Pubs and Bars – Consumer Statistics and Trends for Drinks
Autumn Budget 2021 – Digesting the facts and figures
Rishi Sunak, Chancellor of the Exchequer, delivered the autumn budget this week and there was a mixed bag on offer for the sector. While many of the measures have been welcomed, there are ultimately other measures that will reduce the efficacy of these areas of support offered in the budget. We have digested the budget to try and pull apart what is on offer and what could hinder the industry so that you can plan ahead, with comments from industry leaders.
Alcohol Duty Changes
The chancellor has simplified the duty rates into bands based on ABV strength:
1.2% – 3.4% ABV
3.5% – 8.4% ABV
8.5% – 22% ABV
These new rates are under consultation and will be implemented from February 2023 with changes in the proposals shown below³:
This will favour producers of lower strength produce but there is concern from the Wine and Spirit Trade Association chief executive Miles Beale about the disparity this will cause:
“We welcome the reduction of the sparkling wine super tax, which is long overdue. However, while simpler the proposals for the overhaul of a new alcohol taxation system does not make the regime fairer, which was a fundamental aim of the review. We are mystified by a proposal that embeds unfairness between products meaning that beer will be taxed between 8p -19p per unit, wine increases to 26p per unit and spirits remains at 29p per unit.”
Here are some examples they gave of the changes in wine and spirit duty by 2023 (subject to consultation):¹
- Duty on a 750ml bottle of still wine at 12% remains at £2.23 until February 2023, if the new duty rates go ahead duty will go up to £2.33 (+10p) (which goes up to12p on the sales price when you include VAT)
- Duty on a 750ml bottle of still wine at 15% will remain at £2.33 until Feb 2023 when the duty rate will go up to £2.91 (+68p) (+82p including VAT)
- Duty on a 750ml bottle of sparkling at 12% remains at £2.86 until Feb 2023 when it will go down to £2.33 (-53p)(-64P inc VAT)
- Duty on a 750ml bottle of fortified wine at 17% remains at £2.98 until Feb 2023 when it will go up to £3.30 (+32) (+38p inc VAT)
- Duty on a 70cl bottle of vodka at 37.5% remains at £7.54 and will remain unchanged.
- Duty on a 70cl bottle of gin at 40% remains at £8.05 and will remain unchanged.
There is comment in the consultation document that the revised system will also be beneficial to public health amidst concern over consumption, binge drinking and the pressure on the NHS of alcohol related health issues:
“Many of those patients that we deal with, especially those who suffer the most severe alcohol-related physical harm, consume strong 7.5% cider – the cheapest products currently available (per unit of alcohol). Clinical experience demonstrates that the lower price paid per unit, the more units are consumed. And the cheapness of the products is often given as the reason for a beverage choice.”²
The government is welcoming comment and feedback on these proposals which are cited as the biggest alcohol duty changes in 140 years.
Alcohol Duty Freeze
British Beer & Pub Association (BBPA) chief executive Emma McClarkin commented that the freeze in beer duty would secure 9,000 jobs and save the industry £177 million in costs:
“The Chancellor’s decision to freeze beer duty instead of the Retail Price Index linked increase he had planned is to be warmly welcomed,”
Jonathan Neame of Shepherd Neame agreed:
“After the extraordinary challenges of the last 18 months, this is an important moment for beer and pubs, and will help support their recovery and meet the challenge of substantial underlying supply chain cost inflation.”
The Wine and Spirit Trade Association estimate that the freeze will save the wine and spirit industry £430million in duty payments as the economy recovers; a very welcome sense of relief at this freeze is palpable!
Draught Beer and Cider Rate Reduction
A lower rate of tax on draught beer and cider will benefit pubs and clubs according to the chairperson of The Campaign for Real Ale (CAMRA) Nik Antona:
“We are delighted that the Government has listened, supported our locals and introduced the important principle that beer, cider and perry served in a pub or social club should be taxed at a different rate to alcohol bought at places like supermarkets.
CAMRA has previously commissioned research that showed that a Draught Beer Duty rate could pull consumption into pubs and social clubs from the off trade, providing a boost to pubs and local economies.
We hope that pubs and producers will make sure drinkers see the impact of this revolutionary policy on the price of their pints, to encourage them to return to their locals.”
The rate for 40L containers that connect to dispense and are below 8.5%ABV will be subject to a 5% rate reduction. However this does raise concerns for smaller craft beer producers who sell in 30L containers that would not fit the criteria.
Small Producers Relief
There will be a relief system for producers of cider, wine and spirits that produce ranges below 8.5%ABV. This will be of benefit to smaller firms producing popular low alcohol ranges as well as local firms. Clearly the chancellor has considered small businesses here that may not be subject to the draught relief scheme. The detail of the scheme proposals can be found in the Alcohol Duty Review Consultation document (link at the bottom of this article)
Business Rates Discount and VAT
Business rates are currently undergoing a consultation process based on feedback from the industry via the Business Rates Retention Reform Consultation that ran from 2018-2019 (applies to England only). Obviously, industry comments would not have taken the pandemic into account and this will be important to consider moving forward.
Eligible businesses in retail, hospitality, entertainment and leisure will be able to claim a 50% discount on their rates for one year. However this is capped at £110,000 which will favour smaller firms rather than larger ones.
