Pamela S. Erickson, President Public Action Management, PLC April - - 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? Because some

• me norma
• rmal

l business prac ractic ices — quit ite le legitima itimate te for

• r oth
• ther commod
• mmodit

itie ies — may ay prod roduce socia

• cial

l harm rm when alc lcoh

• hol
• l is

is sold

• ld.

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?

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…

• 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
• ung pe

peop

• ple to build

a future customer base

Your ur b bus usine ness plan an wo woul uld i incl nclud ude:

 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.

 Estim

imates in indic dicate t the alc lcohol m l mark rket includes: s:

 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 w ars.

US Supermarkets have 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

• f 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

Deregulation by Lawsuit

 How can supermarkets

survive?

 “T

“To

• 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 dime dime ma marku rkup.”

 Net profit for food retailers is

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

“Top

• p N

Nor

• rth

th Am Amer erican Food

• od R

Reta etailers ( (Per ercent ent

• f
• f top

top 50 by 2009 es esti timate ted or

• r 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

• stc

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

• urce:

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

• ccur through taxation, minimum price levels and three-

tiered system controls.

 Promoti

• tion
• n: 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

• rcemen

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

• ntana is

is on

• n 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

• hol.

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

• ccurs s

slow lowly ly ov

• ver

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

• n like

likely ly c change in in pric price a and d resulta ltant i t increase i in consumption ption.

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