Minimum Alcohol Pricing

July 2nd, 2012 by Dylan Leave a reply »

Labour has announced that it intends to seek to amend the Alcohol Law Reform Bill to allow for minimum pricing to be enforced. This was something that featured in Labour’s policy before the election (although it wasn’t a bullet point they ever brought up). There’s no indication of how Labour would implement the idea or what the cost implications would be.

The problem that this will supposedly address is related to binge drinking and alcohol related disorder in NZ. The idea being that people (young people) are “pre-loading” on cheap booze before going into town. The simplistic solution then? Make booze more expensive. 

The scapegoats in this argument are usually either “alcopops” (premixed drinks) and discount wine (usually from supermarkets). By imposing minimum pricing, the argument goes, you increase the cost and thus decrease the appeal and availability of those type of drinking.

This, like Labour’s GST-free fruit and vege policy, is short-sighted and unoriginal. They are taking aim at very simple parts of very complex issues and attempting to attack them in broad and blunt way.

So far we have only two clues really about what Labour might be imagining for this law. The first is a quote today from Labour’s Charles Chauvel, “If instead of being able to buy a bottle of cheap wine for $6 from the supermarket, a minimum pricing regime puts that up to 12, 13 or 14 dollars then it’s much harder people to lay their hands on cheap booze.”

The second is a ballpark figure tossed around by Lianne Dalziel in discussion of alcohol law reform late last year where she mentioned “$2 per standard drink” – this would possibly line up with Chauvel’s estimate as a bottle of wine is usually between 6 and 8 standard drinks.

But the whole idea seems fatally flawed really. We’re talking about people who are presumably getting drunk then heading into town and buying a few drinks while out. Is the price rise going to stop them? They’ll still buy the cheapest booze and it’s not going to cost a lot more. Assuming that 6-8 drinks is enough to get you happily drunk then we’re looking at only $12-16 which isn’t much compared to the $5-10 per drink you’d expect to pay in a bar. Sure, it’s more than the maybe $6-10 to get drunk now, but it’s hardly the sort of price hike that’ll change behaviour.

Instead the people who suffer are the rest of us who buy wine, beer and spirits to enjoy responsibly. Chances are we’re not buying the cheapest products on the shelf now, but if the bottom shelf goes up in price then it seems certain that rest of the market will trend upward too. After all, if a budget bottle of wine is $7 now, but will be $14 in the future, then the mid-range $15 bottle is hardly going to stay that price. 

And what of spirits? The only obvious way to legislate pricing is on the “standard drink” measure, any other methods will either be worked around or will simple change demand toward whatever is a cheaper option. So the minimum (legal) price on a standard 1L bottle of spirits will be around $60. That’s about $20 more than you’d expect to pay currently for a common brand like McKenna or Jim Beam. The “middle shelf” products tend to be about $20 more, so maybe they’d go from around $40 to $60? So what do we expect to happen to quality spirits – a 1L bottle of Glenfiddich Reserve currently is around $100 – about 2.5x the entry level price, so should we expect that to come in at $150?

Obviously raising the price of an aged single malt Scotch isn’t going to make any difference to binge drinkers, but it seems likely to be an unavoidable consequence and one that punishes those who are currently choosing to drink responsibly.

Also if $60 is the absolute least you can charge for a 1L bottle of 40% spirits, then will that be the standard retail price? Typical retail marketing psychology makes strong use of discounts and sales to drive business – so perhaps we would expect standard retail pricing to be above that lower limit to allow for price reductions.

Minimum drink pricing isn’t going to make a difference – at the low end (where problem drinking apparently occurs) it makes only a small dent on wallets. But at the upper end where many entirely responsible adults chose to spend their money it sill make a big difference.