So much is being made in the loony press at the moment about the mythical North/South divide. Obviously the dastardly southerners are responsible for the rising infection rates of mad flu* in the northern territories despite the fact that I know of very few southerners holidaying in the North right now……
I don’t believe in the North/South divide anymore than I believe that the Russian government, with all their internal issues, are propagating false media to bring about the downfall of the West by making me shun a particular brand of ketchup. The media need someone to blame for everything, despite being the main source of scaremongering.
Anyway, all that aside, I thought that I would share with you an example of the differences across the country from my industry.
So, as we all know, I run small pub on a very southerly part of the country. Indeed I am so far South that you need to catch a boat to get here. Obviously being in the South we are swamped with lashings of cash from central government which we splurge on extravagant infrastructure projects. Most of these projects can be viewed through the window of the discarded tube trains that serve the island (built in 1938). It’s ok you didn’t miss them as the train bounced down the track, there was nothing to see its just a little local joke.
Quite simply (look away readers from the US) the South is not all London, there is quite a lot of space down this end and London is a small part of it.
So my stock and trade is beer, the nectar of life and the fluid responsible for so many marriages, but that’s another story….
I hear a lot of tourists, from the more northerly parts of the country, telling me how much cheaper the beer is where they come from. Sometimes I actually make the effort to explain why this is, think yourselves lucky this is one of those times.
The big brewers are volume driven businesses, their business relies on the economies of scale that come from brewing huge volumes. They have two real customers; the first being me (the on trade) and other venues where you consume the product on site, and the second, the off trade (retail) where you take the product home to consume.
Both trades are divided geographically into price bands across the country. Beer is most expensive to buy (wholesale) in the South and gets cheaper as you head North. The reason for this, remember, is that the brewers are chasing volume so they drop their selling price further North to deflate the retail price and sell more liquid.
So, as I tell tourists regularly, the reason that their beer is cheaper is because we pay more. The South is effectively subsidising the North’s beer. you’re welcome.
You know me well enough to know that there is more to this post than that simple example. Today I was hit with the most astounding example of how skewed the whole system is.
An announcement from one of Europe’s largest brewers (and the largest in the UK) said that they were shedding jobs due to the effects of mad flu. So how badly has the forced shutdown, hideous restrictions and apparent systematic demolition of the on trade hit their volumes? They have dropped 1.9% (yes the decimal point is correct, less than 2%)
I can see you questioning how shutting the on trade at the start of mad flu can only cause such a small drop. Well that is because the production simply switched from keg to can and the distribution from pub to supermarket.
This brought some other savings since the majority of on trade support was furloughed at the tax payers expense. Distribution to retail is also much simpler since its larger shipments, longer dates and way less deliveries.
So why shed jobs? I am glad you asked. Profits dropped by 76%, that’s right no decimal point, just over three quarters! Obviously this is simplistic view and takes no account of underlying write downs and such like. But in simple terms moving the volume from the on trade to the off trade took 76% of profit out of the business despite reducing costs.
So what can we draw from all of this. There is very little profit in the off trade and the majority of the profit in the on trade (as we already know) is in the South.
So the next time the loons allow you in a pub please raise a glass and toast those of us that drink in pubs in the South, that one is on us, and that cheap four pack from the supermarket that is on us. We are here for you, enjoy your beer, but next time you visit don’t tell us how cheap it is at home just buy a Southerner a pint in a Southern pub and say Cheers. No need for overly effusive thanks (we are easily embarrassed) just raise a glass with a “cheers” we will know what you mean.
On behalf of all pubs in the South, you’re welcome.
*mad flu – a type of seasonal flu originating in China and sending the entire planet mad