Diageo has become the latest drinks company this year to implement inflation-busting price increases in a bid to claw back margin.
They include a 3% hike on Gordon’s Gin, which is heavily discounted in the multiples despite heavy above-the-line support.
Pimm’s goes up 3%, Dalwhinnie by 5%, Smirnoff Blue and Black by 3% and Talisker by 5%. Diageo said the increases would enable it “to continue to increase investment in these brands and in trade activities.”
Retailers are also being hit by a 2.5% increase across Coors brands - including Carling and
Grolsch - from February 6 and are waiting to hear about an above-inflation hike on Interbrew’s Stella Artois.
Top City drinks analyst Stuart Price, of Panmure Gordon, said the real question was whether the price increases would stick during summer and Christmas. “Given that the talk now is of grocers and suppliers looking for margin rather than volume, the hope is that at least some of them will stick,” he said. “Taking the relative gap between pricing in pubs and the multiples into account, there does not appear to be any driving factor to push down prices even more.”
He warned that the off-trade would come under increasing pressure from government over discounting.
“On the high street, the level of discounting has been toned down and for supermarkets not to take heed would be close to irresponsible. The focus appears to be switching,” Price said.
Interbrew this week announced it would be spending £40m on marketing support for Stella Artois in 2005.
Claire Hu