An end to discounting?
It is a measure of JD Wetherspoon’s continuing market influence and leadership that its decision this week to cut soft drinks prices and withdraw some drinks promotions has had such an impact of its competitors.
What Wetherspoon’s does today, the rest of the industry does tomorrow. That maxim still seems to hold true.
In a move designed to claim an early advantage in the social responsibility stakes, JDW announced that it is chopping two-for-one bottle beer promos, reducing the strength of jugs of cocktails, ending double spirit discounts and cutting the price of J20 and mineral water.
Roy Ellis, chief executive of Inventive Leisure, which runs the troubled Revolution bar chain, told the Morning Advertiser trade paper that the news was “fantastic”, claiming that JDW was the main driver in the High Street price war and that many operators would follow its lead.
Ellis, whose company has been hit by another profits warning, with like-for-like sales down almost 15% in recent weeks, was earlier saying that he would have to look at further discounting to retain business in an increasingly tight market.
The truth is that although Wetherspoon's may be taking a responsible lead and discarding discount driven promotions, it is not forsaking its overall low price policy. It is not raising its prices, in fact it is lowering some even more. So it will be short-lived relief for those trying to compete with it purely on price.
Wetherspoon’s move highlights two important aspects of the current pub business, and not just for those on the High Street.
One is the industry’s response to the government’s call for more self-regulation and restraint in its approach to alcohol harm reduction. The other is the whole sustainability of a low price strategy in the pub sector.
Wetherspoon’s price play is but one innovative approach to social responsibility. Another comes from the Thresher’s off licence chain. The chian's chief executive, David Williams, told Martin Information’s Key Issues in Licensed Retail conference last Monday that Thresher’s now has a policy of ringing through the till every time one of its stores refuses an under-age sale, so providing documentary evidence of its vigilance.
At least one pubco is now planning to introduce a similar scheme. It may be a defensive measure, but is the sort of approach that the broader industry will have to embrace as part of a shift towards a higher socially responsible profile.
Similarly, Interbrew is introducing its beers in small-size PET bottles for premises where local authorities might introduce glass-free environments.
More controversially, Ultimate Leisure, the late night operator, has decided to pay for policing in Newcastle’s Bigg Market. Although many of its competitors and trade associations oppose the practice in principle, it has helped cut down on trouble.
Interestingly, the price of drinks is not a component in any of these last three initiatives.
While the new climate over social responsibility looks likely to curb aggressive price promotions, it will not end the “value” pricing policies of either JDW or, for that matter, Spirit, the country’s biggest managed pub operator. Competing against either purely on price will remain just as tough.
Moves against low priced alcohol in pubs, as opposed to one-off promotions, will be difficult for even the most zealous local authority to sustain. What constitutes “cheap” for a pub in the context of supermarket pricing?
As Wetherspoon’s chief executive, John Hutson, pointed out, his move is to remove the incentive for customers to “trade-up” to buying larger quantities of alcohol.
So those hoping for a respite from low pricing will be disappointed. Perhaps they should look instead to the chains that continue to prosper despite JDW’s presence. How does Barracuda’s Varsity brand, targeted purely at students do it? Why is it that O’Neill’s Irish bars are, according to Mitchells & Butlers chief executive Tim Clarke, having their best year ever?
