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Minimum Product Pricing on Spirits

By admin

The government, which is due in the next few weeks to publish its alcohol strategy, has agreed to set a minimum price on alcohol, indicated at around 40p-50p per unit, in all supermarkets. We’ve reviewed the lines that are currently sold below 45p per unit to understand how pricing in Spirits may be affected by this change.

What proportion of products will see a price increase?

The new legislation is set to have a major impact on the dynamics of the Spirits sector with 14% of Spirits lines being impacted by the proposed pricing legislation-based on data across the major multiples. This would flatten the current pricing hierarchy and require retailers to rationalise the more affordable end of their range (affecting 1000ml and 700ml bottles). Almost 10% of Spirits promotions used currently would contravene the proposed legislation, with Whiskey seeing the highest number of promotional bans at 14.4%.


Is this the death of Own Label?

The price increase required to meet the alcohol unit requirements would result in budget lines matching the price of premium branded lines. This leaves the market with a decision to make; all prices in the sector will need to increase, thus maintaining an Own Label and Branded offering. Alternatively, Own Label spirits and Budget brands that will no longer be able to compete on price against more Premium lines will be discontinued.


Winners and Losers

Certain labels will undoubtedly lose out more than others if the new law is passed.  Brand View has seen that around 58 SKUs would increase price as a result. Presumably, the Branded lines which will win are those currently sold at around the 50p per unit mark (including brands such as Smirnoff and Eristoff) since they will be able to trade consumers up whilst increasing their market share.


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