Below cost is below belt
Published:  26 January, 2007

Off-licences' anger at supermarket price tactics

Supermarkets are being urged to stop selling alcohol below cost so smaller retailers can trade on an equal footing.

Cut-price promotions on beer and other drinks in supermarkets have already been criticised by the on-trade . Now independents and off-licence chains are calling for a government review to make trade fairer.

Wine Cellar managing director Paul Gaskell said the biggest challenge for his company this year would be competing with supermarkets on beer pricing. While like-for-like sales at Wine Cellar have risen, beer sales have decreased, Gaskell said.

He added: "It's a challenge for all of us. It's not responsible to sell alcohol below cost. We need to get to grips with what supermarkets are doing.

"There's no sense that supermarkets will stop by themselves. It needs to come through some sort of regulation. We have government bodies, we have industry associations such as the ACS. They should be picking up the mantle."

Thresher Group chief executive Roger Whiteside said: "We would like it to be stopped, but how you stop it, I don't know."

These comments follow the release of the Competition Commission's initial findings from its inquiry into the grocery market , which identified alcohol as one of two main product groups in which items are sold below cost by supermarkets.

Of the 15 grocery retailers questioned for the inquiry, 10 told the commission they sold products below cost: Aldi, Asda, the Co-op, Lidl, Morrisons, Netto, Sainsbury's, Somerfield, Tesco and Waitrose. Most said they did this because they did not want to be beaten on price. They also admitted products were used as loss leaders to tempt customers into store during events such as the World Cup.

Gareth Jones, owner of The Beer

Essentials in Horsham, West Sussex, said consumers could not be blamed for shopping where drink was cheap, but said the practice of selling alcohol with no profit margin needed to be stamped out to give smaller businesses a chance.

He said: "It's ridiculous that the supermarkets should be allowed to sell below cost. We are never going to be able to trade in the same way. The smaller sector can't compete at all if we are to make any margin, and that's really what we are in business for." He added: "If there was a way for the government to step in somehow and make it fairer I'd be all for it."

Alan Dunn, owner of Open All Hours in Keswick, Cumbria, who tries to be price competitive and works on "very, very tight margins", said when supermarkets run cut-price deals he cannot compete.

He said: "Supermarkets are not trading fairly and if they are not going to act sensibly then someone should do something about it."

Tesco said the Competition Commission had not concentrated enough on the views of consumers so far. Chief executive Terry Leahy said: "I believe passionately that consumers have benefited in so many ways from the intense competitive rivalry in this industry. He added he was "very confident that once they look at all the evidence they will find, as they have in previous years, that our industry is competitive and good for consumers and will remain so in the future."

Competition Commission chairman Peter Freeman said: "We are not here to punish success or individual retailers but we are concerned with whether Tesco, or any other supermarket, can get into such a strong position, either nationally or locally, that no other retailer can compete effectively."

Sixty-one MPs have signed an early day motion urging supermarkets and off-licences to end "irresponsible" drinks promotions and the practice of using cheap alcohol as a loss leader.




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