What does the end of “loss-leading” beer sales signify?

It has come to pass that in the last week, Wesfarmers has announced the end of the so-called “loss-leading” sales in beer. The background to this as described by the media and industry experts, is that the larger supermarket owned alcohol retailers purchase beer at a certain price, then sell it at lower than that price to drive consumers in the door, hoping to make up the difference in sales of wine and spirits.

Wesfarmers is the first of the two major supermarket chains to announce the end of this “unsustainable” practice, and there may be serious ramifications when looking outward from these suppliers to the smaller vendors.

In an ABC interview, one vendor mentioned that it was often cheaper for the smaller vendors to purchase these discounted beers from supermarket chains than direct from the supplier. With Wesfarmers cutting back on their discounts, the may be seen a significant rise in beer prices across all vendors.

The flip side of this is the rise of the “grey importing” in the beer sector. Grey importing – or the sale of items that have arrived in the country through other than regular means – has been prevalent across the electronics sector for many years now, with the rise of Ruslan Kogan and his electronic empire. In regards to the beer sector, large breweries pay for the rights to brew and thus distribute certain international beers in this country. Grey imports see companies buy these beers for a much cheaper price from countries such as Indonesia and importing them for sale, enabling them to sell these beers at a lower price.

With beer drinking in Australia at an all-time low due to the continuing growing interest in ciders and RTDs, this may be seen as the absolute best time for Wesfarmers to discontinue their aggressive beer discounting practice to focus on their wider range of offerings. With supermarkets owning 65% of all alcohol sales business in Australia, this could help cement the shift of the beer-drinking culture in Australia.