It's never a pretty sight when big business colludes with big government, but there is something frankly pathetic about the way the pub industry has conducted itself in recent years.
Every British government in the last twenty years has displayed nothing but contempt for the pub trade. The industry has been regulated and taxed to the brink of disaster. In
every battle, the state has sided with neo-prohibitionist health groups who couldn't care less whether pubs live or die (or 'evolve' into sterile licensed cafes and coffee shops, which is effectively what's happening).
And yet, time and again, the pub industry comes back like a battered wife, pretending nothing's wrong and believing that this time it will be different. Stuck in the middle is the consumer, who gets it from both sides. Smokers already know that the pub industry isn't interested in sticking up for them, and now drinkers are getting the same treatment. Or, more precisely, those drinkers who have had the audacity to desert pubs since the smoking ban.
The economics of this are so simple. If you cast out 12 million smoking customers, they will buy their alcohol from supermarkets and drink at home. In a catastrophic misjudgment of cause-and-effect, the pub industry chooses to believe that people suddenly—out of the blue—decided to start buying alcohol from supermarkets in July 2007, thus deserting the pubs. Since this alcohol is cheaper than it is in pubs then, QED, all they need to do is raise the price of supermarket alcohol and all will be well.
And so, strange bed-fellows that they are, the pub industry finds itself in an alliance with the temperance groups in campaigning for more expensive booze. Adam Fowle, the CEO of Mitchell's and Butlers, has come up with the catchy phrase 'binge pricing'. Alcohol Concern must be kicking themselves for not coming up with it first. Playing the role of public health guardian, and resolutely ignoring the smoking ban-shaped elephant in the room, here he is writing for the
Morning Advertiser:
The recently enacted mandatory code rightly bans irresponsible promos in the on-trade. Pubs cannot offer “all you can drink for £10”. However, most supermarket offers would drown a man for £10.
The government’s focus on the on-trade is unbalanced as the majority of alcohol is now purchased in the off-trade, with nearly 70% being bought from supermarkets. We believe a level playing field between the off-trade and on-trade should be the minimum requirement.
Yes, it's the fabled 'level-playing field' argument. We've heard that before, have we not? Like in this Mitchell's and Butlers
press release from 2006:
There are now two alternatives before Parliament: either the retrograde, food based ban proposed in the Health Bill, which would incentivise large numbers of pubs, mostly in less affluent areas, to remove food and revert to a smoking and drinking offer only; or a full ban with no exemptions. We believe that the level playing field outcome of a full ban would be much the better of the two alternatives.
And how did that work out for Mitchell's and Butlers? Let's have a look at the share price...
You'll notice that the collapse of the share price began almost on the dot of July 1st 2007. Recession? No—that didn't start until October 2008, by which time the company had lost 75% of its value. Supermarket booze? 'Twas ever thus. Bad management? Perhaps, but the story is the same for all the pub companies.
This, for example, is Punch Taverns...
When Punch's profits started to slide in July 2007, it was blamed on a 'wet summer'. Since then, the company has lost 90% of its value. One hell of a wet summer, wasn't it?
If the level-playing field was the best option, one can only wonder what the worst option would have done to the pub industry. Still, here they are again, aligning themselves with their natural enemies and demanding a 'level-playing field'.
Except they don't want a level-playing field at all, what they want is special treatment...
Why not have a much lower rates bill for pubs and a higher one for supermarkets?
Why not lower duty rates for draught beer as opposed to a packaged product? Or what about a lower rate of VAT for alcohol sold with food, which is the policy they adopt in Italy?
At heart, the problem is that people like Mr Fowle have forgotten—or are wilfully ignoring—the fact that pubs and supermarkets sell different things. It's about so much more than the cost of the liquid in the glass. Supermarkets sell the liquid, pubs sell the experience. And because they sell different things, there can never be a level-playing field.
Consumers aren't stupid. They've always known that they can get their alcohol much more cheaply from the off-trade. They pay (or paid) a premium to go to the pub because pubs sell atmosphere, comfort, entertainment and relaxation. Above all, they sell an environment. That environment changed dramatically in July 2007. For some people, it was a change for the better, but every economic indicator suggests that for pubs' core customer base, it was a change for the worse. People will not pay a premium to stand out on the street. Whether that premium is £2 or 2p makes little difference when there is a comfy sofa and a roaring fire back at home.
So, yes, it's not pretty when business colludes with government, but it's understandable when business feels it can maximise its profits. But when years of collusion have led to nothing but the decimation of your industry, isn't it time to grow a pair?
