Brits booze without beer, mix drinks at home

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: Robert Munro buys his booze at London liquor stores these days. As his expenses rise and Britain teeters on the edge of recession, the house painter is cutting back on nights out and pouring drinks at home.

“It’s gotten more and more expensive to just head down to the pub for a drink,” said Munro, 55, who is self-employed.

“You’re paying silly prices for a pint—you can drink at home for half the price.”

Five British pubs are closing their doors every day, according to the British Beer & Pub Association, as pound-pinching drinkers embrace staying in as the new going out. That may hurt beer companies like Heineken NV and Carlsberg A/S more than distillers, such as Diageo Plc, because the brewers generate the majority of their UK sales at bars, where profitability can be double the level in retail outlets.

Beer sales at pubs, known as ‘on-trade’ in Britain, fell 8.1% in the third quarter, meaning 1.1 million fewer pints drunk per day, the BBPA says. “Steep declines in the on-trade are a problem for margins,” Joergen Rasmussen, chief executive officer of Carlsberg, said in relation to the UK market in an interview. “Being the most profitable segment, it’s a problem for us and for everyone.”

Britain, whose economy contracted last quarter for the first time in 16 years, accounts for about 3% of the global beer market, according to researcher Canadean, and almost a tenth of the European market. Valby, Denmark-based Carlsberg’s British sales by volume will fall 3% next year, according to the average estimate of two analysts surveyed by Bloomberg.

Amsterdam-based Heineken, which bought Scottish & Newcastle Plc assets this year to become the UK’s biggest brewer, will see its volume sold in Britain fall 4.4% in 2009, according to the average of three analysts’ estimates. By contrast, Diageo sales for western Europe will increase 2.3% in 2009, and margins will widen by 45 basis points, according to the average of two analyst estimates.

Brewers aren’t faring much better at the so-called ‘off-trade’—supermarkets and liquor stores, where 45% of all beer is sold, according to the BBPA, and beer sales declined 6% last quarter.

To be sure, spirits sales have dropped 6% in pubs this year, though the total increase in Britain is 2%, according to Nielsen data, driven by a 4% off-trade gain. About 80% of liquor sales are outside bars and pubs.