Mind the gap

The recent closure of the Waterloo was discussed on a Stockport-related Facebook group, and inevitably the old chestnut came up that pub closures were largely down to low supermarket prices. As I’ve discussed before, this is for the most part a complete canard. There are plenty of other reasons for the decline of the on-trade vis-à-vis the off trade that are nothing to do with relative price. If anything, it’s because, for a variety of social and legislative reasons, the range of occasions when people will even consider a visit to the pub, except if having a meal, has drastically reduced. People just don’t weave the odd one or two pints into the pattern of daily life like they once did.

Many of the customers of the Waterloo were people who visited at lunchtime from local businesses. They haven’t stopped because they can get a can of Stella for a quid from Tesco. Indeed, many pub visits happened, or used to happen, on occasions where people were out of the house and the alternative of a cheap off-trade drink simply wasn’t available. And how often do you really think “now, should I go out to the pub tonight, or stay in with a few bottles or cans?” People won’t go to the pub unless they have a good reason for doing so.

If you are someone with one or more of a job, a mortgage, a driving licence, family responsibilities and some concern for your own health, can you honestly say that you would drink substantially more beer in pubs if it was cheaper? In general, the main factor limiting how much people drink in pubs, or indeed in total, is not price. Lower prices would no doubt attract more custom from those with more time than money, but they wouldn’t bring the better-off flooding back. And simply raising the price of off-trade drinks, as would have happened under the now canned proposals for minimum alcohol pricing, would not give people a single extra penny to spend in pubs.

It’s also very wide of the mark to claim, as people often do, that supermarkets routinely engage in loss-leading on beer or other alcoholic drinks, although it’s all too easy to jump to that conclusion. Yes, they drive a hard bargain with suppliers and sometimes pare margins to the bone. But you’re simply not going to make money if you’re selling things that make up more than a tiny proportion of the average trolley-load at a loss.

There is something in it, of course, because it’s undoubtedly true that, over the years, the gap between on- and off-trade alcohol prices has considerably widened. Clearly this must have an effect at the margins. But I’ve seen some research (although I can’t put it to hand at the moment) showing that off-trade alcohol prices have in general risen in line with the overall movement in the RPI, but on-trade prices have increased by much more. If there’s a problem, it’s not low supermarket prices, it’s high pub prices.

And there’s a serious and potentially uncomfortable economic truth behind this. Over time, as living standards increase, the price of labour will obviously increase relative to that of goods. You might not feel it, but on average people are much better off than they were twenty or thirty years ago. Just look at the rise in car ownership and long-haul holidays, satellite TV subscriptions and the amount of electronic stuff in the average home.

The price of a pint in the pub includes a much greater labour element than that of a can or bottle in the supermarket, so really it’s inevitable that this relative divergence will continue. The same can be seen in the differential between the prices of supermarket ready meals, and those in pubs and restaurants. Pubs have to offer something more than just being an alcohol shop, although often that can be just the totally intangible benefits of atmosphere and companionship.

And this week we’ve also had people moaning that beer in pubs was too cheap. You can’t win!