Pamela S. Erickson, President Public Action Management, PLC April 28-29, 2010
Why Why do we we nee need s spec ecial regul ulati tions ns fo for busines esses that sel that sell al alco coho hol? Why can’t alcohol be sold in a “free market” like other products? Because some ome norma ormal l business prac ractic ices — quit ite le legitima itimate te for or oth other commod ommodit itie ies — may ay prod roduce socia ocial l harm rm when alc lcoh ohol ol is is sold old.
As As an an illus ustr trat ation, i imagi gine yo ne you u deci cide to to b buy uy a a floral al b bus usine ness…
Your ur b bus usine ness plan an wo woul uld i incl nclud ude: 1. Efforts to retain and increase customers who are “freq equen ent buyer ers” of flowers 2. Discounts and promotions to gain new “flower wer-loving” g” customers 3. Advertising to you oung pe peop ople to build a future customer base
Your business plan calls for: 1. Marketing to heavy drinkers and alcoholics. Estim imates in indic dicate t the alc lcohol m l mark rket includes: s: 2. Use of volume discounts/ 17.5% underage incentives to encourage heavy drinkers use. 20.1% adult abusive/dependent 3. Marketing to youth to drinkers encourage present and future (Archives of Pediatrics alcohol use. 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. 100 90 80 70 60 50 UK 40 US 30 20 10 0 Use in past 12 Use in past 30 Drunk in past 12 Drunk in past 30 months days months days
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 w ars.
US Supermarkets have Deregulation by Lawsuit cheap alcohol The he c cour urt f found und n no “p “persuasive e evi vidence ce th that t the p purpose o of an any o y of the challenged r rest strai aints w s was as to p promote temperance b by y rai aisi sing av average b beer an and wine p e prices es.” US District Court, Costco v. Hoen
How can supermarkets survive? “T “To o earn rn a a dolla dollar, r, superm rmarke rkets ts w would d ra rath ther sell ll a $ $1 ite item m 100 100 times es, m mak aking a a pen enny o y on each each sal ale, e, th than 1 10 time times with ith a a Net profit for food retailers is dime dime ma marku rkup.” less than two pennies on each dollar of food sales. Source: Food Marketing Institute
“ Top op N Nor orth th Am Amer erican Food ood R Reta etailers ( (Per ercent ent of of top top 50 by 2009 es esti timate ted or or actua tual S Sales es) Wal al-Mar art/ t/Sa Sam’s $262 $262 b b 30.6 30.6% Kroger er $ $ 76 76 b 8.7% 8.7% Cos ostc tco $ $ 71.4 b 71.4 b 8.3% 8.3% Sup uper ervalu $ 41.3 b $ 41.3 b 5.0% 5.0% Oth thers $406 $406.5 b b 47.4 47.4% Sou ource: e: Sup uper ermarketn tnews.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.
Price ice: Increase in price reduces consumption even among heavy drinkers and especially among youth. Increases can occur through taxation, minimum price levels and three- tiered system controls. Promoti otion on: restrictions on price-related promotions (“two for one”) Availab ailabilit ility: hours of sale, limits on number of outlets Age re restric rictio ion: purchase, possession and drinking age Dru runk d drivi riving m meas asur ures: sobriety checks, random breath testing, BAC limits, driver’s license suspensions Enfor orcemen ent: tools for law enforcement and attention to serving practices Sourc rce: World rld H Healt alth O Org rgan aniz izat atio ion
Alco lcohol Co l Consumption in in Montana is is High High 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/
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.
Mon ontana is is on on a good pa good path th a and d is is expe peri riencing de decli lines in in proble problems w with ith alc lcoh ohol. De Dere regu gulation co could ch chan ange t e that at. De Dere regulation is is in incre remental a and d oc occurs s slow lowly ly ov over r time time. Revers rsal is is dif difficult lt. Any r y reg egulat atory ch chan ange s should b be e car caref efully evaluated ba based d on on like likely ly c change in in pric price a and d resulta ltant i t increase i in consumption ption.
w w w.healthyalcoholmarket.com for Healthy Alcohol Marketplace new sletter and resource material
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