Wednesday, January 08, 2014

What happens when the discounting stops? The Scottish experience

I recently wrote a post suggesting that, for many people, wine might be like smoked salmon, a product that is not part of their regular basket, but one that is often picked up because it is on offer at an attractively discounted price. The basis of that post was the experience of Sainsbury, a UK supermarket that had suffered a loss in wine sales following its dropping of half price offers before Christmas 2013.


Tim Atkin reasonably responded that the behaviour of one supermarket's customers might not be sufficiently indicative of the way a larger mass of people might behave if all retailers decided - or were forced - to abandon deep discounting. Why not, he went on, look at Scotland where, since 2011, BOGOF - Buy-One-Get-One-Free - deals and "3-for-£10" offers have been illegal?

At first glance, the official Scottish government figures (compiled by Nielsen) seem to suggest that the legislation has had little effect on alcohol consumption on the northern side of the border. The total amount of alcohol consumed in the form of wine actually rose very slightly, from 11,022 litres in 2010, before the discount ban, to 11,093 in 2012, the first full year in which it was enforced. Beer sales, on the other hand, fell significantly.




If this would seem to undermine my argument, one has to note that the ban had less effect on wine prices than one might have expected. The same Nielsen research shows that Scottish drinkers had - like their counterparts in other parts of the UK - to carry the costs of increased duty rates, but they were not confronted with sudden hikes in the cost of their drink. Dr Ryota Nakamura, co-author of a report produced last year by the Behaviour and Health Research Unit which is run jointly by the Universities of Cambridge and East Anglia - was quoted in a report in the Scotsman newspaper as saying that  “The industry appears to have responded to the ban by replacing multi-buy with simple price reduction.”




The same study quoted household purchasing data from the Kantar WorldPanel which suggested that, following the introduction of the ban, Scottish consumers bought 8.2% fewer alcoholic products per shopping trip - but, as the same Scotsman report  said, they went out to buy beer and cider – the drinks most discounted in multi-buys – 9.2% more frequently, leaving the overall amount bought the same.
Where does all this leave wine? Atkin might say that that it supports a view that wine drinking is sufficiently habitual not to require the impetus of a discount - as I have proposed. I could respond that the replacement of artificially deep discounting by EDLP - Everyday Low Pricing - has not really moved the goalposts. Scottish consumers are still being offered attractively cheap wine; it just doesn't have such a big "Money off" sticker.
Frankly, I'm not sure what I think, but in any case I'm offering this data as a factual contribution to a debate that is often light on real numbers.






18 comments:

  1. Can't see the tables nor enlarge them on separate screen.

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    1. Sorry about that - and thanks for pointing it out. Should be ok now.

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  2. Elizabeth Gabay10:41 a.m.

    Interesting. My son who is at university in Edinburgh is not much of a drinker (he is still under age) but has commented that he cannot buy cheap wine for cooking as in France.

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    1. Jonathan Hesford10:41 a.m.

      That is what he says its for? LOL


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  3. Jonathan Hesford10:42 a.m.

    Scotland may have banned BOGOFs but it hasn't managed to ban fake discounting as Tesco et al now say, "UK price £10, Scottish price £5."

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  4. Thanks Jonathan. I hadn't seen that.

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  5. @AnneEJones10:43 a.m.

    To be fair, deep discounting hasn't stopped, multi-buys have, but it's not such a good headline :)

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    1. A very fair point - coming by a southern-based chain...

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  6. @bringabottleuk10:43 a.m.

    So it actually works out better for the consumer. Prices are essentially held, and there are no more confusing 'deals' ?

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    1. I wish it were that simple. See Jonathan's point above.

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  7. @GavinQuinney10:44 a.m.

    Good Lord, Robert, what has come over you? "Frankly, I'm not sure what I think." Interesting debate though.

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    1. I'm often not sure what I think. I just don't always let it show!

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  8. @MatDickinson6:33 p.m.

    surely the figures would seem to suggest that ultimate price is the decision driver, not promotion?

    By the way, thank you for providing clarity and interpretation ! All too often lacking as you say

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  9. @goodtastereport6:34 p.m.

    Great post, Roberto...

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  10. @GavinQuinney6:35 p.m.

    This comment has been removed by a blog administrator.

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  11. @AnneEJones6:35 p.m.

    This comment has been removed by a blog administrator.

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  12. @bringabottleuk6:37 p.m.

    This comment has been removed by a blog administrator.

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