Today the first minimum alcohol pricing the the UK has been introduced in Scotland. And that’s a good thing for bars.
What will drinks cost in Scotland now?
A unit of alcohol (25ml of 40% ABV / 80 proof spirit) must now be sold to an end consumer for no less than 50p. This means:
- £14 for a 70cl bottle of 40% ABV spirit like Whisky
- £13.13 for a 70cl bottle of 37.5% ABV spirit, like a budget Vodka or rum
At the time of writing, £14 is around $22 US.
The minimum alcohol pricing has been introduced primarily to reduce binge drinking in problem drinkers, 83% of whom are thought to drink the cheapest alcohol, such as strong white ciders. These drinks could increase in price by as much as 150%, from £2 to £5 per 2 litre bottle.
There is nothing however that I’m aware of in the law that would stop a retailer from bundling in free mixers with their spirits if the increased margin would be enough to fund this.
How will minimum alcohol pricing affect bars?
Very few bars and venues currently charge less than 50p per unit, at least at any scale. The pricing is clearly aimed at the home drinking, or off licence market. This could be a huge win for the bar industry, as it reduces the incentive for people to pre-load on drinks at home before going out.
This means that bars pricing can become more competitive with shops – although, is it that simple?
Is there a potential that bars will try to source cheaper booze in order to effectively price match with what the shops can do while giving a better experience? If a bar is able to buy in a cheap vodka for under £10 a bottle, keep their overheads super low and volumes high, they could almost beat the shops. Selling for a minimum alcohol pricing at 50p would make margins tight, but possibly a loss leader.
I’ll point out this isn’t something I’d recommend, just an interesting thought about what could happen in theory.
How will it affect producers?
I would be surprised if producers of any quality would be affected by the changes as very few spirits will need to change their pricing. However, producers of shop label bulk spirits may well be affected. Why would a customer buy the super budget value spirits when a branded spirit now costs the same?
It remains to be seen if retailers will raise their pricing on spirits above the cut off to keep differentiation between these drinks. That said it would only take a couple to take the lead on this to make the others follow suit.
It will also be interesting to see if overall sales volumes drop in Scotland. What are your thoughts on the changes, and would you like to see minimum alcohol pricing rolled out in other countries?