Monday, 24 April 2017
New study finds Public Health Alcohol Bill will not reduce harmful drinking
Measures in the Bill will:
- · Threaten jobs in an industry that employs 90,000 people
· Increase Cross border shopping
· Stifle innovation and product development by severely restricting advertising and marketing
· Negatively impact rural Ireland
Sunday 23rd April 2017: A Report published today, carried out by DKM Economic Consultants into the Socio-Economic Impact of the Public Health Alcohol Bill (PHAB), has found that the proposed measures would have a detrimental economic impact on an industry that generates €3 billion in GDP annually, while the evidence that the measures would reduce harmful drinking was weak. Indeed, it also found alcohol consumption per capita has been in decline in Ireland since the early 2000s, and youth drinking also continues to decline. The report commissioned by the Alcohol Beverage Federation Ireland (ABFI), which represents alcoholic drinks manufacturers and suppliers in Ireland, examined proposals contained in the Bill, including Minimum Unit Pricing, and regulations and restrictions around labelling, marketing, advertising and retailing of alcohol. The report assesses the Bill’s impact, not only on reducing harmful drinking, but also outlines the economic consequences of the proposed measures, which include incentivising cross border shopping, stifling growth and product innovation in the sector, and negatively impacting small producers and retailers, particularly in rural Ireland.
Incentivise Cross-Border Shopping
The author of the report, John Lawlor of DKM, notes, “Sterling has depreciated by approximately 16% since the Brexit vote last June, and experience confirms that consumers are willing to react in response to differences in cross-border prices. If Minimum Unit Pricing is implemented in the Republic but not in the North, then there will be a permanent shift in price levels, which will be to the detriment of the retail trade, consumers, and the Exchequer in the Republic. For example a one litre bottle of spirits at 40% ABV would attract a minimum price of €31.56.” The reality of the cross-border dimension of MUP was emphasised by the former Minister for Health, Leo Varadkar in December 2015 when he declared that it was the Government's intention to "go ahead with minimum pricing at the same time as Northern Ireland," noting that "it would be totally counterproductive if people just went North of the Border”.
Impose costs on producers and stifle innovation through onerous marketing restrictions
The report found proposals contained in the Bill would increase costs on producers, particularly small local producers and new entrants to the market, while having a lesser impact on established players. For example, requirements under the Bill for an Ireland-only health label would be costly for small producers. The severe restrictions on marketing and advertising proposed in the Bill would also impact the ability of large and small producers to innovate and launch new products. Ireland is currently a popular test market for alcohol products, as a small, English-speaking market with an already highly-developed regulatory structure. Recent high profile examples include:
- · Diageo’s Hop House 13 craft-style beer, developed and brewed in Dublin, which was successfully launched in Ireland and which is now exported to the UK and beyond.
- · Heineken Light, a low alcohol and low calorie beer, available in the US for a number of years, which has been launched in Ireland before a full launch in Europe. The draft beer is brewed in Ireland.
- · Jameson Caskmates, an innovative whiskey product aged in craft stout casks, which has been developed and test-marketed in Ireland and since been launched globally.
“There would be a question mark over whether this aspect of the Irish market would survive these proposals, which would have a detrimental impact on more innovative firms seeking to test out their new products here as well as those new entrants in whiskey and brewing looking to build export businesses out of Ireland”, said DKM Director John Lawlor.
Detrimental Impact on Rural Ireland
The report also found that measures contained in the Bill would unduly impact rural Ireland. In particular, small retailers may decide that it is too costly to adapt their premises to comply with the structural separation proposals. This could result in them no longer selling alcohol which would result in a loss of revenue, as well as reducing product availability and choice for their customers. Commenting on the impact on small shops in rural Ireland John Lawlor said, “The Bill would give a competitive advantage to pubs and stand-alone off-licenses vis à vis mixed retailers. The latter have obtained licenses under the current regulatory regime, and have invested in their alcohol sales business in good faith. This investment is now being undermined, and could be an unwarranted interference in the marketplace.
DKM Director John Lawlor concluded, “Our findings show that there is little evidence that measures contained in the Bill would reduce harmful drinking. However, it would impose potentially substantial costs on producers, particularly small local producers, new market entrants and smaller and rural retailers, placing jobs in those sectors in jeopardy. In addition, it would stifle innovation in the Irish market as new product launches or test launches (such as Heineken Light or Hop House 13) would be impacted. The drinks industry exported goods valued at €1.1 billion in 2015 and employs over 90,000 people both directly and indirectly. Given these negative impacts, the lack of evidence of the effectiveness that it would tackle harmful drinking, and given the long term downward trend in alcohol consumption and youth drinking in Ireland, the measures proposed in the PHAB in question are not justified”.
For further information please contact Richéal Drumgoole Q4PR, Tel 01 4751444/086 8518936
DKM report on impact of PHAB.pdf