Wetherspoon’s price cut to stir soft drinks

JD Wetherspoon’s decision to slash the price of Coke taps into an uncompetitive cash cow: the soft drinks on-trade. A revolution is brewing, argues Brian Wheeler

Pub chain JD Wetherspoon has slashed the price of Coca-Cola at 300 outlets. Pricing Coke at 80p for three-quarters of a pint, it is even claiming to be undercutting fast-food giant McDonald’s.

The move should please the Government, which last month announced it was investigating soft drink prices in pubs – through a survey of 900 licensed premises – as part of a headline-grabbing assault on “Rip-off Britain”.

It has also been welcomed by the soft drinks industry, which has long argued that pub customers should receive better value for money. The industry views the on-trade as something of a sleeping giant.

But how will the rest of the licensing trade – stung by reports of pubs charging up to &£4 for a pint of orange juice – respond?

According to AC Nielsen’s most recent industry survey, soft drinks are the second biggest product category in pubs after beer, accounting for sales of &£1.5bn per year.

This figure represents five per cent of total UK soft drinks volume, but it is growing steadily as people’s drinking habits change. Yet in some parts of the pub trade soft drinks are still viewed as a “distress” purchase – a last resort for customers planning to drive.

Richard Hall, chairman of industry analysts Zenith International, says: “The soft drinks industry has for a long time been concerned that the pub trade is a missed opportunity. All the more so because there is a wide variety of soft drinks available on the supermarket shelves yet pubs have concentrated on a very narrow range of mainstream labels.”

Britvic, which markets Pepsi, 7-Up and its own orange juice brands, is also keen to promote wider choice and larger servings. The company believes people are more comfortable about buying soft drinks in pubs and last year launched J2O, a fruit-flavoured drink aimed at 18- to 24-year-old men.

Britvic spokesman Ruth Laidler has given a cautious welcome to price-cutting. She says: “Anything that makes the pub groups think about soft drinks a bit more seriously and recognise their importance we would definitely see as a plus. It is what consumers want.”

Wetherspoon’s is certainly not the first pub chain to offer a discount on soft drinks. Last year, Yates’ Wine Lodge slashed prices by a third to &£1.10 for three-quarters of a pint of Pepsi or Lemonade. And Greene King is currently testing a similar offer of cola for 99p, at selected town centre sites.

But chairman Tim Martin is hoping price comparisons with other chains’ Coke prices – from Whitbread’s Hogshead at &£1.44 to Bass’s O’Neill’s at &£1.14 – and the fact that it is a national initiative, will give his company the edge.

In common with other pub groups, Wetherspoon’s has always priced its drinks – soft and alcoholic – in line with local competition. It now has a national price list, which, apart from Coca-Cola, includes cut-price premium lager, wine and Perrier water at 50p a bottle. The new strategy is seen as crucial to Wetherspoon’s continued expansion plans.

Martin says: “We have been planning to launch the 16oz (three-quarter pint) glass for some time and the announcement of the Government inquiry is just a fortunate coincidence.

“We are trying to make the whole business of going to the pub a more economical experience. Pubs have become uncompetitive.

“We want them to compare more favourably with the off-trade. One of the key aspects of this will be the comparative prices, particularly of Coca-Cola. We have achieved it by cutting into margins.

People are aware that they are paying more than they should for soft drinks. We are throwing down the gauntlet.”

So far, the rest of the trade seems unmoved by Wetherspoon’s challenge. Most licensees and brewers argue that it is unfair to compare their prices with supermarkets and off-licences.

Joe O’Riordan, chairman of the London-based Guild of Master Victuallers, says: “In a pub, you are not just paying for a drink, you are paying for the whole environment.

“You can buy a glass of cola and spend the evening watching football on Sky TV, which costs the pub &£3,000 a year.”

The brewers have for the most part echoed this view. Whitbread spokeswoman Angela Wajner says: “Our research shows that taking into account that the price includes service, surroundings and entertainment laid on for their enjoyment, customers generally feel they are getting value for money.”

There are, received wisdom has it, a minority of pubs who are ripping off customers but the answer lies in clearer price displays rather than legislation. In any case, the argument runs, hotels and restaurants charge even more.

Bass has had skirmishes with Wetherspoon’s in the past over the price of beer, but has no plans to take it on over soft drinks.

Bass Leisure Retail spokesman Bob Cartwright remains unmoved by the price differential between Wetherspoon’s and O’Neill’s. He says: “You are talking about very different products. That type of price, &£1.14, is still very significantly below the price of a pint of beer.”

The fact remains, however, that margins on soft drinks in pubs are generally higher than beer, wines and spirits.

Whatever the eventual conclusion of the Government’s investigation – and the most it is likely to do is make pubs display prices more prominently – its initiative must mark the beginning of the end for over-priced soft drinks.

If pubs want to avoid being bracketed with the rogue traders and rip-off merchants, they will surely have to follow Wetherspoon’s lead.

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