Tag: supermarkets

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Some facts about cheap supermarket beer prices

14p per unit

Listen: the idea of minimum pricing worries me a little.  I don’t believe that there is a direct link between Britain’s supposed binge drinking problem and the widespread availability of cheap booze.  And I don’t lay sole blame for the plight of the pub at the door of supermarkets.  OK?

But I wanted to comment on the disquiet in the blogosphere about this whole question of whether supermarkets ever sell beer at below cost price, with some comments on this blog suggesting the entire idea is a myth, and others asking if it’s really plausible that any retail business would sell something on which it makes a loss on a sustained basis.

I don’t blame anyone for thinking this – in a logical world it sounds like an insane idea.  But supermarkets are not always logical – or rather, their logic is different from ours.

Below cost selling DOES happen in supermarkets.  I know this because I’ve had conversations about it with the brewers who sell their beer to supermarkets and with the supermarkets who buy it.  They wouldn’t thank me for sharing this, so I’ll keep it completely anonymous, but here are a few trade secrets.  Well I say that, a lot of it is common knowledge within marketing circles.

Beer is what’s known in the trade as a loss leader.  It’s a common concept.  Most beer bought in the UK off-trade is sold on price promotion.  When you have people spending £200 on a mixed basket of groceries, you can afford to lose a few quid on staple items because you make it back – and more – on the premium items they’ll also be buying in your shop.

We do big supermarket shops in the car, stocking up on heavy items.  That means we keep an eye on the prices of bulky purchases.  Research consistently shows that people respond to newspaper ads for cheap beer, driving to one chain instead of the other because we can save a few quid on slabs of lager.  We assume that everything else will be pretty much the same price, and we may be right – but the cheaper beer supermarket is getting the whole of our spend that it wouldn’t otherwise have, and therefore makes a profit overall.  When we stock up in bulk on beer – at Christmas, bank holidays and big sporting events – supermarkets have to cut deeper and deeper to compete with each other, and this is when it can go below cost price.

Ever wondered why beer is right at the back of the supermarket – about as far away from the door as you can get? As soon as you’ve walked through the sliding doors, the cheap beer has done its job.  You’ve got to walk past all the expensively packaged fresh salad, the healthy looking fruit and veg, the deli counter, the bakery with the smell of fresh bread being pumped into the store, to get the the cheap beer you came for.  That’s why you end up putting a heavy 24-pack in the trolley on top of your bagged lettuce, fresh bread and eggs – doesn’t make sense, does it?  Until you think about it from this perspective, that is.  I’ve heard one supermarket buyer say that if they could, they’d take beer off the shelf as soon as you walk in.  They don’t like not making any money on it, but they see it as a necessity to drive footfall, so they make it work as hard as it possibly can to deliver profit. But it delivers this profit indirectly.

And what of the brewers? The people behind one big beer brand told me that on average, their profit margin is 1p per can.  It’s a grim business.  That’s the average profit – meaning that there’s some volume they make more profit on, and some they make less on.  Meaning sometimes, they end up selling it at a loss.

They have to do this to keep the contract, which they need to maintain volume and market share. Once again, there’s plenty of consumer research that shows mainstream lager drinkers view any big, established brand as being acceptable.  You may prefer Carling to Fosters, for example, but if they didn’t stock Carling, or Fosters was a quid cheaper per slab, you’d be absolutely fine with Fosters instead.  The fact that most beer is put in the trolley by women – who don’t often drink it themselves – further erodes loyalty to any one specific brand.  So supermarkets hold the threat of delisting over the heads of even the biggest, most popular brands.

Recently one chain delisted one very big brand and they eventually had to cave in and concede ground to the brewer.  This was significant, because most of the time the sheer volume market power of big supermarket chains means they can kick and bully all their suppliers – even the biggest – as much as they want.

Another popular ploy is for a supermarket chain to decide at the last minute to give a steep price cut on a brand, without getting the agreement of the brewer first, and then simply sending the brewer the bill for the money the supermarket lost by cutting the price!  I’m not saying the brewer always coughs up.  But sometimes they feel compelled to do so.

These are the tricks of the trade.  I’m not suggesting for one minute that all beer or most beer is sold by supermarkets at a loss.  But this is why some of it is.

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Tokyo* Supermarket Sweep

I know I know… I should be blogging about Nanny State. But I need to try some first, and I’m a bit busy.

