Friday, 4 March 2016

It’s just not fair!

For years, we have heard various sections of the pub trade complaining about unfair competition from supermarkets. This always comes across to me as basically making excuses. As I explained here, there are plenty of reasons other than price why the on-trade has lost ground to the off-trade, and price probably isn’t even the main factor. Pubs are far from just alcohol shops; they are essentially selling hospitality, and they are competing as much with restaurants and cinemas for the “leisure pound” as with the off-trade. Plus, a high proportion of alcohol drinking occasions in both on- and off-trade cannot realistically be transferred to the other.

However, this week the Morning Advertiser has published an in-depth article on Are supermarkets killing pubs? which repeats all the familiar canards and exaggerations that I have debunked over the years.

Off-trade alcohol is sold at “pocket-money prices”

Pubs are centres of controlled and responsible drinking

Supermarkets get an unfair subsidy because food is zero-rated for VAT

Minimum pricing would help pubs

Supermarkets routinely sell alcohol at a loss

And there is no mention at all of the biggest single factor that has disadvantaged pubs in comparison with at-home drinking. If you have to stand out in the cold anyway, the attractions of paying £4 a pint for something you can get in a can for £1 and drink in the warmth and comfort of your sitting room seem a touch elusive.

Rather than moaning about unfair competition, surely the pub trade needs to take a collective look at what it can do about it. If you’re grumbling that customers are shunning your £3.80 pints, then you should consider how Sam Smith’s are able to sell bitter for £1.80, and Wetherspoons John Smith’s for £2.15 and real ales for not much more. OK, an individual licensee may not be able to change the pricing structure to achieve that, but pub owners and operators collectively certainly could. They have chosen to adopt a high-price, high-margin business model and the consequences are largely of their own making.

Making off-trade alcohol more expensive is not going to give people any more money to spend in pubs, as the sections of the pub and brewing trades who shamefully supported minimum pricing really should have understood. Trying to make common cause with the anti-drink lobby to skew the market in your favour is in the long run the road to disaster. As Winston Churchill famously said, “An appeaser is one who feeds a crocodile, hoping it will eat him last.”

15 comments:

  1. The pricing argument just doesn't hold up in practice, at least not here in London. The most crowded, popular pubs and bars - the ones where you can't hear yourself think and can never get a fucking table - are the ones that charge the most. £5-6 per pint is not putting people off, and the pubs that are closing tended to be less expensive (albeit often for less interesting or lower quality beer).

    Even Spoons are disposing of pubs left, right and centre now, while we're getting new outlets for the Tap and CraftBeerCo chains. What is more remarkable is that these types of pub do quite a lot of business selling bottled beers, which people theoretically could be drinking at home at a somewhat lower cost.

    We'd all like to pay less for our beer, but I'm not convinced current prices are putting people off, and I think they'd need to be dramatically lower to change peoples habits. 20-30p less ain't going to make a different.

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  2. I think we're all just a) busier, b) more health conscious and c) less inclined to leave the missus and kids at home, than we used to be. Plus people just seem to be more anti-social than they used to be.

    The price factor is a red herring, as is the smoking ban, which is correlation not causation. For every smoker who stopped going to the pub, two non-smokers didn't that otherwise would have done. It just so happens that other factors were kicking in at the same time and thus the impression was of cause and effect.

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    1. What I think you have omitted is the rise in home entertainment (the internet, Netflix etc) in general and social interaction by Facebook and Twitter amongst the young who really are no longer going to the pub like they used to.
      I think price is a factor. The range in supermarkets is greater than it has ever been at lower prices, there are more demands on our money, ie things like Netflix which we want, and the younger generation today actually does have less money than previous ones. The gap between on and off sales prices has widened considerably.
      Pubs have been shutting at various but often quite high rates since 1900 but I don’t think the smoking ban helped. I go to the pub less often now and stay for less time. I don’t think this has been replaced by non-smokers now going and there is no evidence that any non-smokers were just about to stop going let alone in the ratio of 2:1.

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    2. I do mention home entertainment in the blogpost linked in the first paragraph, but didn't want to just repeat all those points. That was written seven years ago, and since then the use of social media has mushroomed.

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  3. If the base value of a pint of lager is 50p, and the hospitality value is £2-£4 (Sams to Spoons to regular pubs) then the difference is the hospitality.

    The publicans claim in akin to saying their hospitality is shite and not adding any value to the base commodity. That they can only sell beer if the government mandates the price. That customers are only buying product.

    What I have noticed, though, is pub going is now a middle class hobby. Middle class pubs appear popular, working class pubs are on their arse. I suspect you could get a Phd if you rationalized that one in 20,000 words.

