Tuesday, 9 September 2008

Supermarket Prices

In a daze, traipsing round Tesco I was thinking about supermarkets' role in Britain's drunken hooliganity. I couldn't crack that problem and my thoughts moved onto the brands "craft" versus "mass" in the supermarkets.

Certainly, it's alarming that price competition has led mass-produced booze to be sold cheaper than water and had the knock-on effect of persuading people to drink anywhere but the controlled environment of the pub, and the pub trade is suffering as a consequence. But there may be another more positive effect.

The beers most affected by this rampant price cutting are the mass-produced ones – the common enemy of craft brewers. Look further in the supermarkets and you find rows of craft beers (remember, I choose not to use the term "real ale"), their prices unaffected by mass-market price competition. Ask around and you hear from SIBA, CAMRA and the brewers themselves that bottle sales are on the up – despite being the expensive option.

Here we have a dichotomy: 

In the off-trade craft beers are priced higher than mass-produced beers.

In the on-trade craft beers are priced lower than mass-produced beers.

It might be a febrile fantasy, but I believe the price-crash of mass produced beers could be a blessing in disguise for craft brewers. "How?" I hear you asking, "isn't it just going to encourage people away from craft beer on to cheap stuff?"

No. As I've already mentioned, bottled craft beers are performing well despite being the pricey beer option.

I believe the phenomenon is this – on the whole, people sensibly understand "poor quality things tend to be cheap – good quality things tend to be expensive". For many years people have taken on face value clever advertising such as "Stella Artois: reassuringly expensive", thinking "it's pricier, obviously it's very good, and I like to consume good things, that's what I'll buy". (I don't mean to single out Stella; I'm just using "Stella" as short-hand for mass-produced-not-very-interesting-beer.)

Now though, things have changed. Everyone uses supermarkets and sees the price of Stella considerably lower than the craft beers. What's the message? – "Stella is inferior to the bottles in the obscure aisle at the back of the supermarket" and a bit of "Stella is the beer favoured by price-conscious al-fresco drinkers".

OK, every single beer drinker isn't going to ditch their fave big brand because it's gone cheap, plenty will clap their hands in glee at the rock-bottom prices. Some won't. Some will be thinking "I like good stuff, and a higher price is a signifier of quality, I'll have to investigate the intruiging bottled stuff I usually ignore while the wife's looking at wine". How many is anyone's guess. I reckon enough people will ditch "mass" and move to "craft" for the sector to experience a good long-term boost. This maybe is what is already happening. This could be a bigger effect than thirty-something years of "campaigning" by you-know-who.

In the pub trade business is very tight with closures rampant. That straightforward message is evident from, for instance, the British Beer and Pub Association, a body which wishes the world to think is the ONLY voice of brewers and pub owners. In fact, if you check its membership list, it largely represents the big players – and in doing so seeks to downplay the efforts of small independents. Travel around the highroads and by-roads of the country and what do you see? - "Pub Lease For Sale" signs. It's the big dull McDonaldsised chains who are in most obvious decline and what do they sell most of? - McDonaldsised mass-produced beer. Freehouses aren't finding current economics such a bed of roses at the moment but they do seem, out of all pubs, the ones most capable of weathering the storm. What do most of them sell most of? - Craft beer.

1 comment:

Velky Al said...

We have the opposite situation in the Czech Republic, the other day I was in my local supermarket and noticed that Stella and Heineken both retail for around 80p for a 500ml bottle, while this year's World Champion Lager, Primator's 16 degree Exklusiv retails at just under 50p per bottle. Even with purely Czech brands, the ubiquitous Pilsner Urquell usually retails at about 80-90p a bottle.