Examination of Witnesses (Question Numbers
1140-1159)
MR PAUL
KELLY, MR
NICK GRANT
AND MR
GILES FISHER
15 OCTOBER 2009
Q1140 Mr Scott: How do you think
your own brand alcohol sales would be affected by minimum pricing,
Mr Grant?
Mr Grant: We have a tiering system
in store which reflects our drive to have universal appeal, which
I mentioned before. We have what we call good, better, best in
terms of quality and price. Probably what would happen is that
you would find the Basics product would disappear, so if you made
a bottle of, let us say, Basics whisky at the price levels we
are talking about per unit I think that would then start to look
like the price of any of the brands, so probably what would happen
is that that whole tier would disappear and there would be a concentration
around the middle pricing.
Q1141 Mr Scott: Mr Kelly, would you
agree with that?
Mr Kelly: I think that is a reasonable
assumption but what you have also got to bear in mind are some
of the unintended consequences in that it will disproportionately
affect those on low or fixed incomes, but in the own brand sector,
as has already been identified in buying Scotch whisky in Scotland,
the impact on jobs for those who make own label products will
be quite considerable.
Q1142 Dr Naysmith: Mr Fisher, is
it less applicable to you?
Mr Fisher: It is a similar situation
to that that Nick has outlined for Sainsbury's in that there is
a tier at the bottom which, depending where the price was, may
go from the range. Broadly speaking, the average spend across
our alcohol categories and at the level of alcohol per unit that
that equates to and what has been talked about in the Sheffield
report and various other areas would not impact our business hugely.
There has been a change in our structure over the last few years.
We have taken out our cheapest gin, we have taken out our cheapest
vodka, but we have done that on quality grounds.
Q1143 Mr Scott: When you say "taken
out", they are just not sold any more?
Mr Fisher: We just do not sell
it; we have just taken lines out, but we have done that on quality
grounds. That is what has driven it, because we were not happy
with the quality of what was in the bottle. Similarly, we have
introduced the Essential Waitrose range.
Q1144 Mr Scott: Does that include
alcohol?
Mr Fisher: No. As I was going
to say, it has been very successful. A lot of people have bought
into it, but we made a conscious decision not to include any alcohol,
so there is no Essential gin or Essential wine because essentially
alcohol is not essential.
Q1145 Mr Scott: I think I follow
that! Thank you.
Mr Grant: I think it is important
to remember that in terms of the experience of a customer in a
store like Sainsbury's, people will fill up their basket, or hopefully
their trolley, with a whole range and mix of goods, so what we
find is that, particularly at hard times, people will shop the
Basics range for some things, let us take typically basic ingredients
for cooking. In hard times they will make more of their own food
at home, which is a good thing, and they will buy onions and carrots
and potatoes in the Basics line. They will go along and, who knows,
they might find something they have a particular liking for and
they will pay that bit more for in our Taste the Difference range.
Customers are very canny and they swap the ranges that they buy
from, which means that if the Basics whisky were to disappear
under minimum pricing it does not follow in my view that you only
therefore eliminate the problem drinkers. You cannot have a direct
read-across that people who are abusing alcohol are the ones are
buying the cheap alcohol. People on fixed incomes, pensioners,
people on low incomes will shop that perfectly responsibly as
perfectly responsible consumers of alcohol.
Q1146 Dr Taylor: We have done minimum
pricing, we are very aware of the importance of cultural issues
and education. Now I want to come on to tax. Each of you, do you
think that levels of alcohol taxation are too, too low or about
right?
Mr Grant: It is difficult to say,
again, whether it is too high or about right. There are, I would
say, some anomalies in our system of applying duty to alcohol.
I think it is always worth reviewing how that works to incentivise
certain types of products or maybe disincentivise the production
of certain types of products. For example, cider is often quoted
as the weapon of choice for harm for people. Historically it has
had very low taxation, so, who knows, there may be a conversation
the Government could have involving industry to work out what
the right incentives would be to change some of that. Plainly,
as soon as you talk about increasing the duty on something like
cider you are then into a very different conversation in social
terms about how cider is produced and the craft industries and
all the other stuff that I think you have probably had representations
to this Committee on. Our own view is that it is a much more flexible
way of targeting certain types of products, and if industry is
involved in that it can be a way forward perhaps.
Q1147 Dr Taylor: So a flexible way,
thank you.
Mr Kelly: I would echo what Nick
has said. Clearly, we are going to see, and the Chancellor has
already announced, that duty rises are going to be ahead of RPI
and clearly at the moment have been very low. I think if policy
makers want to tackle the pricing of alcohol duty is a more flexible
tool than a blanket approach on minimum pricing because, as Nick
says, it does allow you to target a particular product, but increasing
the tax burden for hard-working families at a time of economic
difficulty becomes something of an issue.
