FDBusiness.com

At least 50% of alcohol sold in Scotland does not meet the impending minimum price legislation. Spirits will be the most impacted as 69% of volume currently sold is below the 50p per unit threshold, according to measurement company Nielsen who analysed till sales (EPOS data) in nearly 1,200 stores in Scotland. Beer is the next most impacted (67% of volume is below the threshold) followed by cider (51%), while only 3.5% of wine sales would be impacted.

When looking at the top 50 selling products in each category, instead of total volume sales, 76% of the most popular spirits don’t meet minimum pricing compared to 74% in beer, 54% in cider and 12% in wine.

“Wine is, by far, the least impacted and so has the most to gain from minimum pricing,” says Marika Praticó, senior client manager at Nielsen.“Overall, wine will need to raise prices by the least amount, thus, it becomes more affordable relative to other alcohol.”

Blended scotch and vodka are the two categories impacted most by minimum pricing legislation. Blended scotch, overall, will require prices to rise 20% to meet the threshold, whilst vodka requires a 16.3% rise.

Praticó notes that enforced price rises aren’t necessarily bad for the spirits industry; in fact it could result in increased revenue, as long as demand doesn’t fall beyond a certain “tipping point.” She explains,“This break-even figure is 12.5%, as long as any potential decline in demand doesn’t exceed this the industry will benefit thanks to the higher price point. Should demand fall by more than 12.5%, that’s when their revenues will decline.”

Implications

Nielsen’s analysis also raised four potential implications of minimum pricing legislation on retail behaviour.

As with wine, premium brands, particularly in spirits, are likely to benefit as the price differential between them and cheaper brands diminishes so, “it’s a good time for people to “trade-up” to the more expensive brands, which is likely to have a negative impact on supermarkets’ own-label offerings,” says Praticó.

She also expects a “near extinction” of major price-saving deals offered by retailers in spirits, beer and cider, as the likes of two-for-one deals would mean the effective price paid for each unit of alcohol would fall below the threshold.

In terms of shopper behaviour, there could well be an increase in cross-border alcohol shopping among the Scottish to England and Ireland, where prices would be cheaper, “mirroring what many Britons already do with the annual Calais run.”

Another implication Praticó notes is that there’ll also be the “inevitable stockpiling” of alcohol before the legislation comes into force which could well mean “a bumper Christmas for alcohol retailers.”