Asda vows to end below cost selling

Asda has declared its intention to ban below cost selling in a letter to home secretary Theresa May.

The initiative from the retailer, whose slogan is "Saving you money every day", was put into effect on Tuesday 20 July.

Asda’s chief executive, Andy Clarke, said that the ban on below cost selling would raise the price of the cheapest alcoholic drinks and give the government the opportunity to pass on the tax increases to the consumer.

He declared it would not: “Penalise the vast majority of customers who drink responsibly. Importantly in the current economic climate the beneficiary of higher prices would be the public purse with funds available to tackle alcohol misuse rather than accruing to the drinks industry as would be the case with minimum pricing.”

Asda is the first multiple retailer to introduce a policy of not selling alcohol below the cost of duty.

In his letter to May, Clarke, declared it was, “a small but important first step in the process towards creating a new way of selling alcohol in the UK”.

He also urged the cabinet minister to establish a “floor price” for alcoholic drinks below which it would be illegal to sell.

He said that words counted for nothing without action, hence the supermarket’s voluntary move.

It ensures that a one-litre bottle of Smirnoff will never cost less than £10.49 and a 20-pack of Carling lager will not go below £7.17.

The new policy will apply to 99% of the alcohol sold by Asda. Store managers will still be able to use their own discretion when pricing damaged or end-of-range products.

Meanwhile, the retailer has announced it will hold a cider festival to support the growing category, which is currently worth £400 million with year on year sales growth of 18%.

The festival is seeking to cement the position of big brands such as Bulmers and Magners but also promote smaller cider producers such as Weston’s.

The festival will also see the release of Symonds Founder’s Reserve, part of the Heineken Group’s portfolio and exclusive to Asda alongside the Bulmers Summer Blend made from pear and apple.

Rob Paton, beer buyer at Asda, said: “Cider is a real growth area. With a good summer, in terms of weather, ahead of us and plenty of upcoming festivals, we are really looking to drive penetration into this lucrative category.

“We currently hold 22% of the cider market as a whole, and with this period of targeted activity, are looking to cement this already strong position.”

During the festival Asda will be offering price promotions on brands such as Jacques and Gaymers, selling three bottles for £4 and two four packs for £6.

With its recent pledge to stop below cost selling, the grocer may need to watch out that it doesn’t get caught out on its promises, as Tesco was recently.

Rupert Millar, 26.07.2010