FACED with sluggish profits and stiff competition from supermarkets, Watford-based pub chain JD Wetherspoon is dropping the price of its beer.

The firm, which employs 290 people at its headquarters in Reeds Crescent, Watford, released its preliminary results for the financial year ending Sunday, July 25, 2004, in early September.

The figures revealed a before tax profit of £54.1million - a four per cent drop on the previous year.

Tim Martin, chairman of JD Wetherspoon, which has 643 pubs across the UK, said: "After a good first half, sales in the second half of the financial year slowed, which affected profits.

"This notwithstanding, we achieved another increase in sales per pub to their highest level ever and continue to generate strong cash flow."

According to Mr Martin, competitive pricing schemes by supermarkets have lead to a change in drinking habits - with more people opting to enjoy a tipple at home than ever before.

He said: "When Wetherspoons started business 25 years ago, off-trade sales accounted for about 20 per cent of beer, wine and spirit consumption.

"Estimates suggest that off-sales rose to a record 40 per cent of overall sales during Euro 2004 and that present trends indicate that off-sales could rise to about 50 per cent by 2010."

Mr Martin also said the past year had presented a challenging "political climate" for pubs.

Heavy media coverage about binge drinking and anti-social behaviour has resulted in increasing scrutiny of pubs across the country.

In response to this pressure, JD Wetherspoon has stopped two-for-one drinks deals and offering special double measures for the price of singles.

However this has not stopped the chain from introducing some competitive measures of its own.

These include dropping the price of the firm's biggest selling standard strength lager - Carling - to £1.49 per pint and launching an ambitious marketing campaign promoting a new traditional ale range.