The price is right

The sun is shining on Scottish c-stores this summer - and it appears that Minimum Unit Pricing is too. The extent to which rising alcohol sales are being fuelled by the favourable weather is hard to quantify, but independent operators are convinced that MUP is playing a major role in their buoyant trading since it was introduced on 1 May.

And with Wales set to follow suit with a likely 50p minimum unit price for alcohol next year, retailers beyond the Scottish border will be keeping a close eye on the legislation’s longer-term impact.

To recap, a 50p minimum unit price was finally introduced in Scotland this year, six years after the Scottish government first proposed the measure. Legal challenges by the Scottish Whisky Association (SWA) delayed its introduction and resulted in judgments from European and Scottish courts. The Scottish government’s aim is to reduce alcohol-related ill health, but the SWA claimed that MUP would be ineffective and damage the Scotch whisky industry.

Ahead of the legislation, independent retailers had been generally divided over whether MUP would dent alcohol sales or level the playing field with the supermarkets. But two months in, business pessimism appears to have been assuaged.

Scottish Grocers Federation (SGF) director of policy John Lee says: “All our evidence is anecdotal so far, but the transition has been smooth. Retailers seem to have adapted very well and made the necessary adjustments.

“Consumers of lines affected by MUP have been switching to beer, half bottles of spirits and even wine. Alcohol sales have not dropped at all, which we had been quite concerned about. There’s been no impact on volume or profitability.

“I guess it’s created a level playing field. We were concerned about the impact on profits for independents, but not now.”

All retailers contacted by C-Store have either benefited or been unaffected by MUP. However, their preparation for the legislation, and the subsequent impact on sales of specific lines, have been varied.

Dan Brown, managing director of Nisa Pinkie in Musselburgh, Edinburgh, says: “We phased out pricemarked cider and spirits and large bottles of cider, but we haven’t de-listed the products. Surprisingly, we still have customers buying them. We thought that they’d drop off completely - a 2ltr bottle of Strongbow has gone from about £3 to £6.”

Abbie Morgan, owner of Bridgend Service Station in Fife, took a more ruthless approach. “We’ve stopped selling the high-ABV, low-price lines such as Frosty Jack’s and Strongbow 2ltr bottles, and Glen’s vodka. Glen’s drinkers have mainly moved to Smirnoff, which is now only about 50p more expensive, and Frosty Jack’s drinkers have moved to Magners. There’s been no complaints, even though they’re paying more,” she says. “Our sales are slightly up.”

Mo Razzaq, of Family Shopper in Blantyre, took a similar approach with the stronger lines, also with little fuss from most customers. “We de-listed strong ciders and ran them down. We went through the rest of the stock and adjusted the prices accordingly, so the price of multipacks went up. Those drinkers have moved on to cans of Tennent’s and Carling mostly. They’ve just got on with it and haven’t complained,” he says.

Donna Morgan, owner of Brownlies of Biggar in South Lanarkshire, did not previously stock many MUP-affected lines, but she has nonetheless profited from the legislation. “It hasn’t affected many of our lines - we sell a lot of premium products. Some of the white ciders have gone, but those consumers have gone to 1ltr ciders or higher-alcohol beers. These offer higher margins, so we’re benefiting.”

Dan says sales have increased by about 10% at Nisa Pinkie, and margins have doubled. “The sales rise is split across all categories. I think it’s because the playing field has been levelled and prices have gone up and margins are up, too. We’re making more margin on cheaper vodkas and we’ve put prices up on more premium lines such as Glen’s and Smirnoff to differentiate the prices.”

Mo agrees on the level playing field argument. “Sales overall have gone up because we’re now on par with supermarkets in terms of multipacks and vodkas. We have parity - and margins have gone up, too. Supermarkets had got away with a lot.”

Scott Graham, of McLeish Inverurie in Aberdeenshire, says sales have gone up about 7-8%. “I never stocked stuff like White Lightning, but we stock lines such as Strongbow and Glen’s vodka. We used to sell a 15-pack of Tennent’s for £13.20 while Tesco was selling it for £9.99. Now we’re selling it at the same price,” he says.