Anyway, I was just very briefly revisiting Tokyo* because I’m giving it a mention in a big piece I’m writing about beer marketing for a Sunday newspaper magazine (yep, you read that right – one of the biggest papers in the UK has actually commissioned an article on beer).
Anyway, for this, I wanted to do an accurate comparison of pence per unit of Tokyo versus other stuff. I’ve seen Brew Dog and others do comparisons of how much booze you can get for the same £9.99 price tag as a bottle of Tokyo, but I don’t think anyone has worked out the precise unit comparison I may be wrong – apologies if you have and I missed it).
Anyway, I found an alcoholic unit calculator, looked at some offers on supermarket websites, and got a bit more absorbed than I needed to for the feature I’m writing. So I know Tokyo* is old news and has been blogged to death, but I thought I’d share it here – if you live in the constituency of one of those Scottish MSPs who signed the motion against it, please feel free to copy this to them:
  • One £330 ml Tokyo* contains 6.1 units – at £9.99, that’s 0.61 units of alcohol per £1
  • Blue WKD is in Asda – three four packs for a tenner. Even with the alcohol level having been recently lowered to 4.5%, that’s 1.4 units per £1
  • The standard price in Tesco for 24 x 284ml bottles of Stella is £10. At 5%, that works out at 2.39 units per £1
  • Promotional prices on Stella over the last 12 months have reached as low as the equivalent of 67p per pint. That’s 4.5 units per £1
  • Tesco Currently has a really nice offer on a lovely-looking Kiwi Sauvignon Blanc – six bottles for £23.52. The wine is 12.5%, so that’s 2.84 units per £1.
  • Morrisons is currently flogging Grants Whisky for £12.99 a litre. At 40%, that’s 3.07 units per £1
  • Even Carling – hardly a drink that’s going to get you smashed in a hurry – gives you more bang for your buck – Sainsburys is flogging 15 x 440ml cans for £10 – at 4.1%, that’s 2.7 units per £1.
So let’s summarise that, in order of units per £1:
Tokyo* – 0.61
Asda Blue WKD – 1.4
Tesco Stella (normal price) – 2.39
Sainsburys Carling – 2.7
Tesco Kiwi Sauvignon – 2.84
Morrisons Grant’s whisky – 3.07
Morrisons/Asda/Sainsburys Stella (promo price) – 4.5
WKD gives you more than double the alcohol for your £1. A fairly common offer on white wine (I checked out several other deals that came in similar) gives you 4.5 times as much alcohol per £1 as you get from Tokyo*. When it’s on promotion – which it will be again for Christmas – Stella gives you 7.5 times as much alcohol per £1 as Tokyo does. If you want to get wankered cheaply, Tokyo* is rubbish – it’s worse than even Carling.
Of course, it’s not all about price. There are issues about it being one serving, and about general perceptions of how strong beer should be, versus wine or spirits, based on how we normally drink them.
But pricing comparison is crucial because the anti-alcohol lobby that is attacking Tokyo is the same anti-alcohol lobby that wants minimum pricing and duty increases on alcohol… because they think higher prices will deter binge drinking.
And with that feat of deduction, it would be nice if the neo-prohibitionists would finally disappear up their own arses.
Or at least admit the total and utter logical incoherence of their argument.

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Er… what’s happening to the off-trade bottled ale revolution?

Bottled ales in supermarkets – brilliant!  OK, they have no idea whatsoever how to categorise and arrange beers, but they stock an incredibly diverse range at reasonable prices.  Or at least, they did.

I don’t actually go to supermarkets very much.  I’ve just got back from my nearest big Sainsburys at Angel, Islington, for the first time in a few months  I’ve always been impressed by the range of stuff they stock – a full range of Taste the Difference beers (brewed by Meantime), 750ml bottles of Meantime Porter and IPA, comprehensive ranges from the likes of Fuller’s and Marston’s, plus loads of micros.  As Angel is a pretty upmarket area, I’ve often used this store as an example of how affluent, curious people are clearly embracing ale.  
And now, they’ve refurbished it, approximately doubling the floorspace.  This could only be brilliant for beer, right? Right?
In a store that’s doubled in size, premium/speciality beers have been slashed from an entire aisle to two bays.  Premium bottled ale has been cut from three bays to one.  No Meantime.  No Micros.  No Taste the Difference.  In fact nothing that isn’t made by Marstons, Fullers, Innis & Gunn or Hall & Woodhouse, save the odd exception.
So I went next door.  One of the reasons for the refurb is that the old Woolies has now turned into a medium-sized Waitrose.  Now they’re the best supermarket chain for bottled beer.  They stock Deus and everything.  Um, not here they don’t.  The same ranges from the big regionals, plus one or two locals, and that’s it.
Nearer home, my corner shop has sold out and just reopened as a Sainsbury’s local.  The Turks who used to run it knew nothing about beer, but they stocked a fine and constantly changing range.  The new Sainsburys stocks three ales and about four lagers, in much greater quantities.
I’ve read that in most categories in grocery, supermarkets will only stock the top two or three brands – higher quantities, better terms for them, less hassle, less choice for the consumer.  But until now beer has always been different.  
Is this now changing or am I just unlucky with my choice of store? If this is typical of what’s happening across the country, it could be disastrous for smaller brewers, as supermarket chains don’t look at range and diversity, just who the top three or four brewers are, and maybe the odd concession to someone else local.  No disrespect to Marston’s, Fullers and H&W – I frequently buy their beers – but if they are going to be the only ones available outside specialist beer shops in future the whole category will be poorer for it.
Please tell me this is not happening in your local supermarkets too.