Are supermarkets killing off Shropshire's pubs?

Talk about a blast from the past. Walking along the beer aisle of a well-known retailer, something caught my eye.

Hofmeister, the infamous lager from the 1980s, remembered more for its laddish "George the Bear" adverts than any semblance of flavour, was back on the shelves. And sporting a very 1980s price tag. At 60p a bottle, how can anybody possibly make a profit?

Well, the answer is they probably can't.

"At that price, they are probably just about covering the cost of the duty," says John Ellis, who keeps The Crown at Oakengates and The Elephant & Castle in Dawley.

"When you take into account the cost of the packaging and the transportation, somebody is making a loss somewhere."

Of course this is an opening promotional offer, designed to reacquaint the public with the brand, and to that end it appears to be successful.

Apparently, the new Hofmeister is a very different beast from the fizzy, faux German lager of 30 years ago. Stronger, lighter and less gassy, the new Hofmeister is said to be a bona fide, award-winning craft lager, using only natural ingredients, and – whisper it quietly – is actually brewed in Germany.

But while it might share only a name and a logo with its less than illustrious predecessor, it is the brand – and of course the price – which is attracting the public's attention.

The Hofmeister, promotion is an extreme example, but the fact that it is on sale for little more than the cost of a pint of milk does raise questions about how the pub trade can compete with discounted beers in the supermarkets.

New figures from the British Beer and Pub Association (BBPA) reveal a 3.6 per cent year-on-year fall in pub beer sales. About 35 million fewer pints were sold in licensed premises during the three months to September compared with the same quarter last year. It is the biggest drop in five years, says the body.

Chief executive Brigid Simmonds warns that pubs will continue to close if the trend continues, blaming "sky high" business rates as part of the problem.

She is calling for Chancellor of the Exchequer Philip Hammond to cut beer duties in this month's Budget to alleviate the problem.

"When the Government was cutting or freezing beer duty from 2013-15, sales of British beer stabilised, after years of steep decline," she says.

"With sales down this quarter, following the Budget tax hike, urgent action from the Chancellor is needed.

"Beer has had a 39 per cent tax rise in the past decade. With tax rates 14 times higher than in Germany, these levels are unsustainable.

"We need fair taxes for British beer, so that brewers and pub operators can invest in thriving pubs, and take advantage of new opportunities to export more beer around the world as we leave the EU."

Mr Ellis, who has himself had to appeal against a rise in business rates, will probably not argue on either front. But he says the real issue is the way that the supermarket giants are able to sell cut-price beer as loss leaders, offsetting the losses against VAT. They will then cross-subsidise the discount beer by marking up the prices on food which does not attract VAT.

He says sales at his own pubs, which specialise in cask ales, have held up over the past year, but it is a different story for those who sell beer from the brewing giants.

"Who is going to buy beer from the big breweries in a pub, when they can get it subsidised by the taxpayer in a supermarket? That is the crucial part of the problem," says Mr Ellis.

"We hope it's something the Chancellor will address in his Budget."

Neil Williams of the BBPA agrees that it is the big brewers which are taking the hit when it comes to pub sales.

"The microbreweries do appear to be holding up better, but they are only a very small part – around 10 per cent ­– of the total market," he says.

Overall total sales are down 1.9 per cent compared to the same period last year, with just over 6.8 million barrels being sold in July, August and September.

However, shop sales performed much better than pub sales, falling by just 0.2 per cent from 3.579 million barrels to 3.573 million. By comparison, pub sales fell from 3.359 million barrels to 3.237 million. Over the past two years, the figures have fallen by almost seven per cent.

Tom Stainer of the Campaign for Real Ale (Camra) is also urging the Chancellor to act.

"It's disappointing to see beer sales fall, especially when it is likely to harm the chances of survival for the local pubs which play such a vital role in our communities," he says.

"Camra is urging the Chancellor to cut beer tax and give pubs rate relief in the forthcoming budget to help drive sales back into growth. Supporting the pub and brewing industry which provides so much employment and contributes so much to the economy."

Camra has also called for a £5,000 business rates discount for pubs in the wake of the Government's controversial re-assessment of business rates. The organisation claims that while pubs make up 0.5 per cent of the UK economy, they pay 2.8 per cent of its rates.

Roger Protz, editor of Camra's Good Beer Guide, says that Brexit will present opportunities for the pub industry, by removing some of the red tape which ties the Chancellor's hands

"The decision to leave the European Union will give this country more freedom to decide how to levy taxes and duties on alcohol," he says.

"Camra will argue strongly for draught beer sold in pubs to have lower rates of duty, which is contrary to EU legislation. At present pubs are at a disadvantage as the supermarkets and other licensed retail outlets sell beer at substantial discounts. Lower duty rates for draught beer would create more of a level playing field and attract drinkers away from the sofa and back into the pub."

The problem, of course, is that with the Government facing increasing demands for the lifting of the public sector pay cap, money to tackle the housing crisis, not to mention calls to cut the public sector deficit, Mr Hammond will have very little room for manoeuvre.

Meanwhile, pubs continue to close at an alarming rate, although the rate of closure has fallen from 29 a week to 21 a week.

“The pub is under threat as never before,” says Mr Protz.

“When Camra was formed in the early 1970s, Britain had 80,000 pubs. The number is now fewer than 50,000, and more beer is drunk at home than in the pub.

Mr Ellis says, in his case at least, the answer is for pubs to concentrate on the more discerning customers, selling specialist beers which cannot be bought at a discount in the supermarket.

"It is best to go for quality beers you won't find in the 'pile 'em high, sell 'em cheap' supermarkets," he says.

"The best place to get fresh beer and quality products is still the pub."