Price hikes on own label alcohol inevitable if MUP policy enacted, study shows

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Prices of 80% of standard supermarket own label alcohol products could increase if the alcohol minimum unit pricing (MUP) at 50p goes through, according to research by global pricing and marketing consultancy, Simon-Kucher & Partners. 

Own label cider and beer will be worst hit with an average increase of 60% and 49% respectively. Own label spirits will have to go up in price by 17% on average, while wine will have to increase by just over 14%.

Spot price checks* of 142 items of own label beers, wines, spirits and ciders at four of the UK’s main supermarkets – Tesco, Asda, Morrisons and Sainsbury’s – were captured 28 February- 8 March 2013 by. 

Some of the biggest actual price changes charted:

  • Sainsbury’s Basic 2l cider from £1.99 to £4.20 (+111%)
  • Tesco Everyday Value 2% Lager 4X440ml from £1.00 to £1.76 (+76%)
  • Asda Vodka 1.5l from £22.00 to £28.13 (+28%)

It is worth pointing out that MUP would not lead to vast distortions of the overall market given that prices of branded products will be less affected and they constitute four fifths of off-trade alcohol sales, said researchers. Also, top end own label, such as Tesco Finest and Sainsbury’s Taste the Difference, will to a large extent be shielded from a direct impact as most of it sits in the medium tier, offering decent quality alcohol at reasonable (rather than the cheapest) price.

Impact on retailers and brand producers

The high level of potential price increases may lead retailers to question whether to continue providing budget own label alcohol products – usually cheaper than branded counterparts, said Simon-Kucher. 

James Brown, partner at Simon-Kucher’s London office, said: “MUP essentially levels the playing field for retailers and they may decide to abandon low end own label.”

“Should retailers choose to retain own label, it’s likely they would need to adjust all alcohol product prices – not just those affected by MUP – to avoid the loss of the appeal of this section of their alcohol portfolio.” 

Ivan Segrt, senior consultant with Simon-Kucher’s consumer division, said: “Longer term we expect prices overall to regain their current structure, maintaining the price differential between premium and ‘budget’ products. For example the price difference between a bottle of table wine and a ‘fine’ wine will maintain a similar gap. More expensive products are expected to increase prices to preserve their ‘premiumness’.”

“It is essential retailers and producers properly assess changes in customer demand that could be caused by MUP to be able to respond to newly created opportunities in the market place.”

*Simon-Kucher’s analysis was conducted 28 February to 8 March 2013, based on online data for 142 items. The impact of implementing MUP at 50p was used – the threshold recently requested by campaigners.