Focus - Australian drinks industry braced for tighter alcohol policy
Industry advocates may have branded the recent tax rise for RTDs in Australia a "tax grab masquerading as health policy", but it has shown the Government's resolve when it comes to alcohol regulation. And, Ben Cooper writes, as the Government ponders the findings of its Preventative Health Taskforce, the industry may have to steel itself for further policy initiatives.
Having lost out in its battle with the Government over the taxation of RTDs, further trouble could be brewing for the Australian drinks industry, with reports that government public health advisers are urging politicians to target sports sponsorship by alcohol brands.
The Preventative Health Taskforce was briefed by the Rudd government to provide evidence-based advice to government on preventative health programmes and strategies, and support the development of a National Preventative Health Strategy.
Excessive alcohol consumption is one of its three prime areas of concern, along with obesity and smoking. The taskforce delivered its report to the Government on 30 June 2009.
Industry and health advocacy groups have been attempting to second-guess what its recommendations were and what the Government's response is likely to be in policy terms. A leak last month suggested drinks sponsorship would be one of the areas to be addressed.
Stephen Riden, information and research manager at the Distilled Spirits Industry Council of Australia (DSICA), one of the 400 organisations and individuals to have made submissions to the Taskforce, says a sports sponsorship ban would be "very difficult" to introduce simply because of the importance of those funds to sporting bodies.
Riden adds that the leak also included reference to tightening up legislation on internet advertising and advertising in youth magazines but it was sports sponsorship which attracted by far the most comment. If, as some have suggested, the leak was a 'range-finding' exercise by the Government, the response seems to underline how problematic such a measure would be.
Geoff Munro of the Australian Drug Foundation, which belongs to the Alcohol Policy Coalition, a group of health organisations lobbying for alcohol policy reform, believes the Taskforce may have made a recommendation on sports sponsorship but that the Government might hold off from taking action in the near term.
While elite sports "could easily replace" alcohol funding, Munro states, the Government would be concerned about the effect on minority sports. It has already allocated A$25m for sponsorship of community sports, but the current state of public finances limits the scope for such subsidy which might replace alcohol sponsorship.
But Munro believes the Government will eventually act on sports sponsorship even if not right away. "The days of alcohol sponsorship of elite sports are numbered but it won't happen immediately," he tells just-drinks. "I think there is a public groundswell against alcohol sponsorship of sport."
Other measures that may be considered in light of the Taskforce's findings could include tightening up self-regulatory systems for alcohol advertising, mandatory health warnings on alcohol and a social marketing campaign around alcohol misuse.
For now, the only certainty is that the Government will make some announcement related to the Taskforce report in the very near future. Rather than introducing new policies, Riden says the Government could opt simply to publish the Taskforce's findings for further consultation. Also, the Government's imminent announcement is unlikely to involve any more changes at this stage to alcohol taxation, given that a major review of the Australian tax system, the Henry Review, is scheduled to be concluded in November.
However, the Rudd government's stance on RTDs suggests any decision to hold fire on sports sponsorship would owe more to pragmatism than faintheartedness. Certainly, alcohol advocates are under no illusions that Health Minister Nicola Roxon lacks resolve when it comes to taking the industry to task.
The battle over the RTD tax increase has been protracted and convoluted. The measure, which increased the tax on RTDs by almost 70% from $39.36 per litre of alcohol to $66.67, was introduced by the Government on 26 April 2008, and was in effect for almost a year before being voted out in the Senate on 17 March 2009. However, the Government continued to levy the higher tax and subsequently announced on 13 May 2009 (Budget Day) that it intended to introduce a bill to ratify it. Delaying this until August was politically significant as under the Constitution if the Government had been defeated twice on the same measure but more than three months apart, it would have provided a trigger to call a General Election. The Opposition did not want that, so this time did not oppose the tax hike.
The political manoeuvrings have been more than matched by an acrimonious war of words between industry and public health campaigners, with industry representatives suggesting public health advocates with an anti-alcohol agenda have a disproportionate influence in shaping health policy. Public health campaigners, meanwhile, have accused the industry of putting out misleading information and unsubstantiated claims about drinking patterns among consumers.
While being branded a "tax grab masquerading as health policy" by DSICA, the hike in taxation has made a marked impact on sales of RTDs. According to a Nielsen report published last month, the tax change resulted in a 25% increase in the average retail shelf price of RTDs, while in volume terms the RTD category was down 30% in year to April 2009.
Beer and spirits volumes increased by 5% and 16% respectively for the year to April 2009. Nielsen concluded that while the RTD tax change had delivered its objective of reducing RTD consumption, other categories had benefited from the change.
The key objective, however, was to reduce RTD consumption among young and underage drinkers. While being "happy" that the Government has ratified the tax, describing it as a "useful measure" and a "step in the right direction", Munro concedes that the sales data does not give any indication as to whether this has been achieved.
"The only evidence that exists is volumes of alcopops declined by about a third," he says. "We don't know who's responsible for those changes. Even the official figures that we've seen can't distinguish which demographic groups are responsible for any changes. I think we're some way off understanding what, if any, effect the tax [rise] has had."
By which time, other policy initiatives with both similar and broader aims appear likely also to have come into effect.
Industry advocates may have branded the recent tax rise for RTDs in Australia a “tax grab masquerading as health policy”, but it has shown the Government’s resolve when it comes to alcohol regulation....
While the unprecedented global financial contraction is enforcing changes in consumption patterns, innovation is retaining its focal role as a primary driver for the alcoholic drinks industry, accordi...
- Focus - Pernod's YTD Performance by Region
- Comment - Will We Understand the Language of Rum?
- just On Call - Pernod shifts Scotch focus in China
- Focus - Heineken's Q1 Performance by Region
- just The Preview - Pernod Ricard's Q3 & YTD
- CFO of Diageo's United Spirits stands down
- Pernod Ricard sees YTD recover as sales increase
- BrewDog launches GBP25m crowd-funding attempt
- Remy Cointreau US head to step down
- Africa "subdued" but Heineken sees Q1 rises
- Global Tequila insights - market forecasts, product innovation and consumer trends research
- Global rum insights - market forecasts, product innovation and consumer trends research
- Diageo plc (DGE) - Financial and Strategic SWOT Analysis Review
- ALDI 2015: Radically transforming Anglo Saxon grocery markets
- Bacardi Limited - Strategy and SWOT Report