April 28-29, 2010 Why do we need d special ial regula re ulati - - PowerPoint PPT Presentation

Pamela S. Erickson, President Public Action Management, PLC April 28-29, 2010

 Why can’t alcohol be sold

in a ―free market‖ like other products? Be Because ause some normal al busines iness s practi tices ces — quite te legi gitimate ate for other r commoditi ties es — may produce duce social harm m wh when en alcohol l is sold.

Why do we need d special ial re regula ulati tions

• ns fo

for b r busin inesses esses that sell ll alc lcohol? l?

As an il illu lustra rati tion,

• n, im

imagin ine you decide to buy a floral business…

• 1. Efforts to retain and increase

customers who are ―frequent buyers‖ of flowers

• 2. Discounts and promotions to gain

new ―flower-loving‖ customers

• 3. Advertising to young

ng peopl ple e to build a future customer base

Yo Your r busin iness ess pla lan would ld in inclu lude: e:

 Your business plan calls for:

• 1. Marketing to heavy drinkers

and alcoholics.

• 2. Use of volume discounts/

incentives to encourage heavy use.

• 3. Marketing to youth to

encourage present and future alcohol use.

 Estimate

ates indicate te the alcohol

• l market

t includ udes:

 17.5% underage

drinkers

 20.1% adult

abusive/dependent drinkers

 (Archives of Pediatrics

and Adolescent Medicine, 2006)

 The United Kingdom is

an example. Today alcohol is available in bars, clubs and grocery stores 24 hours a day, 7 days a week.

 They have high taxes,

little regulation, poor enforcement and lots of cheap alcohol.

 The also have an

alcohol epidemic on their hands.

 Hospital Admissions have doubled for liver

disease and acute intoxication.

 Drinking and intoxication of youth 15-16 are

at very high rates, according to the European School Survey.

10 20 30 40 50 60 70 80 90 100 Use in past 12 months Use in past 30 days Drunk in past 12 months Drunk in past 30 days UK US

Percent of 15-16 years olds consuming 5 or more drinks on 3 or more occasions in the past 30 days

 Large increase in public

disorder crimes around bars (vomiting, urination, fights, vandalism).

 Thirteen ―Booze Buses‖

used for 2009 New Year’s Celebration to take revelers to the hospital.

 Serving practices promote

rapid intoxication.

 ―Predrinking‖ at home

increases bar intoxication.

 Source: Statistical handbook 2007 (British

Beer and Pub Association

 Four large chains

control 75% of the market.

 Most use alcohol as a

“loss leader”.

 Drinking at home has

increased.

 The large chains are

locked in price wars.

US Supermarkets have cheap alcohol

The he cour urt t foun und d no ―persuasive evidence that the e purpose

• se of any of the

chall hallen enged ged restr train ints was to promo mote te tempera erance ce by raisin ing g ave verage age beer and wine prices.‖

 US District Court, Costco v.

Hoen

Deregulation by Lawsuit

 How can supermarkets

survive?

 ―To earn a dollar,

superm rmarkets rkets would d rather er sell a $1 $1 i item 10 100 t 0 times, s, making ng a penny ny on each ch sale, than n 10 10 times s with a dime markup.‖

 Net profit for food retailers is

less than two pennies on each dollar of food sales. Source: Food Marketing Institute

―Top North

h America ican n Food Retailer lers s (Percent t

• f top 50 by 2009 estimat

ated ed or actual l Sales)

 Wal-Mart/Sam’s

$262 2 b 30.6% 6%

 Kroger

ger $ 76 b 8.7% 8.7%

 Costco

co $ 71.4 b 8.3% 8.3%

 Superv

rvalu alu $ 41.3 b 5.0% 5.0%

 Others

ers $406.5 6.5 b 47.4% 4%

 Sourc

rce: : Superm rmark arket etnews news.com .com

Mass Merchandising Model for alcohol: Cheap alcohol sold in high volume. Coming to a store near you!

• 1. Large store chain
• 2. Wholesale volume

purchase at discount

• 3. Warehouse
• 4. Distribution system
• 5. Retail sales at low

prices, volume discount, heavy promotion, loss leader

 Shift to drinking at home: 37% going to bars and

clubs less often (Nielson survey)

 Increase in off-premise locations: 2,392 in August

2009 (Beverage Information Group)

 Cheap alcohol in stores (sometimes 50 cents a can

for beer); private labels

 Proposals for all forms of alcohol in grocery

stores…sold as ―Customer Convenience‖ (privatization, ―wine in grocery stores‖, Sunday sales, etc.)

 Original purpose: tighter controls for products of

higher alcohol content (wine and spirits)

 Business’s primary or only function is selling

alcohol-can focus on regulatory compliance

 Training and license requirements for staff  Age restrictions for employees and customers  Hours and location restrictions  Off-premise locations without these controls can

undercut on price and use alcohol as loss leaders making up loss on other products.

 Pric

ice: Increase in price reduces consumption even among heavy drinkers and especially among youth. Increases can

• ccur through taxation, minimum price levels and three-

tiered system controls.

 Prom

• moti

tion: restrictions on price-related promotions (―two for one‖)

 Avai

aila labil ility ity: hours of sale, limits on number of outlets

 Age restricti

ction

• n: purchase, possession and drinking age

 Drun

unk k driving ing measure res: sobriety checks, random breath testing, BAC limits, driver’s license suspensions

 Enforc

• rcement:

ent: tools for law enforcement and attention to serving practices

 Source: ce: World Health Organizati tion

• n

Alc lcohol l Consump umption ion in in Montana na is is Hi High gh

Source: Behavioral Risk Factor Surveillance Survey –CDC 2008

Montana also has high binge drinking rates

Source: Behavioral Risk Factor Surveillance Survey—CDC, 2008

Data Source: YRBS, CDC

http://www.cdc.gov/

Percentage of MT students using before the age of 13:

10 20 30 40 50 1993 1995 1997 1999 2001 2003 2005

Cigarettes U.S. Survey Alcohol U.S. Survey Marijuana U.S. Survey

Source: YRBS

 Overall adult consumption and binge drinking

rates are high as they frequently are in northern states.

 Youth underage rates are high, but declining.  Percent of highway deaths due to alcohol is

very high, but declined in 2009.

 Overall trends are down which indicates

progress is underway.

 Montan

tana a is on a g a good pat ath an and is ex exper erie ienc ncing ing decl clines ines in problems ems with alco cohol.

• l. Deregula

ulatio tion n co could ld ch change ge that.

 Deregula

gulatio tion n is incr cremental emental and occ ccurs rs slowly y over time.

• e. Re

Reversal sal is difficul icult. t.

 Any regulatory

tory ch change ge should ld be ca carefull ully y evalua luated ted based on likely y ch change ge in price ce and res esultant ltant incr crea ease se in co consum umption. ption.

 www.healthyalcoholmarket.com for Healthy Alcohol Marketplace newsletter and resource material