20 June 2012
The talk of the introduction of minimum pricing in E&W continues to gain momentum, further spurred on by the vocal support of David Cameron. Whether this comes to fruition or not, it is my considered opinion that alcohol will become more expensive in the off trade. Whether it be from a focus on below cost sales, the potential minimum price, further use of the duty escalator, inevitable producer cost inflation and/or the health lobby pressure to denormalise alcohol (and thus make it harder to use as a loss leader) this activity will all move prices north.
With all of this attention (and possibly legislation) focused on alcohol pricing and responsible retailing, the big value discounting mechanic will come under threat. While deep discounting has never been desirable from a supplier in regards to brand value, it has been a welcome volume driver. If retailers stop (or are stopped from) using this mechanic the very nature of the consumer decision making process will alter dramatically. Price would move from being the main factor driving a purchase and we would see the decision shift to consideration of brand equity and perception.
In supermarkets, Mum typically purchases the brands on behalf of the family and therefore looks at the offers (65% of beer is purchased on offer in Supermarkets). If price is taken out of the equation the question of “what beer should I pick up” will ring round every household putting the decision back in the hands of the primary consumer.
This is something that suppliers need to be aware of and start planning for today. While minimum pricing and/or legislation may be some way off, the war for brand equity needs to start now. The good news for us is that the on-trade will form the battle ground.
The on-trade has long been seen as the place to build perception and establish brand credentials. The continued best practice of brand positioning, pricing and engagement in the on-trade has been shown to build brand equity. In fact there is a double win to be had as, a strong on trade brand image will reinforce consumer support and thus influence the off trade big volume purchases. Suppliers therefore need to start future planning now and taking a long hard look at the current positioning and support invested behind brands in our pubs and bars. Done correctly, brand profile and retailer profit can be reinforced as consumers engagement is experience based rather than exclusively down to price.