UK on-trade responds to alcohol duty increases
The changes in alcohol duty in the UK at the start of August spared few drinks categories, with significant increases for pretty much everything except draught products and sparkling wine. It’s unwelcome news for the on-trade, which is having a difficult enough time as it is.
As Clays operations director Jon Calabrese says: “The duty price changes have certainly affected us. We've seen more than 95% of our products increase in price, all of which include our highest volume products. Following a three-year period where we’ve seen prices consistently increase, this comes at a time that is far from helpful.”
Unless venues resort to selling nothing but cava and draught beer, they’re likely to feel the effects. We spoke to a few operators about the impact of the increased duty, not to mention all the other financial pressures at the moment – and what they’re doing about it.
Revisit your list
Before changing all of your prices to pass on your increased costs, it might be worth taking another look at your drinks offering. As Adam Terry of Monopoly LIFESIZED explains, “Some of our cocktails have been adapted in order to offset price increases – we have substituted products out of tie with either newer products on the market or competitively priced ones.”
Being flexible when it comes to your offering, and looking local in particular, can help, as Julien Cassanova, director of restaurant, bars and lounge at Shangri-La, The Shard, explains. “Our latest signature menu reflects a willingness to open our offer further to UK products, leaving more room for these while still keeping the Asian influence in our core offer,” he says. “This has allowed us to bring a new dynamic to our selection of cocktails, and to our signature menu ‘Hues of Cultures’.”
This focus on local, and working closely with suppliers, is core to Shangr-La’s approach to alleviating various pressures being felt by the on-trade at the moment. “In order to optimise our bottom line and avoid revisiting the GP of our selection of drinks, we focus on carefully collaborating with local producers and suppliers, with the scope on minimising the impact of other costs, such as labour and energy bills,” explains Cassanova.
There are suppliers out there doing their part to help too. Master of Malt is among these, who have rolled back all duty increases throughout August. Those ordering via their trade website will find the additional duty refunded at checkout.
Master of Malt explained the move: “Inflation has already hit the drinks industry hard, with a significant increase in costs and a reduction in many people's discretionary spending. Add to this a slow July for pubs, bars, and restaurants due to poor weather across the U.K., and the duty hike is just more bad news for an industry that has struggled to recover from the pandemic. It’s also bad news for consumers in the midst of a cost of living crisis, with prices going up on a majority of their favourite drinks.”
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Pros and cons of price increases
Sometimes there’s nothing left to do but raise your prices. Monopoly LIFESIZED is among those that have made the decision to charge more. “Duty changes have compounded with numerous other cost increases across the business, and as a result we have recently implemented price increases,” says Terry. “However, we have found that it’s an exceptionally fine line between covering costs and still being mindful of the cost of living crisis, so we have sought to keep certain house lines below the local average pricing.”
Shangi-La, too, is charging more for its drinks. “Indeed, a price increase had to reflect on our offer in order to absorb the rise in costs generated by our suppliers,” says Cassanova.
Calabrese isn’t raising his prices just yet, choosing instead to absorb the rise in duty. “We have not yet deployed any price increases, holding firm in our current position and taking a hit on our margin,” he says. “We want to prevent making socialising any more difficult for guests when their pounds are being stretched in all directions. We will of course have to see how badly this affects us over the coming months and make some changes if necessary.”
The situation is made more challenging when operating more than one site, where changing the product offering is a more complicated endeavour, he explains. “As a multisite operation, and valuing consistency and continuity, we have not looked at making any changes in our product offering,” says Calabrese. “This is a far more complex process than a single site operation. So our guests can expect to continue to see the products they know and love.”
At Four Quarters, director Marc Jone believes the increases are too great to pass on to guests. “Market conditions including inflation and duty changes have led to a steady stream of price increases from suppliers, to the point where it is now next to impossible to pass this wholly onto the customer, who are themselves deeply affected by rising mortgages and find themselves with less money for casual spend and nights out,” he says. “At Four Quarters we acknowledge this and are reviewing every product and supplier to see what can be done to renegotiate to both of our benefit. We are looking to hold our prices at the level they are now, or even lower them slightly where we can.”
Tips from the trade for dealing with duty increases
“We would recommend that venues explore the range of available producers within the UK, and enhance relationships with activities such as marketing/PR events, brand collaboration pop-ups, and freshening up their offers, not only with different cocktails, but bar food too.” Julien Cassanova, Shangri-La, The Shard
“Sometimes more volume can trump more margin. I would recommend that operators consider their ingredients carefully, avoid fresh ingredients out of season, and offer something to delight guests.” Jon Calabrese, Clays
“Check with your wholesalers for items on deal, and use these for classic modifiers for instance, as this can increase margins.” Adam Terry, Monopoly LIFESIZED
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