Is alcohol too cheap?

 

ALCOHOL PRICES:Supermarkets are flooding the market with cheap alcohol, the result is that it now costs 50 per cent less to drink at home than it did in 1996

WHILE THE PRICE of everything else was rising at sometimes frightening speeds during the boom years, the cost of alcohol, one thing that might be considered fairly integral to Irish society was falling dramatically. In 1990 a night out in a pub could be had for no more than a fiver, with pints of lager costing around £1.50 (€1.91). If you were going to a house party you could easily pick up five cans of fairly low-grade lager – some might have had scantily clad ladies on the side – for around a pound a pop.

While the price of drinking in a pub has increased by well over 300 per cent in the intervening years, the cost of alcohol in an off-licence has fallen precipitously and, in real terms, it now costs more than 50 per cent less to drink at home than it did in 1996.

According to the Rand report, commissioned by the European Commission’s Department of Health, Ireland is one of six countries in the EU where alcohol has become over 50 per cent more affordable than it was 15 years ago. Furthermore, alcohol prices in Ireland are falling at a much faster rate than average prices. According to CSO figures, alcohol prices fell by 4.6 per cent in Ireland between July 2009 and July 2010, while average prices fell by only 0.1 per cent.

Before the euro change-over in 2002, Richard Butler, who owns the Drink Store off-licence in Dublin’s Stoneybatter, was selling cans of Budweiser for £1.55 (€1.97). Today he sells them for €1.47 but his margin is the same, reflecting a significantly lower price at wholesale level. “In real terms, the price of alcohol in off-licences has fallen by at least 30 per cent in the last five years,” he says.

Alcopops have also fallen significantly in price in recent months. They used to sell for €3 a bottle when they were launched but now sell for as little as €1.65 in some major retailers. They are high in sugar, high in alcohol and are undeniably targeted at younger drinkers.

The price cuts are “being driven by the big supermarkets who are selling below cost. Anything you see on special in the big stores is being sold at below cost,” Butler says.

The alcohol market in Ireland is worth over €6 billion a year and the off-sales element is used as a loss leader by supermarkets whose biggest challenge is to coax people through their doors. Using cheap booze as bait, they then maximise their profits elsewhere in the stores. Tesco alone controls more than 50 per cent of the off-licence trade in Ireland while 95 per cent of all carry-out business is done by five companies – Tesco, Dunnes Stores, Centra, Spar and Costcutter.

Into the lower price equation you can add Lidl which is selling Lambrusco for €2.29, and more full-bodied wines for €4.29. Given that a bottle of wine attracts excise duty of €2.72 to which VAT at 21 per cent has to be added, these prices are barely covering the tax never mind the production costs or profits. Interestingly, Aldi does not sell much heavily-discounted alcohol out of concern that such sales may damage its image as a family retailer.

This move toward indiscriminate low-cost selling by the supermarket chains is, says Butler, “irresponsible trading”. His concerns are echoed by Alcohol Action Ireland (AAI), the national charity for alcohol-related issues. It believes a floor price below which alcohol can not be sold should be introduced. In a recent survey people polled appeared to back this stance.

The AAI questioned people aged between 16 and 65 in an attempt to gauge attitudes to drinking, prices and how alcohol is promoted. It found that 65 per cent of people believed there should be a minimum price set for alcohol.

Minimum pricing is the lowest price at which an alcohol product can be sold, the cost of a product based on the number of units it contains. The more units of alcohol in a bottle, the higher the price. As such, minimum pricing affects people directly in relation to how much they drink so it will primarily affect heavy drinkers and young people who are more likely to consume low-cost alcohol.

Scotland’s government recently tried to introduce a minimum price system set at 45p per unit. At this price a bottle of wine would cost at least £4.23 (€5.07) and a bottle of whisky £12.60 (€14.31). The Scottish health secretary Nicola Sturgeon said the move would lead to 225 fewer deaths a year after a decade and a saving of £83 million (€94 million) in healthcare costs. The plan foundered as the Scottish nationalists and Labour could not agree a formula. Local authorities in Manchester are also considering bylaws that would set a minimum price for alcohol. The law would affect all pubs, supermarkets and off-licences and mean that each unit of alcohol could not be sold for less than 50p.

Fiona Ryan, director of AAI says cheap alcohol carries a high cost which Irish tax payers end up paying. She says alcohol-related harm costs this country around €3.7 billion a year including health, absenteeism and crime-related costs. That is €3,318 for everyone paying income tax. She insists that it is a myth that alcohol in this country is expensive.

“In Ireland, it is possible to get drunk for as little as €6, with cans of beer selling for 66c each or less, wine for €4 and bottles of vodka retailing at €12. It’s possible for a woman to reach her low risk drinking limit for just €6.30 a week and a man can do so for less than €10.

“People might look at other countries, particularly in southern Europe and say it is much cheaper there but we have a minimum wage of €8.60 and a can of beer can cost as little as 67 cent so someone would have to work for just one hour on the minimum wage to earn enough to consume 15 units of alcohol.”

According to Ryan there has been “a definite move” by the drinks industry to cut out the middleman of the independent retailer which has led to cheaper alcohol. “Consumers say that this is a good thing and moderate drinkers ask why they should be penalised. We want minimum prices per unit to be introduced. This impacts most on heavy drinkers and young drinkers and has very little impact on others.”

She says banning below cost selling doesn’t work as there is no agreed formula for calculating cost prices so the practical implementation of such a ban is all but impossible.

AAI also believes the government should introduce a social responsibility levy which would have to be paid by producers.

“The industry is making vast profits and while we recognise that it is a legal drug it is also one which costs us a significant amount each year.”

READERS’ VIEWS: Are drink prices too low?

More expensive here than anywhere else in Europe. Our over-consumption isn’t due to low price, rather a deeper national malaise. JK

On the whole, no. Over-consumption tends to be a cultural issue, rather than cost-driven. NFN

Absolutely not. We can’t cope with it culturally, but that doesn’t mean gov should use that for tax income. Educate people. FK

Yes, but it’s even cheaper up North, so increasing price here won’t make a difference. NB

Yes. Defo, there are signs for 10 bottles of alco pop for €10. I see kids walking out of shops with boxes of them and drinking them near our place in a very anti-social manner. I would pay more for my drink to stop this sort of behaviour. MD
€4.50-€5 for a bottle of beer in a pub. €20 for 20 of them in an off-license. EO’M

Alcohol is too expensive here, compared to the US and most European countries. It’s practically a luxury here. FIS

It’s the off-licences’ deals on drink that are scary – encouraging people to buy more units to get a better deal. AMD

I worked with Norwegians. In Norway they deliberately price alcohol at prohibitive prices. They thought Ireland was dear. CB