Head of Steam boss accuses supermarkets of killing pubs with pre-budget beer prices

Head of Steam pub owner Tony Brookes has launched a powerful attack on supermarkets and their beer prices. He accuses some high street retailers of cutting the price of beer after the duty increase in the budget this March. He says they are guilty of irresponsible pricing policies that are the major cause of binge drinking, alcohol-related health problems and the closure of pubs.

Tony Brookes owns nine pubs, mainly in North-east England. He conducted a survey of supermarket prices before and after the March budget and again in June, choosing a Tesco store in Hexham, Northumberland.

He says that before the budget, most bottled beers, mainly 550ml, were sold at £1.99 or £6 for any four bottles -- making the notional price of a case of 12 bottles £18 or £15 excluding VAT.

“In the budget, duty increased from £18.57 to £19.51 per hectolitre – equating, for example, to 2.068 pence for a bottle of 4% beer. You would expect everyone’s prices to go up – but not Tesco’s. On 13 April, the deals had got even better. The same products were being offered at four for £5.50 – less than before the duty rise. These prices made the notional price of a case of 12 bottles £16.50 or £13.75 excluding VAT. The price check on 26 June revealed the deal had gone back to four bottles for £6.

“The fact remains that Tesco was selling many beers after the budget for less that they were selling before the budget – and three months after the budget they were selling them at pre-budget prices. The question has to be asked: did Tesco refuse to accept the duty rises that the brewers would have attempted to pass on to them or did they absorb the increase themselves?”

On 25 September, Tony Brookes returned to the Hexham store and discovered that the price of the vast majority of the British beers stocked had been reduced to £5 for any four bottles.

“This price is absolutely ludicrous,” he says. “It works out at £12.50, excluding VAT, for a case of 12 bottles. That is much cheaper than our company can buy at discount from industry trade sources. Pub operators are expected to make a profit by selling at a mark-up on what they pay for their stock. The alcohol market is clearly massively out of balance. It would be far cheaper for most pubs to buy their stock from supermarkets.”

Brookes found that Robinson’s Old Tom (8.5%) in 33cl bottles was being sold at £1.25 a bottle. The duty on a bottle is 69.10p, VAT is 20.83p. This means taxes on a bottle are 89.93p out of the selling price of £1.25. The price of a case of 12 bottles excluding VAT is £12.50 – but the trade price is around £19 a case.

“It’s absolutely impossible for pubs to compete with supermarkets when their prices are so low,” Brookes says. “Pubs just cannot compete with these prices. £1.25 a 50cl bottles equates to £304.80 per brewer’s barrel of 288 pints, excluding VAT. Most pub operators could not buy Taylor’s Landlord, for example, for that price.

“The question arises: why are Britain’s brewers selling their beers so cheaply to supermarkets so they can be sold for a lower price than a pub operator can buy them for? Where does their allegiance lie – with the pub operator or the supermarket?

“The government must act to stop the supermarkets’ irresponsible abuse of the market, which is driving pubs out of business. I appeal to all suppliers of drinks to supermarkets to hold their nerve, charge a realistic price that gives you a profit, pass on all duty and cost increases, and give your pub customers as good a deal as you give supermarkets.”

Image shows Tesco shelves in Hexham