Below-cost, below-the-belt marketing to be addressed?

While below-cost selling certainly plays a role in poor consumer value-for-money perceptions of on-trade prices compared to the alcohol price promotions being permitted in the multiples, there’s more to the canvas than meets the eye. Drinks Industry Ireland reports.

The practice of below-cost selling continues to make the on-trade seem very expensive and relatively poor value compared to the deals available in the off-trade. This is especially so in relation to bottles of beer, soft drinks or water. But it’s the comparative freedom with which the multiples have been able to market their alcohol discount deals that really gets the on-trade’s goat. The two-tier system applied to the on-trade/off-trade reflects the comparatively unfettered ability of multiples to market their business as they see fit when set against the fairly onerous on-trade restrictions to marketing.

The LVA and VFI’s protest earlier this year highlighted the commercial disadvantage under which the on-trade must labour.

Their withdrawal from MEAS formed part of the two organisations’ overall campaign to get a level playing field in the retailing and marketing of alcohol.

Their calls to the Minister for Justice, Equality and Defence Mr Alan Shatter for a new all-encompassing Code for the responsible sale and promotion of alcohol which would be equally applicable to both the on- and off-trade was answered by a joint meeting in the Department recently.

The two organisations were subsequently asked to submit their views and a follow-on meeting is likely for later this month.

“Time will tell if anything comes of it,” commented one senior VFI member wearily.

The widely-awaited Report of the Strategic Task Force on Substance Misuse is likely to have some words on below-cost selling – perhaps even the setting of minimum prices – while also addressing long-standing issues with regard to the sponsorship and advertising of alcohol.

At a recent Oireachtas Committee meeting on alcohol misuse, she pronounced herself  “personally committed” to introducing minimum pricing if the legal advice backs it – that’s a big ‘if’ there though…

Neither is the Junior Minister satisfied with the supermarkets’ current voluntary Code of Practice on the Display and Sale of Alcohol Products in Mixed Trading Premises and is determined to end the practice of alcohol being sold alongside normal goods.

Others at the Oireachtas Committee meeting, such as Fianna Fáil Spokesman on Health Billy Kelleher, could not understand why below-cost selling had been allowed run for so long.

“When tobacco prices were increased, the next day we reduced alcohol prices,” he told the Committee. Both Fine Gael’s Denis Naughten and Billy Kelleher are seeking a ban on below-cost selling.

This finds resonance in the VFI where its Chief Executive Padraig Cribben tells Drinks Industry Ireland, “The current practice of selling alcohol as a footfall driver is irresponsible in the extreme. Alcohol is treated as a commodity like biscuits or beans by supermarkets and is marketed in a cavalier fashion. This is portrayed as consumer-friendly. It is not. Why? Because the prices of other more staple products are inflated to compensate. Who says so? A leading UK supermarket group has admitted to this practice.

“This is not either consumer-friendly or consumer-desirable. The only solution is to introduce a minimum price based on the alcohol content of the product.”

While it’s understood that the Government is indeed examining minimum pricing, there may well be serious impediments to its implementation in terms of EU Competition law.

“All along we’d been of the view that a reintroduction of the Groceries Order for all is warranted,” comments LVA Chief Executive Donall O’Keefe on the prospects for a below-cost selling ban, “But this doesn’t seem to be flying politically. Inflation means that prices would rise if re-introduced. But what’s the definition of cost?”

There are lots of LTAs/promotional incentives etc knocking around, he points out, so this is a tricky issue.

And who would monitor and enforce the re-introduction of the Order?

“While we would love to see it, we can’t see how it could be done,” he admits.
The issue “completely failed” to make any traction with Fianna Fáil last time around.

“We’ve engaged with Fine Gael but definitions of cost and enforcement remain a barrier to us.”

The LVA too is exploring this issue on its own behalf, getting legal advice, but believes it’s not as wonderful as it sounds, the legal impediments to the necessary mechanisms being substantial.

However one can never link the present pressures on the on-trade to just one factor.

Other, perhaps more major, factors with a bearing on the pub trade include: regulation and all defaults to the smoking ban and drink-driving limits. Then there’s unemployment making consumers cautious in spending and of course, the switch from on-trade to off-trade, driven not only by perceived value factors but by lifestyle choice too – away from the pub.
With so many factors coming into play, off-trade selling practices may well be a big part of it, but it’s not the sole reason for the on-trade sales slump.

Additional factors are at play, agrees Donall O’Keefe, such as elasticity of product where, as the price expands, people buy less since there are ready-made easily-accessible and affordable products that people can drink at home.

“We’ve a role to play ourselves,” he concludes, “Our standards need to improve. That which we control ourselves needs to develop. And don’t forget that there’s a reasonable chunk of the LVA membership in volume growth at present – about 25 per cent – so there’s growth to be had for operators who do the job well.”

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