Kate Nicholls of UKHospitality commented:
“We have been lobbying hard for significant reform of the outdated business rates system and therefore very much welcome the Chancellor’s move today to extend the 50% business rates relief for the hospitality and leisure sector for the next financial year. The devil will be in the detail, though, so we look forward to learning to what extent it will benefit businesses.”⁴
The system of business rates is due to be modernised and it will be interesting to see how this affects small and large businesses after consultation.
A concern among many firms is that the VAT rate is due to revert from the 12.5% discounted rate during the height of the pandemic to the usual 20% rate from April 2023.
Kate Nicholls went on to say that:
“it is imperative that the Government go further to support businesses in our sector. The most effective way to achieve this would be to maintain the current lower 12.5% of VAT for the sector. The Chancellor has been bold and radical with alcohol duty – we urge him to adopt the same approach when implementing root and branch reform of business rates, to ensure industries share the burden equally.”⁴
National Wage Increases and Product Cost Rises
The increate in the national living wage to £9.50 for those aged 23+ from April 2023 reflects a 6.6% rise. The rise for those aged 21-22 will be 83p and those aged 18-20 will be 27p.
Businesses will also be impacted by the 1.2% Health and Social Care Levy and rising energy bills and huge product cost increases:
“Positive as these announcements are, hospitality remains incredibly fragile, facing myriad critical issues. Rising utility bills, wage bills and food and drink prices have resulted in 13% inflationary costs that businesses are having to absorb at the same time as they navigate severe supply chain issues and chronic staff shortages. Given this toxic cocktail, it is imperative the Government go further to support businesses in our sector.”
UKHospitality’s Chief Executive, Kate Nicholl⁴
Sandra Rowley of Takepayments.com echoed this concern about spiralling inflation and costs:
“On top of the increase in energy bills, increase in petrol costs, rise in inflation and the confirmed national insurance increase, this 6.6% increase would require an additional £1,000 per year for minimum wage full time workers. Whilst there is some welcome news in the budget for hospitality, the overall business environment will remain challenging for those small, independent businesses in the UK”⁵
I think that Kate Nicholls of UKHospitality sums up the response to the budget perfectly:
“Hospitality has shown this summer that it has the potential to kickstart the nation’s recovery and deliver jobs, growth and investment at pace across all parts of the country but that could grind to a halt next year. It can only lead recovery with the right measures of support in place.”
The changes seem so far away as we are only in Q4 of 2021 and many of these proposals won’t take effect until Q2 of 2023, however it will be interesting to see how the books balance as we continue to move through the pandemic and what the industry will look like after the Christmas season and in to 2022.
Post Pandemic Purchasing: Do Apps Still Have a Place?
As restrictions have varied over the course of the pandemic, the growth in app ordering popularity has boomed. However some in the industry are abandoning the model as either an exclusive or embedded part of the business model in favour of returning to “traditional” pre-pandemic style service. We crunched some numbers and produced this infographic to illustrate why it’s worth sticking by app options as part of your ordering system, and why Hopt is an excellent choice of company.
Hopt Spot Champions: The Red Lion, Kegworth
Hopt Spot Champions: The Red Lion, Kegworth
“The help in the pandemic is great, but the legacy of what our customers call ‘Spanish Style Service’ is one of the few good things to come out of the whole Covid era.”
Chris – Owner of The Red Lion
The use of Hopt at The Red Lion in Kegworth started out as a pandemic lifeline but has left a legacy that has changed the way this business operates in a post pandemic industry. Speaking to Chris, it’s clear that he is a huge Hopt advocate and the app has helped him not only survive, but thrive in the past 18 months and beyond.
Chris has been telling us some of the highlights that the app has brought to his day to day service, not only for his business but for his customers too. Customers comment that they don’t have to stop their conversations to get a round in, whether they are in the reaches of the beer garden or even if they are sitting right next to the bar. Its reduced the mobility of people around the venue and thereby increased the safety of everyone present.
Customers have commented on the clarity of the menu layout on the app. They don’t have to try and find menus or specials boards and can browse categories of interest such as cocktails by simply browse or using the search bar to bring up items that match their criteria.
They have also enjoyed the ability to order in a more stress free way – avoiding a queue or a crowd when they may still have anxieties about being out and about post Covid. They have also taken advantage of the ‘reorder’ function which speeds up getting in rounds with friends or ordering a favourite meal on repeat visits.
Another perk that Chris’ customers have found, is that running Hopt alongside traditional service means that there is something for everyone:
“The choice is the best thing – you can go for traditional service at the bar with a mate or stay at a table with a young family and wait for the service to come to you”
Customer feedback is obviously hugely important to the team here at Hopt to further improve the app, but business feedback is just as valuable. Chris has explained to us that using Hopt has allowed him to expand his business despite industry-wide issues such as staff shortages, customer reluctance and pandemic restriction uncertainty:
“As a business we have opened up a new 42 cover space in a new building. Our beer garden has also expanded. The only space we can’t make bigger is the bar itself. Hopt allows us to service more people efficiently and get them ordering more even when we are busy. We still get the customer interaction when we deliver drinks/food and its a natural time to clear tables without disturbing people continually. In essence, we can serve more people well, even with fewer staff available, and the customer still feels special.”
Chris – Owner of The Red Lion
We are so pleased to feature The Red Lion as our first Hopt Spot Champion – a business using Hopt as the mainstay of their business model. If you would like to be featured to explain how you are successfully using the app to boost your business, please get in touch with the Hopt team.
Check out The Red Lion, Kegworth at https://redlionkegworth.co.uk/