Scott also envisages healthy trading for convenience stores later in the year. “There will be a real opportunity at Christmas when litre bottles of spirits are popular. We could never compete with supermarkets, but now we have the opportunity,” he explains.

Glasgow wholesaler JW Filshill, which supplies more than 175 KeyStore stores across Scotland and the North of England, has de-listed about 30 of the 55 or so products affected by Minimum Unit Pricing for Scottish stores, including pricemarked variants of Frosty Jack’s, although some non-PMP lines are still available in certain sizes. Filshill retail director Craig Brown says Strongbow has now become the entry-level cider. In terms of beer, there has been 30-40% sales growth of 660ml lines of premium brands such as Peroni, Moretti and Stella. “There has been a definite switch as MUP has narrowed the price gap,” he says. Regarding spirits, he envisages an uplift in 50cl and 70cl variants, while prosecco is experiencing “massive growth anyway”.

A spokesman for Scotmid Co-operative says flavoured ciders have benefited from MUP, in contrast to large packs of ciders. “Flavoured ciders were on trend before MUP, but we believe the price changes have moved more shoppers into this sub-category,” he adds.

Filshill’s Brown says that the better retailers are currently enjoying double-digit sales growth for alcohol, “although it’s difficult to quantify exactly what MUP has done because of the great summer we’re having”.

Nevertheless, the legislation is generally benefiting c-stores due to the price parity and the advantage of being able to offer chilled beer and wine, he adds. The SGF’s Lee agrees: “With the switch to beer there are advantages to c-store retailers in that beer is usually chilled in c-stores and not always in supermarkets.”

Social impact

The Scottish government introduced Minimum Unit Pricing because, it claims, “there is strong international evidence that tackling price - as part of a package of measures, including education and diversion - can help reduce alcohol consumption and related harm”.

Of course, it is too early to gauge whether MUP is having the desired effect, and opinion among retailers is mixed. “With evidence that some consumers are switching to half- bottles of whisky, it does little to convince me of the health benefits of MUP, which I’ve always had my doubts about,” says Lee.

Donna is also sceptical. “In my opinion, those who want to drink high-ABV products will find a way to buy it - they’ll go without food if necessary,” she says.

Or from Mo’s experience, some people will go to other lengths to get the products they want: one negative consequence for his business has been MUP’s impact on shoplifting. “We said all the time that this could happen,” he says. “Shoplifting has increased because some customers can’t afford the price rises on their usual products; people do stupid things if they don’t have the money.

“There’s been a noticeable increase since May - it was about one incident a fortnight, now it’s once a week. We’ve taken it up with the NFRN.”

Abbie is optimistic about the potential societal benefits of MUP. “Although it hasn’t affected our business much, I think it’s good for society. Lots of drinkers of certain white ciders were young people who weren’t alcoholics but wanted to be able to get drunk quickly and cheaply. It can’t have been good for them - and now they’re forced to drink more sensibly. In the long term I think the legislation will have positive results.”

Scott agrees that it’ll “possibly help the younger generation who will be steered off high alcohol lines at an early age”.

Scotmid is fully signed up to the health arguments at the heart of the legislation. “Scotmid is completely behind this legislation and believe it will have the desired effect on customers, who can be impacted by alcohol-related problems and help improve the lives of our country’s hardest hit population,” its spokesman says. “As a community convenience retailer, our core purpose is to serve our communities and improve people’s everyday lives, so we believe this legislation fits alongside our values and principles. We will wait for the official review from the government to learn the true impact.”

Dan says: “In terms of MUP’s health impact, it might work to a slight extent but not as much as I expected. The biggest concern is where else they are going to legislate. We need to self-regulate on areas such as selling energy drinks to show the government we’re doing it.”

In the meantime, Dan is enjoying the moment. “MUP is probably one of the best things to happen to c-stores,” he says.