The multiples appear to be listening to the pleas of drinks suppliers and putting a lot of effort into managing the beer category as Christmas approaches, according to exclusive research carried out for The Grocer.
Yet there is still time for a doomsday scenario to emerge. ACNielsen’s forecast for Diageo says that out of stocks could end up costing the beers, wines and spirits categories more than £192m in lost sales over the Christmas period.
On the face of it, our new research offers reassurance to suppliers concerned about availability as a result of increasingly deep price cuts. The multiples are managing availability of promotional lager lines particularly well. Only 6% of lager brands on promotion across the top six grocers was at risk of going out of stock when Storecheck Marketing audited stores at the beginning of December. This compares to an average figure of 22% on promotional lines across all categories surveyed to date in our monthly Stockwatch.
Asda, which began an aggressive pricing war in alcoholic drinks when it slashed the price of spirits at the end of October, is performing best to date, with 4.5% of promotional lager lines at risk compared to its average of 26% across all categories.
Tesco has the most work to do, with 8% of promotional lager lines at very low stock levels. But it is obviously working hard to ensure stock hits Christmas shelves because this figure is well below its average of 20% across promotional lines.
But this could well be the calm before the storm. HI Europe revealed in last week’s issue of The Grocer that most consumers were not planning to start food and drink shopping until this week.
On top of this, brewers warned in September they were working flat out to replenish stocks after the summer shortages caused by retailers increasing orders by up to 300% to meet demand during the unusually hot weather.
Our new research this week indicates that many lager brands are over-stocked, so consumers might well not be buying in the category yet.
Storecheck Marketing sales and marketing director Stephen Smith says: “The majority of lager brands we audited were well stocked, which could point either to stores managing the category well or light levels of consumer purchase - or a combination of the two.”
A review of the beer category by Visuality, also published in last week’s issue, confirmed the Christmas rush was due to start this week. It also showed shoppers were increasingly savvy when it came to beer promotions. Many weighed up the retailers’ offers and checked prices before purchase. As Christmas drew nearer, they expected to see more price cuts.
The early flurry of discounts may well have backfired. Keith Hogg, managing director of Scottish Courage Brands, says he believes they were an attempt to stimulate sales in November and take the pressure off the last two weeks. “This is compounded by Christmas Day falling on a Thursday, giving the impression of an ‘extra’ week’s shopping time,” he says.
Consumers do not seem to have fallen for the strategy. And with price cuts still coming - Iceland and Somerfield the latest - suppliers are concerned availability will slip.
Says Hogg:“We’re disappointed at the drop in price of some market leading brands. We don’t believe it’s necessary and fear it will put significant pressure on availability.”
Steve Kitching, managing director of take home sales at Interbrew UK, agrees. “Out of stocks were a problem last Christmas, particularly among big brands which were heavily discounted,” he says. “The discounting meant that they took a bigger share of beer business than expected, which distorted projected levels of demand at a time when distribution resources were stretched to the limit. The result was that all too often big, promoted brands were out of stock in the closing days of the Christmas and new year period when demand was at its highest. There is a risk that this will happen again this year.”
So while retailers appear to be managing promotional lager availability well so far, there is clearly no room to be complacent. Any further discounts or failure to replenish quickly enough could realise ACNielsen’s prediction of £192m in lost sales.
When it comes to non-promotional lines there is already trouble. According to Storecheck Marketing’s research, 14% of non-promotional lager lines are at very low levels in store. This compares to 12% across all categories visited in 2003. Asda, Safeway and Sainsbury are managing non-promotional availability better than usual, but only Asda shows a significant improvement against its usual performance, coming in two percentage points ahead at 9%.
However, Somerfield, Tesco and Morrisons appear to be concentrating so heavily on promotional stock that non promotional lines are suffering.
Tesco is the worst performer, with a fifth of all non-promotional lager brands at risk of going out of stock compared to a typical 10% in other categories.
Smith says “this Christmas is likely to be most promising for retailers and suppliers”.
But for the latter the news is mixed. Yes, retailers are getting behind the lager category and, so far, working hard to ensure promotional lines are bursting off the shelves. But there are still gaping holes among normal stock. With the Christmas rush only just beginning, the picture is by no means complete.