Publication - Report

Minimum unit pricing of alcohol : final business and regulatory impact assessment

Underlines the rationale for minimum unit pricing from health and economic perspectives, setting out anticipated costs and benefits for all parties affected by a minimum price of 50 pence per unit.

Contents
Minimum unit pricing of alcohol : final business and regulatory impact assessment
Annex B

Annex B

1. The Scottish Government and the United Kingdom are requested to express their views on the specific effects of the national measure requiring the imposition of a minimum retail price (calculated according to the number of units of alcohol in products), on the imports of all alcohol products, subject to that measure and originating in other Member States, sold in Scotland below the MPU. They are in particular requested to produce the percentages of sales of alcoholic drinks other than wine which are effected at prices lower than the MPU.

The Scottish Government’s view on the specific effects of the national measure on the imports of all alcohol products, subject to Minimum Unit Price ( MUP) and originating in other Member states sold in Scotland.

1. Table 1 below details by product category the data we have on the effects MUP would have on the imports of alcoholic drink from other Member States.

Primary effects

2. The imposition of MUP will apply to all alcohol products whether UK or imported and irrespective of where they are sold. The legislation will apply equally to all producers and retailers. It is a feature of the statutory requirement that direct impacts will fall solely on those products retailing below the MUP, with the impact being progressive, so that the products which have the cheapest cost per unit of alcohol will be required to introduce the largest price increases.

3. Table 1 taken with the information set out in the Business and Regulatory Impact Assessment ( BRIA) show why the Scottish Government is clear that by far the larger share of the impact of the introduction of MUP in Scotland will fall on domestically-produced (i.e. UK) goods compared to imported products. Even within wine, we have data to show that the greater part of the impact falls on non- EU imported goods ( http://www.healthscotland.com/documents/24482.aspx.).

4. University of Sheffield modelling (January 2012), which informed the BRIA, estimates the effect of a 50p per unit minimum price on different alcoholic drink types. It estimates a reduction of 5.7% 1 in consumption of all alcoholic units, albeit without any reduction in the overall value of the market. The reduction breaks down per alcoholic drink type as 8.9% of spirits; 6.3% of beer and cider and 3.2% of wine (as measured by pure alcohol content).

Secondary effects

5. In addition to its own modelling, the Scottish Government consulted the industry about the impacts of MUP on the market, but found no consensus from any sector of the industry. That accords with a market for alcohol in Scotland which is mature and highly competitive. In the light of the impossibility of predicting with any certainty the market response, the Scottish Government agreed it should be under a statutory obligation to commission research to monitor the impact of the legislation on the market following the introduction of MUP.

6. In summary, the Scottish Government accepts there will be market impacts; these are primarily on domestically produced alcohol but in some sectors also affect imports ( EU and non- EU). The effects are not, and could not be, a disguised restriction on trade. The immediate market effects are clear but the Scottish Government’s main analysis and views are focused not on producing particular market results within or across categories but on health impacts.

Percentage of sales of drinks affected by minimum unit price of 50p per unit (50ppu)

Table 1 provides information on the sales of alcoholic drinks other than wine which are affected at prices lower than the MUP of 50ppu.

This table employs data from Nielsen 2 which demonstrates the market situation. The data is compiled by reference to volume of pure alcohol (i.e. ethanol content) and sales values. Data using a single measure is not available.

The total market comprises both the off trade and the on trade. Approximately 72% of the market relates to the off trade (shops, supermarkets) with 28% relating to the on trade (bars, pubs, restaurants, hotels). More detailed price data is only available for the off trade.

Column 3 shows the market share of each type of drink. The data used here relates to the total market and is measured in terms of the volume of pure alcohol.

Column 4 also uses data based on the volume of pure alcohol. It gives an estimate for each type of drink of the proportion of that type sold at below 50ppu. This column uses price data that is available only for alcohol sold in the off trade. It is highly unlikely that any alcohol will be sold at below 50ppu in the on trade because the average price of alcohol sold in the on trade is high 3.

Column 5 contains observations on the impact on EU imports. Comprehensive data on the impact on imports does not exist. The data that is available is published by Nielsen in “ SG off-trade – Scotland’s most valuable brands” The Scottish Grocer, March 2014. The data relates solely to the off trade and provides a breakdown between imports and domestic ( UK) production of the top selling brands in Scotland by sales value. Data on “own label” alcohol (which is alcohol that is sold in the off trade under the supermarkets’ own brand names) was also obtained from Nielsen.

