper in unit terms. That four-pack will need to be at least £2.22. And, when I last visited, Tesco were selling 4x440ml cans of both Carlsberg Special and Tennent’s Super for £7.09, which is pretty much bang on 45p/unit. Clearly, although the margin will be less than with a weaker beer, it will still be profitable to sell 9.0% beers at that price.
So, in retrospect, the whole exercise looks like futile tinkering that has done nothing significant to change the beer market.