Alcohol Pricing

“Now is the time to tackle the toll Scotland’s unhealthy relationship with alcohol is taking on our society.” This is how Nicola Sturgeon, Scottish health secretary, confirmed the Scottish government’s decision that minimum pricing per unit of alcohol is the way to go to stem Scotland’s descent into the alcohol-fuelled abyss. Perhaps tellingly her statement came during a visit to the cardiac unit at Glasgow’s Royal Infirmary. From April 2013 and against speculation that it would be inthe region of 45p per unit, the amount has now been set at 50p, an increase to allow for inflation according to the health secretary. Sounds a lot, doesn’t it?

Depending on what your regular tipple is, this decision may not actually affect you. Unless you’re in the habit of buying cut-price booze, that is. I’ve long been saying that spending a bit more on a bottle of wine is good for us all. See my previous article on tax and duty on wine and you’ll know what I mean.

In itself I’m actually not against this government move, but I do question whether it will have the desired effect. Buckfast has often been blamed, particularly in the west of Scotland, for fuelling anti-social behaviour. It is a fortified (tonic) wine containing around 15% alcohol as well as caffeine and observation indicates the combination of both might drive gangs of teenagers into causing havoc. This may be an isolated example but many people I’ve spoken to recently find it strange that the minimum price set by the Scottish government means absolutely no change in the price of Buckfast, which already retails for around £7. I can’t see how this policy is going to solve that particular problem and I think that current laws could be used more effectively to curb underage drinking and antisocial behaviour which seems to be at the heart of the problem. If we don’t teach young people a responsible attitude to alcohol, excesses will just escalate.

I’m in no doubt that drinking less alcohol is better for our health, I’m just questioning whether this particular policy will achieve the desired outcome. But since the policy is now a fact, we’ll be sure to find out if it does. And the ‘sunset clause’ built into the policy means there will be an opportunity to review its results infive years time.

The challenge is now to see how the trade reacts with the positioning of brands in the middle price brackets. As cut-price alcohol becomes more expensive the distinction with products in that middle range becomes muddled. There is a widespread view that this may result in price rises across the board. And some will welcome this as an opportunity to review how prices are set and make the wine trade in particular more sustainable over the longer term for producers and importers.

It’s worth reading the small print though. At this stage Sheffield University’s Alcohol Research group, on whose report the Scottish government has based its policy, has estimated that large retailers stand to make £124.5 million from minimum pricing as well as from the discount ban already in force. This number may actually end up being considerably higher according to CBI Scotland because of the increase from 45p to 50p.

There is currently no mechanism to claw this back from retailers, as the Scottish government doesn’t have the power to set central tax or duty on alcohol. They did introduce the ‘public health levy’ earlier this year which will see larger alcohol (and tobacco) retailers pay a supplement to their business rates. There are calls for similar measures in the form of a ‘social responsibility levy’ (that of course is just tax to you and me) so, before we celebrate a move to a more sustainable model, we could well end up with a significant increase in the overall price of alcohol that goes straight into the government’s coffers and does nothing to restore balance in the trade and that would be a great opportunity missed.

As it stands the minimum unit price will only apply to Scotland and there is genuine concern that it could harm Scottish retailers when south of the border there are no restrictions. Evidence from Canada, where similar moves have introduced minimum pricing in some provinces, suggests that cross border trade from provinces without restrictions is a significant issue. But the Westminster government is already making noises about minimum unit pricing south of the border,making it likely the imbalance will only last for a short time.

So where does this leave the average consumer? Clearly this is the start of the end of cut-price alcohol as we know it but as a result we may well see price increases at the higher levels as well as the market resettles. The question is whether this will end the love affair consumers have with cheap deals and stop them buying on price but rather look for quality, or the illusive ‘value for money’. It is worth noting that the minimum price for a bottle of wine will now be £4.69,which is only marginally below the current average price paid in the UK. Perhaps it will encourage people to start exploring the wine isle with renewed vigour and root out some real quality, but I think it takes more than minimum unit pricing to fix that.

The current focus on lower alcohol wines may also benefit as a result as they are in prime position to take the spot vacated by the lowest priced wines, but that is of course assuming these wines can be produced at this low cost and find sufficient favour with consumers. The time is right for the larger retailers to take the lead and convince consumers about the real value of a bottle of wine, rather than just play the blunt pricing game. Wishful thinking, perhaps.