Friday, 7 May 2010

Why the World Cup is bad for pubs

In the short term it won't be, well, not if the pub has a large screen and an eager audience. But the long term doesn't look so good and events such as the World Cup have a negative effect. And here's why: beer sales are in decline across the UK (because you're drinking poncy wine) and sales are shifting from pub to supermarket. These supermarkets are well run, they know how to play suppliers off against one another and they therefore get beer at low prices. These low prices, in turn, drive up volumes which, in turn, gives the brewers greater incentive to be involved, which, in turn, gives the supermarket better bargaining power, which, in turn, lowers prices. Do you see where all this is going? Course you do, rock bottom give away price land, that's where.

But how, you ask, does this affect the pub? Obviously because it's cheaper to drink at home. But it always has been and this isn't the whole truth, there's more going on. You see the prices the brewers get for their supermarket cans and bottles doesn't necessarily cover production costs or make a profit. The brewers' profit comes from the beer it sells to the pub. So, as supermarket prices go down, pub prices go up. Up and up to rip-off central and beyond - we're in a declining market and yet the wholesale price of draught beer continues to rise above inflation and above duty increases defying, at first glance, economics. What goes through your mind when you're charged £3.60 for a pint of beer that you know very well would cost you a pound a can? "Rip-off" you think. And you'd be right. Get this: I have just been quoted, quite reasonably, £93.11 for a 50 litre tub of Stella, ex-vat. That, with vat, works out at £1.24 per 568ml serving, which is the size of a large Stella can. The same large Stella can that costs £1.10 today at a major UK supermarket.

That's right, despite all the costs of the cans, the 'secondary' cardboard packaging and the extra time and machinery costs associated with a canning line versus the far quicker, simpler bulk beer kegging line, and despite the cans having a retail margin on top, versus my wholesale industry trade quote, the canned beer is still cheaper than the keg. Retailed 'small pack' beer is now cheaper than trade draught beer.

And it's set to get cheaper during the World Cup. You know who's expected to fund that now don't you?

Point your finger at the supermarkets if you like but point it too at the big brewers going down the pan, desperately hanging on to market share and dragging the pub industry down with it. The small minded, bonus-greedy, little shits.

Sorry about the swearing: I don't do it lightly though.


Paul Bailey said...

All the more reason for pubs to take the bull by the horns, dump major Global-piss brands and tell the bis brewers where to go,
In reality only freehouses are able to do this, but if enough of them have the balls to do so, and to start stocking beers from local micro-breweries, then perhaps these pubs can start to make a small difference.

MicMac said...

You said on Twitter that you'd got angry again, but if so, you've done it righteously here, Eddie. (I'll go & ReTweet this).

I've heard a load of unpersuasive stuff said about the peculiar disparities between the on & off trades, but little facts or joined up thinking, so well done chap!

The recent messages from the (outgoing?) govt have that if the pub-co/pub-owning breweries don't put their own house in order, in various ways, then certain things will be imposed upon them, but as with previous moves, that's a hard nut to crack (opening up the off-trade market) and can have unforeseen results (e.g. the rise of mega-pubcos after the Beer Orders), plus all of that has no direct impact on the on-trade's loss-leaders.

Eddie said...

Paul, cask ale only accounts for 7.6% of the UK beer market and 'craft' beer less than 2%. Not a strong position from which to make a difference.

Mike, I have no answers! Hey, in the on-trade '10 pints for £10' is a promotion specifically banned. Shame it ain't in the off-trade. But this kind of commercial behaviour is impossible to legislate against in reality.

Mark said...

Good post Eddie. Thought I would reply here, rather than to your comment on my blog.

When I wrote my thoughts, I wanted to draw a line between Supermarket pricing and drinking habits during big sporting events.

I agree with what you're saying about the impact that Supermarkets are having on Pubs and it's interesting to read about the direct impact they have on Pub pricing.

My argument was more around the fact that the issue obviously goes way beyond any promotions that are specifically set up for the World Cup. Selling beer even cheaper during that period is another example of the wider issue; I just genuinely think it will be counteracted by a temporary shift in people's drinking habits.

Eddie said...

Hey Chunk, as I said I agree with you, completely. There will be stay at home games and there will be go to the pub games - we won't see any pubs close down as a direct result. Some will do very well indeed. I wanted to get the wholesale price argument across - I could have titled my post differently, it wasn't meant in direct opposition to your observations, more as a different way of looking at it. I didn't need to pick on the World Cup but, then again, the pub industry will subsidise the supermarkets' cash-in in the long term.