Comment - Wine - Minimum Pricing: For Richer, For Poorer?
The spectre of minimum pricing for alcohol took physical form in the UK last month. Chris Losh is confused, however: Will the poor get hit harder than the richer in UK society? And, if so, will the move really achieve the desired aim?
The British government’s assault on booze, boozing and boozers last month caught the industry by surprise. While the ‘duty escalator’ hikes in the budget on 21 March were predicted, the announcement two days later of plans to introduce minimum pricing, curbs on drinks promotions and a late night levy on pubs and clubs was not.
Blame politics. The new policy draft was almost certainly presented to the press earlier than planned to distract attention from a welter of negative publicity that followed the budget. Not that this will be of any consolation to a shocked drinks industry that thought it was working with the Health Secretary to find a non-legislatory ‘Responsibility Deal’ to address Britain’s drink problems.
Nonetheless, the ending of multi-buy offers – where it’s cheaper to buy, say, three bottles together than if they were bought individually – is a good one. Deaths from drink in the UK are on the rise, suggesting that rather too many people are drinking rather too much – and have been for a while.
"We can't go on like this. We have to tackle the scourge of violence caused by binge drinking. And we have to do it now," said PM David Cameron, in a statement which proves that at least some of the blame for the drinking problem lies in the tendency of politicians to muddle two separate issues.
British town centres at the weekend can, for sure, be scenes of alcohol-induced carnage. But a) this is not a new phenomenon, and b) groups of youths drinking too much in their 20s doesn’t necessarily lead to liver damage 40 years later.
So, is the problem social disorder or persistent over-consumption? Lawlessness or alcoholism? Because, while the two are related, they are not the same.
There are a vast number of perfectly respectable people who, by the Government’s own criteria of 21 units of alcohol a week for men and 14 for women, have a persistent drink problem. A G&T and a shared bottle of wine five nights a week will see to that. But, sending TV cameras onto the streets of Cardiff to film hammered 18-year-olds makes for better television than showing Mr and Mrs Average drinking a glass of Blossom Hill.
So, will minimum pricing affect these rowdy weekenders or Suburban Joes?
The answer is, ‘unlikely’. Youngsters tend to ‘pre-load’ with cheap booze at home before going out to save money. Paying GBP3 (US$4.80) more for a bottle of vodka is an insignificant increase in the context of a big night out. While, for the middle-aged drinkers, wine (with a minimum price per bottle of around GBP3.20) is barely affected.
Of course, if the Government were to set the minimum price per unit at GBP0.50, rather than the mooted GBP0.40, it could all be different. We’d see vodka at GBP14 a bottle, a four-pack of Stella Artois at GBP4.40 (instead of GBP3.52), and Blossom Hill at GBP4.50 per 75cl. But, this would be political suicide. In finding a level that is broadly acceptable to the public, the government has removed the policy’s teeth. Rather than moderating their behaviour, most consumers will simply pay slightly more for what they’re doing already.
The worry for the drinks industry is that, once the principle of minimum pricing is accepted, the level at which it’s set is only likely to go one way. Increasing the unit price by GBP0.01 every year for ten years, for instance, could lead, incrementally, to prices that will hugely affect consumption. Ironically, research shows that the heaviest drinkers, are the least likely to drink less if prices go up across the board, but for many it would be death by a thousand rises.
It could be argued that minimum pricing would be useful in setting a ‘floor price’ below which alcohol can’t be sold. I’ve long argued that the biggest problem with drink retailing in the UK is over-aggressive promotions, and this would stop some of the worst examples at a stroke. Twelve cans of Stella Artois have been sold on promo at GBP6.50. At GBP0.40 a unit, they couldn’t be less than GBP10.56, whatever the promo.
But, this might just shift the focus for big promotions more upmarket. There would be nothing to stop supermarkets continuing to use Champagne, single malt whisky etc in half-price deals to drive footfall, which would send out hugely mixed messages.
Is the problem cheap booze per se, or a culture that encourages shoppers to buy more? And, why is it okay for the wealthy to enjoy double-digit price cuts on premium gin, but exclude such benefits to the less affluent? Is irresponsible drinking the preserve of the less wealthy?
Such ponderings might, in any case, be irrelevant, since (unlike with banning multi-buy offers) there are big question marks over whether the Government will be allowed to implement minimum pricing in the first place.
Three years ago, the European Court ruled that Ireland, Austria and France were in breach of competition rules for trying to set a minimum price for tobacco. And, there are plenty who feel that attempts to set a floor price for alcohol will hit the same obstacle.
The Scottish parliament (which is ahead of the UK government on this issue, and intends to introduce minimum pricing this year) is confident that the tobacco issue is irrelevant. But, others are convinced the impending drinks-related initiative will also fall foul of Brussels’ anti-competition legislation. A challenge over the summer is almost inevitable, and its progress will doubtless be watched carefully in London.
So, if minimum pricing is blocked how should the UK address its drink problems? The answer is education, which since it is neither quick, glamorous nor eye-catching means it is likely to be ignored by politicians.
But, legislation is at its most effective when backed up by a consistent, long-term campaign aimed at changing public perception.
Drink-driving, for instance was illegal for 20 years before public opinion viewed it as totally unacceptable. And this for an object (the car) that had only been a part of mainstream culture for 50 years.
Given that alcohol (and its often irresponsible consumption) has been a big part of the British way of life for hundreds of years, this clearly isn’t something that can be fixed overnight, whatever the policy wonks in Westminster might think.
- Focus - Edrington's FY Performance by Brand
- Pernod relies on Indian whiskey to crack Africa
- Where Beer is Brewed Can Leave a Bad Taste
- Analysis - Storm clouds lift over Diageo Towers
- Hail Marie Brizard: But, For How Long?
- Comment - Diageo CFO to North America? Do the Math
- Diageo CFO Mahlan to head up N America
- Diageo sells "non-core" Gleneagles
- Former Bacardi exec takes De Kuyper CEO role
- Diageo lining up Gleneagles sale - report
- Global liqueurs insights - market forecasts, product innovation and consumer trends research
- The IWSR Company Profile 2014 – Remy Cointreau
- Edrington Group in Spirits (World)
- Diageo plc (DGE) - Financial and Strategic SWOT Analysis Review
- Global Tequila insights - market forecasts, product innovation and consumer trends research