Supermarkets under attack

“In other words we believe based on past evidence that this tax is unlikely to be passed on to the consumer in any meaningful way. Given our position in the market with our fascias Bargain Booze, Bargain Booze Plus, Bargain Booze Select Convenience, Thorougoods and Thorougoods Select Convenience price is obviously a key focus for us and we will have to review the position of any brands where the retail ticket is increased in our business.

As you know, Bargain Booze is built on high volume turnover so a reduction in demand and sales would be disastrous (as would the drop in margin, were we to ask our retailers to swallow the increase).

“As a result we regret to say that we cannot asbsorb the increases in costs that the budget would seem to demand. We accept that these increases have not originated from yourselves but we would ask your help by joining with other major brand-owners in supporting the take-home drinks market by absorbing these increases within your own company.”

Denunciations of the role of the supermarkets in promoting alcohol problems, principally by selling alcohol at heavily discounted prices and in some cases below cost, continued apace. At one point Sir Terry Leahy, Chief Executive of Tesco, was accused of being the `godfather of binge drinking’ by John Grogan MP, Chairman of the Parliamentary Beer Group.

The accusation, described as inaccurate and offensive by a Tesco spokesman, indicates the depth of hostility that now sector and the supermarkets. The latter often sell alcohol for less than the on-trade can buy it. Some supermarkets are reported to have been selling lager more cheaply than water or cola, and indeed to have been selling alcohol at below cost price. Ten supermarket firms - Aldi, Asda, the Co-op, Lidl, Morrisons, Netto, Sainsbury’s, Somerfield, Tesco and Waitrose – all reported to a Competition Commission inquiry in 2007 that they used alcohol as a loss leader.

These practices have been condemned as antisocial by politicians and the public health lobby as well as spokesmen for the on-trade. They have given rise, amongst other things, to what is referred to as ‘pre-loading’ whereby customers, mainly young, consume cheap alcohol from supermarkets before going out for the night and are thus at least partially drunk when they arrive at the pubs and the bars. An academic study has provided confirmation that pre-loaders do indeed tend to drink more than others who wait until they get to the bars and that they are also more likely to get into street disturbances and other sorts of trouble. This is, of course, occurring in the context of a long-term trend towards home consumption and the relative decline of the onsector as the principal location of purchase and consumption.

While the supermarket bosses have consistently denied any responsibility for fuelling the binge drinking problem with their pricing policies, their protestations of innocence appear to be regarded with growing impatience and the climate of opinion has clearly shifted against them. The Government has commissioned research specifically into the impact of price discounting in relation to alcohol consumption and harm and supermarket sales of alcohol were on the agenda of the Downing Street summit on binge drinking called by Prime Minister Gordon Brown. In an interview in The Publican, Conservative Party leader David Cameron also supported moves to end irresponsible supermarket sales practices. “One of the things we’ve said is if we want to stop the practice of heavily discounted alcohol in supermarkets, we need to change the law,” he explained.

The pressure on the supermarkets became so intense that Tesco was finally driven to announce that it wished to work with the government on possible legislation to limit its own ability to sell cutprice alcohol. Lucy Neville-Rolfe, Tesco's Executive Director for Corporate and Legal Affairs, said government would have to take the lead because competition laws stop retailers from artificially raising prices. Moreover, she said, it would be commercial suicide and pointless for Tesco to act alone, as shoppers would simply go elsewhere.

Another indication of the supermarkets’ wish to improve their image was provided by Asda which announced that it intended to phase out sales of "shooter" alcopops, popular with young teenagers as part of a drive to stamp out underage drinking. In addition, from April, the chain's 100 town-centre 24-hour stores ceased selling alcohol between midnight and 6am to stop people buying alcohol late at night when leaving bars and clubs. However, not everyone found the supermarkets’ claims to be mending their ways convincing. The Institute of Alcohol Studies commented that despite the rhetoric about social responsibility the supermarkets were still heavily discounting alcohol for bulk purchase in the run up to St Patrick’s Day and a major rugby tournament. Speaking for IAS, Russell Bennetts said:

“The Institute of Alcohol Studies strongly condemns supermarkets for continuing to sell and promote alcohol in an irresponsible manner. As we enter a weekend of major sporting events and St. Patrick’s Day celebrations, supermarkets have been promoting cut-price alcohol that encourages binge drinking.

He added: “Supermarkets claim that cut-price alcohol bought from their stores is consumed over a long period of time and in a responsible manner. However, they are hypocritical to say this while they continue to advertise cheap alcohol in relation to specific events.

“The Competition Commission have found that five leading grocery retailers sold £38.6 million worth of alcohol at belowcost during the 2006 World Cup. Supermarkets know full well that drinks promotions linked to such events entice consumers to buy more alcohol and to drink more alcohol. To claim otherwise is disingenuous.

“Supermarkets are not truly interested in saving the consumer money or in ensuring their customers remain healthy. They are aware that alcohol is a more price responsive product than milk. This is why they choose to use alcohol as a loss-leader. In fact, the Office of Fair Trading has claimed that the leading four supermarkets colluded to keep the prices of milk, cheese and butter artificially high.

“A Sainsbury’s radio advertisement offered cut price Guinness in the lead up to a weekend of rugby matches and St. Patrick’s Day celebrations. This appears to be part of a continuing trend for supermarkets claiming sporting and other events as a reason to drink at home. Tesco have continued to advertise cut-price alcohol even after claiming that they wish to halt such behaviour.”