On Minimum Alcohol Pricing

[miss_s_b]

This was posted as a comment on somebody else's blog, but I figured it deserved a broader airing, since it's me explaining (again) how the government's actions are not neutral on pubs even when they try to appear so:

Prices for everything will go up if there's a minimum price, not because of some nefarious plot by big business (or even the Tories), but because of simple economics. If a bottle of White Lightning costs #5, no self-respecting wine manufacturer is going to want their bottle of wine to cost less; all alcohol will rise in price because market position is more important than anything else, so the lowest priced product going up will have a knock on effect right up the chain.

Meanwhile, prices in our pub will go up because we get most of our spirits from Sainsburys - because they are cheaper than any of the industry suppliers who are used to supplying people who are tied to them - so when Sainsbury's put their prices up, ours will have to rise too. This is not pubs whining, this is a simple fact.

Comments

White Lightning

[(Anonymous)]

I expect a completely different outcome.

In the alcohol market there's a clear link between quality and price - the nicer stuff costs more. If you create a minimum price, to a large extent you create a minimum quality too.

White cider exists to tax-efficiently supply a maximum quantity of alcohol to people on low budgets, taste be damned. A minimum price would make white cider compete with better tasting drinks, so would cease to exist.

I expect there to be numerous products selling at minimum price which compete on quality - the only caveat to this is the extent that supermarket bullying forces quality down. The higher end marketplace won't really change.

@DuncanStott

Re: White Lightning

[miss_s_b]

Unfortunately the manufacturers of white cider do not just manufacture white cider. They are huge conglomerates that make lots of other drinks.

Why would the manufacturers of white cider stop making it when they can make more profit on it just by putting the price of all their other products up?

Re: White Lightning

[innerbrat]

People who drink White Lightning for the taste like the taste of White Lightning.

People who drink indiscriminately whatever is available at the cheapest price will not suddenly become discerning drinkers.

Re: White Lightning

[matgb]

Behavioural economics not your thing, right?

If White Lightning were to cease to exist you would expect this to have already happened to various cheap strong lagers like Special Brew, it hasn't.

Immediately White Lightning goes up to the same price point as something actually worth drinking, that drink will go up in price as it cannot be seen to be the same price as cheap crap, differentials matter in all things. There's been research and studies on this sort of thing, loads out there in the economics press.

The idea that cheap crap will cease to be made if it's forced up in price is a nice notion, but it's not going to happen, business in general simply doesn't work that way. All that happens is that Tesco and the manufacturer make more money from the product.

[(Anonymous)]

I agree up to a point, but surely it depends on the product:

Wine - almost certainly higher-end products will be affected, because the arbiter of quality at the moment is usually price.

Beer (effectively lager) - not so much, because it's usually selected by brand. Stronger brands will feel more comfortable about remaining relatively cheap - so Stella will probably hike up the price because it's doing its best to shake off the wifebeater image as it is, but another slightly more high-end beer like Kronenberg, which actually has a higher ABV, will probably feel more secure. In any case, I'm guessing your pub doesn't buy beer in.

Cider - same as beer, except brand attachment is probably a bit weaker.

Spirits - supermarket sales not affected that much anyway, if the BBC is to be believed - more likely to hit club deals.

Price is one way that products denote quality, but it's only one. I chose wine on price, ale on 'oooh, this has a funny name/description sounds similar to X/I trust this brewer', and spirits on a mix of brand and price.

James

[miss_s_b]

Except that because of the differential taxation by ABV that was brought in LAST budget, lagers (which I refuse to call beer) are all having their ABVs tweaked to fall into different tax brackets; and stronger lagers ARE more expensive than weaker ones, partly because of this. It might only be 10 or 20p at the pump right now, but I predict a change in this - either the ABV will drop or the price will go up. You're right that most people select by brand rather than price (or ABV) - but they don't think that they do. The number of customers who, when offered the choice of the two lagers we sell in our pub (Amstel at 4.0 or Heineken at 5.3) will say I'm driving, I'll have Heineken because they assume that something they normally only drink abroad will be stronger than a familiar drink in the UK...

[innerbrat]

Out of interest, do you correct that assumption when made?

[miss_s_b]

Yes. And if someone asks "What lagers do you have" I always tell them strength and price as well as name; more people react with surprise than don't to the relative strengths and prices. I get lots of people saying they were going to choose Heineken because they thought it would be cheaper.

[http://www.nickbarlow.com/blog/]

That's interesting, and I'm sure ABVs have increased over time, haven't they? It's getting on for 15-20 years since I worked in a bar, but I'm sure Heineken then was around 4% ABV or so and it was only the premium stuff like Stella that went over 5%. But yes, I'd assume Heineken would be cheaper, as I remember it being a non-premium lager, so it's interesting that it's crept up into that category. Or maybe they just got rid of regular Heineken and took the 'Export' label off the premium brand.

[miss_s_b]

I think it is that it just says Heineken on it, but it's what used to be Export. It does SAY 5.3 on the font top, but people never look at that. But this iskind of what I'm saying; people choose lager not based on brand per se, but on their half-remembered assumptions from 20 years ago ABOUT the brand....