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by GK Strategy 12th February, 2019
4 min read

Has the bell rung for last orders on cheap alcohol?

In January, Ireland called last orders on the sale of cheap alcohol as health minister, Simon Harris, communicated his intention to implement a minimum unit price ‘as soon as possible’. It will join Scotland and – later this year – Wales in putting a floor on the price of alcohol in a bit to reduce harmful drinking. While plans to introduce a minimum unit price in England were dropped in 2012, the government has said it is keeping an eye on Scotland’s experience, suggesting that the trend towards greater regulation on the cost of alcohol is not going away soon.

What is minimum unit pricing?

Minimum unit pricing (MUP) is the lowest price at which a unit of alcohol (8 grams or 10 millilitres) can be sold. The policy targets alcohol at the lower end of the market, typically high strength, low cost ciders and lagers which are associated with ‘problem drinking’. Campaigners say that raising the cost of these products discourages dangerous or irresponsible consumption and in turn improves the health outcomes of drinkers. However, critics of the policy argue that it is indiscriminate and unfairly penalises responsible drinkers, as well as pricing some consumers out of the market by driving them towards premium products.

Scotland

The Alcohol (Minimum Pricing) Act was passed by the Scottish Parliament, giving the devolved government powers to set a minimum price for alcohol. MUP is not designed as a tax and instead the proceeds are retained by producers and retailers. After a lengthy legal challenge by the Scottish Whisky Association, a minimum unit price of 50p was introduced on 1 May 2018. This means that a one litre bottle of scotch whisky with an ABV of 40% must now cost a minimum of £20.

An early evaluation by The Retail Data Partnership (TRDP) found that alcohol sales actually increased by nearly 15% between the May to July period from 2017 to 2018.  However, a fall in unit sales of cider – particularly high-alcohol white ciders – suggest that the policy has successfully hit its intended target while the government has pointed to an unusually hot summer and the FIFA World Cup as reasons behind the jump in overall sales. Evidence has also emerged showing that consumers are moving away from low cost brands as more premium items grow their market share. The Scottish government is set to publish a review of the policy in 2023 which will help MSPs decide whether to extend MUP after a ‘sunset clause’ kicks in during 2024.

What next?

Wales is expected follow Scotland and introduce a minimum unit price of 50p during summer 2019. Similarly, Ireland is set to roll out a minimum price of €0.10 per gram of alcohol in the coming months after plans to introduce a MUP in tandem with Northern Ireland were scuppered by the ongoing political stalemate at Stormont. Some have argued that going ahead with MUP alone will simply drive consumers to retailers north of the border who can offer cheaper prices, disadvantaging businesses in its southerly neighbour. Ireland’s Public Health (Alcohol) Act 2015 also introduced tougher labelling requirements for alcoholic drinks, including cancer warnings similar to those displayed on tobacco products.

Irish EU Commissioner, Phil Hogan, has warned that such health warnings could be deemed to breach EU single market rules, although the legislation has been initially approved by the Commission. Should Ireland make a success of its new labelling rules, observers may want to turn their eyes to the UK to see if this, like MUP, becomes a trend.

How GK can help

GK has ten years’ experience providing businesses and investors with market-leading political risk assessment.  We advise on the political, regulatory and taxation risk to businesses both in the UK and internationally, as well as opportunities offered by change, from manufacturing to retail. With our knowledge of policy making processes and key decision makers and influencers, we offer informed and in-depth insight into the impact of political change across the drinks sector. With our horizon scanning and political monitoring tools, we can keep you abreast of significant developments and ensure you are best place to engage with key figures in the political and policy making process. We work with clients to understand and identify ESG risks and opportunities, in line with consumer, political and societal expectations on quality and standards, ever evolving as public attitudes towards alcohol consumption and health changes.

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