Minimum alcohol pricing will make promotions unviable, says SymphonyIRI

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David Ware, director of grocery at grocery market and shopper intelligence consultancy, SymphonyIRI Group, considers the impact of minimum alcohol pricing on deep price promotions

The Government’s proposed minimum pricing for sales of alcohol continues to cause controversy today. Many people doubt the legislation will help curb underage drinking, crime or alcohol-related deaths, however, there is no doubt the major alcohol brands will be busy this Christmas re-thinking their marketing strategy.

The proposed minimum price for alcohol (at whatever price is set above 40 pence) completely changes the sales and marketing dynamics for promotion centric brands.

Data from SymphonyIRI Group for the year ended 29 September 2012 shows:

·        71% of all alcohol (excluding wine and spirits) sold in the UK by the major grocery stores is currently sold using promotions – such as 33% extra

·        The volume of alcohol sold on promotion has dropped slightly over the last year but has risen since 2009 when it was at 60%

·        The amount of reduction given on all alcohol promotions over the last few years has declined from 24% in 2010 to 20% in 2012

·        Alcohol sales value in major grocery stores (excluding wine and spirits) was £2.7bn in last year (up 3.7% on the previous year)

This heavy use of promotions is what makes much of the alcohol sold at a retail price below the 45p per unit minimum price the Government is expected to propose.

Price promotions will be a thing of the past for many. Tomorrow’s strategies will need to focus on other ways to differentiate the brand. Many will look to establish a premium strategy and packaging and branding will be key to their success. 

We expect to see more innovation and use of cross brand promotions or added value promotions where price is no longer a driver of purchase. This might include providing a free multi-pack of crisps or a branded gift with every pack of beer purchased, especially where brand loyalty will become a major driving force on purchases moving forward.

Retailers will also be impacted by their reliance on alcohol promotions to drive footfall around key events (particularly busy periods like Christmas).

Minimum unit pricing could be catastrophic for all retailer own label alcohol products where high volumes are currently sold solely on price. Even consumers focused on price are more likely to migrate to branded products or stop purchasing altogether. With focus on branding we may see the same levels of range reduction in alcohol that is taking place for other grocery categories.