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  4. "If the base value of a pint of lager is 50p"

    Some of the beer available in decent pubs for £4.00 would cost you £2 from a bottle shop, making it better value than a £3.00 pint of Fosters.

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    1. It may be better (relative) value, but it's still dearer. And I don't think most pub drinkers make a calculation of what the same or similar beer would cost them in the off-trade.

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  5. The top comment, as found on BITE, of a pub I visit often, went there with a mate this lunchtime in fact, seems very timely.
    http://www.beerintheevening.com/pubs/s/42/42643/Jolly_Collier/Oldbury

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  6. Price is not a red herring; it genuinely puts people off. I know this, not just from from personal, anecdotal experience, but from stats suggesting that that one fifth of UK drinkers are not willing to pay more than £2.99 for a pint. I certainly would not want to make a habit of paying £4.40 a pint, which I did on a visit to London last week.

    What happens to pubs in London is one thing, but it can be a very different story elsewhere in the country where most of us live. Not only that, pubs in the vast sprawling suburbs of London, as opposed to those in the many town centres in the Greater London area, are suffering similarly to those elsewhere in the UK. A friend who has lived in Hounslow for 19 years tells me that the number of pubs within walking distance of his home has declined from nine to four since he moved there.

    In the last few days I've heard of two more pub closures in our area, on top of the many that have already occurred in recent years. The fact that some people can't see a problem does not mean that it doesn't exist.

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    1. I'm not saying price has no effect, but it's greatly exaggerated as a reason for the relative decline in pubs, as I explained in the blogpost I linked to.

      And, broadly speaking, it's not the off-trade that has become cheaper, but the on-trade that has become more expensive. People in work with reasonable incomes will still be happy to fork out for an evening's drinking. But where it has hit is the blokes who used to spend most nights in the pub drinking multiple pints. To the extent that people still do that, they're mostly doing it at home with slabs of Carling or John Smith's.

      And even if you implemented a 50p/unit minimum price, a 4x440ml pack of Carling would still only be £3.52, which is about the price of a pint in some of the dearer pubs. The idea that arbitrarily jacking up off-trade prices would do anything to help puts is a complete illusion.

      The pub trade would do far better putting its own house in order rather than moaning about unfairness.

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    2. The trouble in London is partly increasing property prices. A pub may be trading as well as ever but increasing property values mean that its alternative use as residential has reduced the return on capital.

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  7. An article of quite breath taking stupidity: if this is what the licensed trade believes then god help them. In another MA piece, CAMRA’s campaign to charge half price for a half, not half plus say 20p, is called “ludicrous”. Well, I realise that there are overheads but if I had had two pints and fancied another half and were charged more than 5p extra I would be aggrieved; I covered the overheads with the two pints. What makes it worse is that 60% of pubs in a CAMRA survey didn’t display a price list which I thought was illegal. It might be quite galling in a multi beer pub where you wanted to sample a number of halves.
    In economics there is something called a Giffen good; it is an item that sells more when the price rises. There has to be special circumstances for this to happen; the good has to be an inferior good and not the only good purchased. For example, as the price of bread rises (poor) people buy more of it as they can no longer afford meat. Now, if off sale prices rise, it won’t help the on trade because their prices will still be higher: those consuming off trade won’t go to the pub and those that do exclusively won’t be affected but those that do both will probably go to the pub less. Nor is it just beer drinkers or the poor: many people may set a limit on what they spend on alcohol below what they can afford and may only drink wine and spirits at home. This theory is not well evidenced but it seems common sense that many drinkers drink both at home and out and by putting up the prices at home will leave them less money to spend in the pub.

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    1. the rules on having to publish a price list changed must be 18months or so ago as it came up as question in the CAMRA AGM motion that debated this fairer price for a half issue, note its not necessarily half price for a half, we accepted in some cases 5p-10p isnt necessarily unreasonable charge and often done at beer festivals to prevent breaking token systems, but the examples they used were where pubs were charging 50p or more extra, which didnt promote responsible drinking or choice, and seemed unreasonable.


      but back to the original subject, there isnt one single key factor thats causing the demise of pubs, if there was people would have worked it out by now and fixed it, its a combination of very many different things, that may in different parts of the country be totally in a different proportion in size to those same factors elsewhere.

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  8. Good blog + commnts very enlightening. I thought something didn't sound right with that article in the MA. They like a bit of a campaign but the magazine as a whole sometimes leaves a bad taste, because of it's need to sell advertising from the big players in the drinks industry.

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    1. The MA stands up for the pub trade, but often tends to target the wrong enemies.

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