Wine trade weighs in against Scotland’s minimum alcohol pricing

Nik Darlington 9.48am

In the spring, David Cameron announced that the Government would set a minimum unit price for alcohol and ban multi-buy discounts in England. The policy is presently under consultation, with legislation promised in the autumn.

The Scottish Parliament, meanwhile, has already ratified a ban last year on “irresponsible” alcoholic drinks promotions (which apparently caused a fall in sales even in the typically busy pre-Christmas period).

Alex Salmond’s Scottish government is also determined to press on with its plan to introduce minimum alcohol pricing at 50 pence per unit (25 per cent higher than David Cameron’s proposed 40 pence).

The Scotch whisky industry’s opposition to the SNP’s policy - which could mean a bottle of blended whisky’s costing at least £14 - is well documented. The Scotch Whisky Association (SWA) recently submitted a formal complaint to the European Commission and is seeking a judicial review in the Scottish courts. Whisky producers claim that the SNP’s minimum pricing would breach EU trade laws.

Now, according to the Express, the wine trade is getting in on the act too. The Comité Européen des Entreprises Vins (CEEV) has joined forces with the SWA to oppose minimum unit pricing on the grounds that wine is classified as an “agricultural product” by the Common Agricultural Policy (CAP). And like other agricultural products - such as sugar - wine is regulated at the EU level or else there is the risk of breaching trade laws.

The SNP says it shall carry on regardless with its “proportionate public health measures”.

There is an irony here in that minimum alcohol pricing could be in the interests of some members of the wine trade, principally independent merchants who are undercut by supermarkets’ volume purchasing power and aggressive discounting. Supermarkets make 80 per cent of wine sales in the UK. Minimum pricing could make the independents more competitive on price.

Furthermore, approximately three-quarters of all alcohol purchased in the UK is on discount - far and away the highest proportion in the EU. Restrictions on alcohol promotion would hit supermarkets’ BOGOF and multi-buy attractions, and offer another silver lining for smaller wine merchants.

But one thing is for sure. The SNP is finding out the hard way that genuine independence only runs so deep within the realms of the European Union.

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There’s no easyJet solution to higher education

Nik Darlington 6.00am

I used to work for a strategy consultancy advising universities - amongst other organisations such as car manufacturers, telecoms and big pharma - how to set their prices. The higher education sector was a vastly different challenge, a million miles away from four-door saloons.

Or was it? Whilst there are obvious differences in the purchase decision-making for a university education, it was realised that the actual pricing models could be transferred to HE.

Take a new sports car or breakthrough drug. They both involve one-time, high-risk purchases making the costs of failure very high. These are hugely risk-averse industries that need to get their pricing right from the off, based on robust evidence of price and demand. Similarly, higher education has a long cycle of decision-making (the annual recruitment process) and institutions have to get their pricing right or lose out (see the lesson of Leeds Met). Moreover, there are huge potential costs to the student if they make the wrong university or course decision. Another huge similarity that must be recognised is that like for luxury goods, when choosing a university students are making a ‘lifestyle’ choice which is emotional as well as functional. Pricing has to accommodate these ‘soft’ factors too.

So we brainstormed. We started with the low-hanging fruit then drilled down and really looked under the bonnet. We thought (blue skies only) outside the box. Many water cooler moments later, our door was open to some issues, firmly closed to others. We factored in everything possible, from financial cost to political achievability.

One of the best ideas was to translate ‘bundling’ to the HE context. Not only is it straightforward and very common (think meal deals and broadband with your TV subscription), bundling is also widely practised in US universities. I was very pleased recently to see that Coventry University will be doing just that and bundling “extras” such as printing credits and textbooks within tuition fees.

Other ideas, such as variable fees across ‘product’ (i.e. course) ranges, are also being tried out by several universities from next year, instead of pricing everything at £9,000.

There were some sound business ideas on this strategic staircase that didn’t quite have enough bandwidth - with clients, at least. Surcharges, for instance, are smart on paper and expected in industries like airlines but they struggled to fly with university executives. It is already commonplace in the US and in private universities (such as BPP) in the UK to have add-ons like exam fees and registration charges. As public universities increasingly ape private counterparts, their time might yet come.

Above all, one idea proved impossible to sell: yield management. In its most sophisticated sense, yield management is when businesses like hotels and airlines vary their pricing - often in ‘real time’ - to adapt to changing consumer demand. As we are all aware, the price of an aeroplane ticket varies hugely depending on the popularity of the route, the date you make your booking and how many seats are available. Could this be translated to universities?

This - or a less complex version of it - appears to be what the universities minister, David Willetts, was floating last week, by implying that universities could discount their tuition fees during clearing in order to drive demand for undersold courses. And, to answer the question - could it work? - in one word: “no”.

Offa rules say universities would then also have to discount fees for all students already on affected courses, but of course if the Government wanted to bring this idea to the table then the Offa rules could be altered.

We concluded that yield management could not work in universities principally because of institutional aversion. Like shadow universities minister, Gareth Thomas, I agree that “you can’t treat university like a holiday”. We received a lot of push-back from university executives for this exact reason (though then the comparison most often made was with easyJet and Ryanair). It would be unfair for two students to sit next to each other in the same lecture hall, one having paid £9,000 and the other £6,000, for example. And it would mean that students focused too much on the price tag of a course, instead of a myriad of more important factors such as university reputation, employability, facilities, satisfaction, teaching hours etc.

Overall, what we found is that in a more deregulated tuition fee environment, as now exists, universities must think differently about their pricing and marketing. There are no easy solutions to higher education. That includes easyJet solutions.

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