What’s in a price

Posted on February 28, 2010

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Yesterday I Spotted on Twitter this comment about the difference in pub and supermarket beer pricing which was apparently quoted in a Parliamentary debate on the Future of the Pub……………….
“When Labour came to power beer in pubs was priced 2 times the price in supermarkets. Now it is 7 times the price. #ukpubs”
According to My Supermarket  Carling is currently an average of £1.05* per pint in the supermarket, for @arfurd to be right then pubs must be punting out pints of Carling at £7.37 a pint!! Actually the truth is that the average price of a pint of Carling (according to Nielsen) is £2.54 and even in fancy London town only reaches a peak of £2.79, so either @arfurd is drinking in very posh pubs or maybe things aren’t actually that bad.
This week I presented at a BII forum on how to attract more women into pubs and over lunch sampled some Kasteel Cru which went down very well until one licensee asked me if it was available in supermarkets. When I sad yes he put the bottle down in disgust and said “well I’ll never be able to sell it in the pub then” which to me seems short sighted – do we honestly believe that on and off trade prices should be the same? I do think that supermarket pricing needs to be addressed, using alcohol as a loss leader should be stamped out and a minimum pricing policy be enforced to build the right level of respect for alcohol but to suggest on and off trade pricing should be the same undermines the pub service offer.
At home I drink Sainsburys Italian Coffee at £1.95 which is about 13p a cup and it’s very nice, I’ve experimented with other coffees and this one’s my favourite. But, almost every day I stop at my local Starbucks and part with, by comparison, a whopping £3.20 for a Grande Skinny Caramel Macchiato (with full fat syrup of course, credits and debits after all). Now I could recreate this at home, Starbucks sell all the things I need to do that, but I wont because what I’m paying the extra for is the service that comes with it – the fact that a barista they’ve taken the time and expense to train makes it for me, that they use their electricity instead of mine and they offer me a muffin to go with it.
And the same goes for pubs, if I went into my local Sainsburys and they asked me what beer I wanted, offered me a seat at a table their staff had cleaned, went out the back and got a bottle they had chilled for me, poured it into a glass they had washed and allowed me sit there and enjoy it whilst using their heating and lighting then I’d be prepared to pay a lot more for it. A good pub with a good service offer must be able to command a significantly greater price than the supermarket for the same product, if they cant and customers wont spend the money they need to look at their offer and make sure they are offering value for their drinkers and a reason to be drinking in their pub, not at home on the sofa.
But, said the BII man, the reason that supermarket beer is so cheap is not the difference in offer but because the brewers sell it to them for them for next to nothing. But is that really the case or are the supermarkets prepared to lose money on beer to drive punters into store in the hope that they’ll also buy toilet rolls and milk and a whole host of other things they can off set the loss against.
Using the average selling prices above what is the actual difference in cost price to retailers……..
So why the difference I hear you cry – well firstly the VAT, obviously the higher the retail price the more the government want to grapple off retailers. The biggest difference is the retail margin £1.11 of the £1.49 difference because pubs need to charge much higher margins as they have to cover all their costs (cost of beer, staff, cleaning, rent, rates, electricity etc) from this margin. The supermarkets obviously have similar costs but spread over a huge range of products – beer makes up a fraction of their total sales.
That leaves about 15p difference on average on the price of beer sold by brewers between pubs and supermarkets – not such a great difference after all eh? Especially when you consider how much more it costs a brewer to service a pub versus a supermarket – extra distribution costs (delivering to lots of individual pubs is more expensive than one supermarket distribution centre), the cost of dispense equipment, engineers and that 15p difference is very quickly spent.
So the brewers are making the same amount of money from pubs and supermarkets, if we want supermarkets to charge more for beer we need to be lobbying the government not the producers.
And if pubs really believe they cant charge any more than supermarkets for beer then it’s time they reviewed their service – that’s what should set them apart not having completely different products.
*at the time I wrote this, it changes all the time as they pick up new offers.
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Posted in: pricing, supermarkets