To tell the truth I can’t remember, without glancing at a newspaper, what the Chancellor had to say about duty on wines and spirits in his Budget on Tuesday. Over the years, it has all become a blur of Chancellors at the Despatch Box, putting a few pence on or taking a few pence off a bottle of whisky – an opportunity to raise their glasses of choice Budget tipple to the Opposition in a moment of joshing light relief.
These moments almost invariably never address substantive issues in the drinks industries. The poor Scotch Whisky Association lobbied fruitlessly for years to have its plight actively raised in Brussels by a Chancellor who would be prepared to acknowledge that levels of UK duty were playing into the hands of protectionist French vintners.
Nor, now that single-market liberalisation means it is considerably cheaper to cross the Channel to stock up with booze at a French hypermarket, do we hear anything about what might be done for the British retail wine trade in an unprotectionist sort of way. Cross-Channel drinks buying actually wiped more than 4bn off our domestic trade last year, or 15 per cent of the total market.
The Chancellor might, for example, have suggested that he was creating a mechanism through which British supermarkets would not be allowed to raise the prices of spirits this Christmas. I refer to the well-worn practice – which the Office of Fair Trading has examined, but so far has been unable to restrict – whereby the major retailers decline to pass on to consumers competitive seasonal discounts provided by their suppliers.
Which brings me to my text for today’s sermon. It comes from Verdict Research and was published on Monday. It reveals that supermarkets have increased their share of the take-home drinks trade by 14 per cent to 64 per cent over the past six years at the expense of the traditional off-licences and are set to widen their stride despite planning curbs on new superstores.
Well, knock me down with a feather. The superstores have greater marketing and buying power than the off-licences. I don’t suppose anyone can work themselves up into a lather of indignation and amazement at this discovery by Verdict, but the scale of the rout is nevertheless worth recording.
The traditional high-street off-licences have seen their share of the take-home market tumble from 40 per cent in 1990 to 31 per cent today, while that market itself has been enjoying a boom. The total drinks market in the UK has grown by over 48 per cent in the past eight years, while the off-trade has expanded at almost twice that rate, by 82 per cent.
Such expansion is obviously due to the relentless charge – and relentless low charges – of the supermarkets. Tesco, as so often these days, has led the way, boosting its share of the drinks market by nearly one-third since 1992 and overtaking Sainsbury’s. Safeway has expanded its share of this market by a creditable 20 per cent and Asda has managed a five per cent increase.
The market is worth 8.5bn annually – equivalent to an incredible 400 per household in the UK – which is nearly double its size four years ago. Over the same period, take-home sales have risen from 25 per cent to 31 per cent. In the home-owning democracy that has been created over the past 18 years, more people are apparently choosing to get wrecked at home.
It is an astonishing growth market, considering the challenge of cross-Channel trade, and all credit is due to the superstores for developing it – even those which fix prices by failing to pass on suppliers’ discounts.
But what of the pathetic performance of the high-street off-licences? They will doubtless whinge about the superior buying power of the superstores and out-of-town purchasing trends. They will say they can’t deal in the same kinds of bonded-wine volumes as the likes of Tesco and Sainsbury’s. They will claim they don’t have the same global reach through international buyers as the grocery multiples. All of this is true.
But it won’t do. These are not single-branch, family-owned butchers or greengrocers in the high street of a provincial market town. These are off-licence chains with mighty corporations behind them.
The two largest off-licence chains, Thresher (which absorbed Bottoms Up) and Victoria Wine, are owned by Whitbread and Allied Domecq respectively. Oddbins is owned by Seagram, which is said to be trying to sell the chain to Whitbread. These are companies already heavily ensconced in the international drinks trade, which ought to be able to provide a wide consumer choice at competitive prices – as well as exclusive specialist lines. Enough, certainly, to give the grocery dilettantes more than a run for their money.
Indolence and lack of business imagination in a booming market are holding back the off-licence trade. This is one high-street market sector that shouldn’t get away with pleading that it’s all the fault of superstore bullies.