Six weeks before the World Cup kicks off, Tesco and Asda are at it again with heavy promotional offers on beer multipacks. Rob Brown reports
The World Cup price war appeared to kick off early last week, with Tesco and Asda performing 'kamikaze' raids on the beer aisles 46 days before the first whistle was set to blow.
As The Grocer revealed, Tesco's £10-a-slab offer, launched as the 3 May bank holiday loomed, was swiftly countered by a £9 deal from Asda, bringing the in-store price of a can of lager down to 38p.
So: is this business as usual in the run-up to another summer of football? How deep are the discounts? Who will win and lose?
The sales director of one boutique brewer put the loss on a £9 slab at £6 and claimed he could not remember "such ruthless kamikaze trading" in his 37 years in the industry.
And he warned the current promotions could just be a 'friendly', with the biggest deals still to come as the competition kicks off for real on 12 June: "This could lead to two-cases-for £16 deals as the World Cup gets nearer."
But the boss of a leading brewer claimed: "the depth of the discounts is no different from the promotions in previous seasons."
Indeed, the savings this year are in some cases actually lower. According to exclusive research for The Grocer, while the number of promotions on beer at Tesco since the start of the year is up 38% versus last year, the level of saving is down from 24.5% to 19.9% [Assosia, 16w/e 3 May].
And looking at the last week in isolation, the 18% savings Tesco offered on its 11 beer promotions were nothing like as generous as the 30.7% savings available on eight deals in the same week last year.
Nevertheless, the promotions landscape does appear to have altered in a number of ways since previous campaigns, with Asda taking prices down. Promotions on beer this year are not only up 48%. Asda's discounts on beer are bigger: up from 18.5% to 21.5%. And the savings at the retailer last week were 29% against a 7.6% discount in the same week last year.
Another key change surrounds funding. Historically, promotions on beer have been funded by supermarkets, using headline-grabbing savings to increase footfall.
But while suppliers, of course, can never determine the price at which their products are sold, brewers also potentially get to increase volumes to steal sales from competing categories and rivals.
And while the leading brewer admitted "long-term deep discounting is not sustainable for supermarkets or suppliers," with short-term promotions during the World Cup, "10% to 15% of the incremental sales may stick for the long term," he claimed.
This has reportedly led some supermarkets to seek greater contributions from brewers. Colin Harper, head of insight at the Institute of Sales Promotion, claims some suppliers are now fully funding or "even more than covering the cost" of the multiples' deep discounting.
The boutique brewer's sales director agrees. "The supermarkets cannot do this without help. I can only assume this activity is being fronted by the major brewers."
The boss of the big four brewer denied this. "The suppliers may pay for some of the features and supports, but we don't believe any supplier is fully funding any deal."
But a third change from previous campaigns is further muddying the waters, with promotions no longer being used exclusively to drive volume: while pack cases of 18-24 bottles or cans have been the norm, 94% of the beer deals in Asda this year have been on packs containing 10 units or less compared with 46% a year ago, according to the Assosia analysis. At Tesco, 73% of beer deals were on packs of 10 or less, compared with 55% in 2009.
This means the entry price for an average promotion on beer at Asda almost halved in the last year, from £8.61 to £4.75; while in Tesco the entry price fell from £10 to £7.84 though its entry price in the last week was up from £9.38 to £12.19.
With so many deals on smaller packs, this takes supermarkets into independent trade territory. And they "simply cannot compete", says James Bielby, FWD CEO. He fears low and invasive price promotions by the multiples will inevitably fuel duty fraud in independents. "This is just the start. Around the World Cup, duty fraud will get doubly worse."
Independent brewers will be equally scared.
World Cup tie-in boosts Budweiser volumes (5 May 2010)
‘Kamikaze’ 24-pack booze deals blasted by suppliers (1 May 2010)