The Government has missed an opportunity to impose a realistic ban on the sale of below-cost alcohol, as the definition of the cost of alcoholic drinks announced on Monday will do nothing to prevent the very cheap supermarket promotions that such a ban is intended to address, says the Federation of Wholesale Distributors (FWD).

The proposed policy will reinforce the lack of competitiveness in the grocery market in favour of supermarkets which, due to their size, are able to offer alcohol at low prices. Smaller wholesalers and retailers may turn to the grey market to enable them to compete with the aggressive cheap alcohol price promotions available in larger stores.

In its Coalition Agreement the government pledged to ban the sale of below-cost alcohol, but the definition it has put forward is based solely on VAT and duty. FWD, along with the Association of Convenience Stores, has made the case for production, marketing and distribution costs to be included in the calculation.

FWD chief executive James Bielby said: “We are disappointed that Ministers have chosen not to adopt a more realistic model that reflects the true cost of putting alcoholic products on the shelf.”

"Aggressive below-cost price promotions by multiple supermarkets have an adverse effect on FWD members and their customers, thereby undermining the competiveness of the overall grocery market, and the ineffective definition of below cost adopted by the government will do nothing to prevent this," Bielby added.

“Our concern is that with no curb on the availability of very cheap alcohol from supermarkets, smaller traders who cannot offer the same prices on legitimately sourced stock will be tempted to investigate other options, such as alcoholic drinks on which UK duty has not been paid.”

“This is a missed opportunity to prevent very cheap alcohol being used as a hook to bring customers into a supermarket, and we will continue with our efforts to persuade the government to adopt a more credible and realistic definition.”