Alcohol profits in Scottish and Welsh convenience stores are set to soar by as much as 70% when minimum unit pricing (MUP) begins its roll out next May.
The law changing will commit retailers to charge 50p per unit of alcohol. More than one in five of the top 125 beer, wine, cider, spirits and pre-mix lines in convenience stores will see a price rise, with an average price increase of £2.
This could increase sales of the top 125 by nearly £20,000 a year in the average shop.
Retail Express worked with Faisal Naseem of Premier Arbroath Party Time in Angus to examine the impact MUP will have on his store. With consistent volumes, alcohol sales would increase by 8.5% and profit after VAT by 70.4% to nearly £50,000 a year.
“I feel better about it after seeing the stats. I think it will work to our advantage due to expanding our margins and blocking the current supermarket pricing strategy,” said Naseem.
Ferhan Ashiq from Levenhall Village Store in Musselburgh agreed. “It will create a level playing field with multiples and help secure the future of the local shop, as long as suppliers don’t increase their prices,” he said.
According to Matt Norbury, licensed trading manager at wholesaler Parfetts, there won’t be much that suppliers can do to take back a share of the raised margins. “I don’t think suppliers will be cute enough to build different pricing for England and Scotland because you would just get stock moving up and down the UK,” he said.
One of the worst-affected products will be Aston Manor’s Frosty Jack’s brand, with a 3l bottle increasing from a current average convenience price of £4.22 to £11.25.
Aston Manor refused to say whether it would be increasing wholesale prices in response, but said there were “concerns about the artificial distortion of the market in Scotland and also across the border.”
The impact of MUP varied wildly by category. None of the top 25 lines in wine or pre-mix drinks will be affected, while 68% of the top 25 ciders will be forced to increase in price.
Other severely impacted brands include Glen’s Vodka, which accounts for four of the top five spirit lines in the average small shop, and Lambrini, where the price of a standard bottle will increase by 67%.
Conversely, brands often associated with problem drinking such as Buckfast Wine and Carlsberg Special Brew are unaffected by the legislation as their average convenience price is already higher than the new MUP.
Despite the mostly positive impact of the scheme, there are concerns about the impact on both the illicit trade and crossborder sales.
It's not just Scottish retailers that will benefit, the Welsh government is also looking to implement MUP in 2018.