Saturday, May 16, 2009
Ray says "Yeah right!"
The two big supermarket chains say they have stopped selling alcohol below cost as a "loss leader", after claims the cheap deals lead to alcohol abuse.
Supermarkets have voluntarily given up offering liquor deals to encourage customers into stores where they buy other goods.
The decision follows criticism from the Liquor Licensing Authority that loss-leading "promotes the abuse of liquor" and may breach the law aimed at reducing abuse.
"I buy a bottle of wine that the supermarket has discounted from say $25 to $15. I enjoy that bottle with my dinner over the next 3 or 4 days. Someone else buys a non-discounted 3 litre cask of cheap plonk for the same amount and drinks it all in one day. Which one of us is the responsible drinker?
So ending discounting will fix alcohol abuse. Yeah right"
Ray is sort of correct. It will not reduce alcohol abuse.
This story last week made me sit up and take notice. The supermarket duopoly (New Zealand has only two supermarket operators no matter how many brands they have out there)have seen an opportunity to increase profits along with reputation by making that statement. Sure they aggressively market against each other and will always have deep-cut wine sales but they always have an eye to the bottom line. The Liquor Licensing Authority criticism must have been music to their ears.
Here is a scenario - Either or both of the supermarket chains discuss the Licensing Authority criticism at a board meeting. The CEO asks what they should do about it. The Merchandise GM says that they have over 600 wine companies daily pleading with them to take their wine and are prepared to pay the usurious 'merchandising' fees to get the product on shelf or on promotion - there is no shortage - they can pick and choose. They can also screw down the suppliers to give an attractive into-store price enabling them to 'pass on savings to consumers' while still enjoying a very healthy margin (whether as GP or the aforementioned 'merchandising' fee.
The Marketing GM says that their consumer research of drinking behaviour suggests that drinking patterns are static or increasing (not decreasing). If a wine drinker enjoys drinking 4 bottles of wine a week he will continue to drink 4 bottles regardless of whether the price goes up or down -- they might as well get an extra couple of bucks for each bottle they sell.
The PR GM (spin doctor) then says that if they release a statement saying that they too are concerned at alcohol abuse and will cease loss-leading alcohol then they can get good (free) publicity, satisfy the Licencing authority, sell as much wine as before and bank more dollars. Everyone is happy. Right?