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UK: Asda jumps the gun and bans below-cost alcohol

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The second largest supermarket chain in the UK, Wal-Mart-owned Asda, has pre-empted possible Government legislation by pledging not to sell alcoholic drinks below cost.

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Asda will not sell alcoholic drinks below the cost of duty tax and value added tax, company CEO Andy Clarke said in a letter to home secretary Theresa May, published by the supermarket yesterday (22 July). 

The firm's commitment follows a series of statements on alcohol by leading retailers as the new Coalition Government in the UK considers a way of restricting supply and forcing up drinks prices in order to cut excess consumption.

Tesco, the grocery market leader, and rival Morrisons, the number four player, recently said that they would support a minimum price on alcohol if enforced by the Government. Sainsbury's, the number three supermarket, does not support minimum pricing but has said that it does not sell alcohol below cost.

Asda's statement comes only a month after the price comparison website mysupermarket.co.uk reportedly showed the retailer to be the biggest discounter of alcoholic drinks during the FIFA World Cup.

A ban on below-cost sales of alcohol and tougher licensing rules could become law by autumn 2011 at the latest, under plans set out by the UK's Coalition Government.

However, there is strong disagreement within the drinks trade and beyond about what should constitute 'below cost'.

The Wine & Spirit Trade Association wants this to be calculated as duty tax plus value added tax (VAT). But, the British Beer & Pub Association, which has a stronger on-trade membership, wants ministers to go further in order to close the gap between supermarket and bar prices.

Some multinationals, including Diageo, reject a link between price and consumption but are willing to explore a below-cost ban.


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