Mr Fisher: I go along with what
has been said so far. You can see across the whole of Europe that
duty is different in different countries. People have different
relationships with alcohol in those countries and it is not true
to say that higher duty levels equals less harmful drinking. In
the context of addressing harmful drinking duty is a blunt tool
but, as Nick says, there are anomalies in the system and that
is something that probably should be reviewed.
Q1148 Dr Taylor: We have just had
a few days in Paris, of all places, to look at this subject. One
thing that came across very clearly was that alcopops have not
got a hold in France because tax was put up tremendously and specifically
on alcopops alone. We have also learned that France and the wine-drinking
countries are among those with the lowest death rates from alcohol
liver disease and, obviously, in France wine is taxed extremely
low. It brings us back to the culture issues. Any comments?
Mr Kelly: I think if you look
at the HMRC's own consumption figures and just take flavoured
alcoholic beverages, they are down 22.4% in terms of consumption,
and certainly as a business 18 months ago we took the decision
to de-list some of those fruit-flavoured products because we felt
this was something we were not comfortable selling.
Q1149 Dr Taylor: When you say "de-list"
you mean take it off your list?
Mr Kelly: We stopped selling them,
yes.
Q1150 Dr Taylor: Did that include
some of the alcopop-type drinks?
Mr Kelly: Yes, it did. Some of
those drinks generically referred to as alcopops were some of
those that we de-listed, fruit shooters, small, highly concentrated
bursts of alcohol, which we said we were uncomfortable selling.
Q1151 Dr Taylor: Waitrose—I
should not think you sell those.
Mr Fisher: The ready-to-drink
segment for us is slightly different in that it tends to be gin
and tonic in a can and Pimm's ready-mix.
Q1152 Dr Taylor: Is that one of your
Essential range?
Mr Fisher: No, it is not.
Mr Grant: I think there is potentially
something in that. One could foresee a way in which duty was measured
around the sweetness of particular types of products which might
otherwise appeal to young people. I am reliably informed that
young people need sweet things and that is what attracts them
and as you get older you lose that need for it. It has not happened
in my case, but it might be that that would target young people
in a way which was quite sensible, to track the duty around some
of the sweetening content.
Q1153 Dr Taylor: Thanks. We have
been told that if duty on whisky had been linked to the RPI since
1947 it would amount to something like £30 a bottle now.
Do you think duty on spirits is ridiculously low, or is that something
that we should be recommending is targeted?
Mr Grant: We are retailers; we
are not tax experts. That is a decision for policy makers and
there are clearly a number of other factors within that.
Q1154 Dr Taylor: But overall you
feel that taxation is a more flexible way of tackling this than
minimum pricing?
Mr Grant: Its advantage is that
you could target certain types of drinks that appealed to certain
types of people.
Q1155 Sandra Gidley: Why do supermarkets
sell alcohol at below the cost of the duty that is on it from
time to time as a loss leader?
Mr Kelly: As we said earlier,
we are in a highly competitive market competing for customers
and we will sell sometimes loss leaders across a whole range.
Q1156 Sandra Gidley: Do you think
it is right to do this with alcohol though? Do you think it is
socially responsible?
Mr Kelly: We are in a highly competitive
market. There is nothing that currently stops the floor continuing
to fall away. There is a legitimate question there for policy
makers about whether instruments need to be brought in to stop
that happening.
Mr Fisher: It is not something
that we make a habit of doing. We have done it twice in the last
year. The first instance was on a half-price champagne promotion
and the second was part of an overall offer on six bottles of
wine where you saved 25% and that meant that some of our first-growth
clarets were sold at below cost, but I do not think either champagne
or first-growth clarets are really where the problem lies with
this.
Q1157 Sandra Gidley: It would not
be the same thing.
Mr Fisher: As I said before, we
do not sell three cases of beer on a deal. We do not put pallets
of beer at the front of the shop. We do not sell things like that
below cost because we are uncomfortable with it.
Mr Grant: We do not sell below
one definition of cost, which is duty plus VAT, except if there
is a shelf of damaged goods or something which we just need to
move, a very tiny percentage. We do sell below another definition
of cost, but again very rarely.
Q1158 Sandra Gidley: What prompted
that decision? Was it a commercial decision, because we keep being
told that it is a competitive, commercial environment?
Mr Grant: It would be an entirely
commercial response to the market.
Q1159 Sandra Gidley: So you do not
feel the need to slash things as much as ASDA then, because from
ASDA we have just heard that it is a commercial environment and
that is why it is okay to do it?
Mr Grant: It is slightly circular,
I guess, but we remain competitive so that we offer a universal
appeal. We are not in Waitrose's position of being able to price
to a very precise type of customer. We do have to cater for everyone
from low, fixed income to the wealthy, and that is our mission
as a commercial organisation, which means that we do have to very
closely monitor what is happening in the market and make sure
we remain competitive.
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