Table 1: percentage of sales of drinks affected by minimum unit price of 50p per unit (50ppu)

1 2 3 4 5
Product
Total Market Share (%) (by pure alcohol) Proportion of product type retailing below 50ppu (%) (by pure alcohol) Impact on imported products : off-trade sales
All spirits 29 51
Whisky
blended 7 57 All blended whisky is produced in Scotland. EU imports are, thus, not affected.
malt 1 0.8 All malt whisky is produced in Scotland. EU imports are, thus, not affected.
imported 0.6 7 Of the top 15 selling imported whiskies in the off trade in Scotland (representing 95% of sales of this product), EU (Ireland) represents 12% of sales by value and retails above 50ppu. Other imports are from Canada and the USA which retail at above and below 50ppu. The Scottish Government cannot exclude the possibility that there may be niche products from the EU retailing below MUP, but think it highly probable that EU imports will not be affected.
Vodka 12 61 Of the top 15 selling vodkas in the off trade in Scotland (representing 98% of sales of this product), 90% by value are produced in the UK. Of these sales, imports from the EU (Sweden and France), retail above 50ppu and would be unaffected. The Scottish Government cannot exclude the possibility that there may be niche products from the EU retailing below MUP, but think it highly probable that EU imports will not be affected.
Gin 3 54 Of the top 15 selling gins in the off trade in Scotland (representing 98% of sales of this product), all are produced in the UK. The Scottish Government cannot exclude the possibility that there may be niche products from the EU retailing below MUP, but think it highly probable that EU imports will not be affected.
Rum 2.5 45 Of the top 15 selling rums in the off-trade in Scotland (representing 98% of sales of this product), all are imported from the Caribbean and North and South America. However, the Scottish Government cannot exclude the possibility that there may be niche products from the EU retailing below MUP, but think it highly probable that EU imports will not be affected.
Brandy 1 44 All brandy is imported from the EU – mainly from France and Spain. EU imports are, thus, affected.
cognac 0.3 1.4 All cognac is imported from France and almost all retails above 50ppu although some retails below 50ppu. EU imports are, thus, affected.
Liqueurs, cream liqueurs, minor spirits 0.1 36 The Scottish Government does not have detailed information on these categories. It is highly likely that most of these drinks will be sold at above 50ppu but some will be sold at below 50ppu. There are imports from the EU and non- EU. The Scottish Government cannot exclude the possibility that some EU imports may be affected.
Speciality drinks 0.5 27 Of the top 15 selling specialities in the off trade in Scotland (representing 74% of sales of this product), only 2 (representing 4% of sales) retail at under 50ppu and both are produced in the UK. The Scottish Government cannot exclude the possibility that there may be niche products from the EU retailing below MUP, but think it highly probable that EU imports will not be affected.
Beer 31 31
lager 27 33 Nielsen estimate 86% of branded lager sold in the UK is brewed in the UK. Of the top 15 selling lagers in the off trade in Scotland (representing 82% of sales in this product), 82% by value are produced in the UK. Imports from the EU represent 15% of sales ( EU, Italy, Germany, Netherlands, France). EU imports are, thus, affected.
ales 3 25 Of the top 15 selling ales in the off trade in Scotland (representing 69% of sales of this product), all are produced in the UK. The Scottish Government cannot exclude the possibility that there may be niche products from the EU retailing below MUP, but think it highly probable that EU imports will not be affected.
stout 0.6 13 Of the 15 top selling stouts in the off trade in Scotland (representing 99% of sales of this product), 87% by value are produced in Ireland with most selling at above 50ppu, although some sell below 50ppu. EU imports are, thus, affected.
Cider
7 53 Of the top 15 selling ciders in the off trade in Scotland (representing 78% of sales), 36% by value are imported from the EU (Ireland, Sweden, Belgium) and sell at above and below 50ppu. EU imports are, thus, affected.
Other
Fortified wines 2 35 Fortified wine includes sherry and port, and production is mainly in UK, Spain and Portugal. Most products retail above 50ppu with some below 50ppu. EU imports are, thus, affected.
Ready To Drinks ( RTDs, alcopops) 1 1 Of the top 15 selling RTDs in the off trade in Scotland (representing 74% of sales of this product), 95% by value are produced in the UK. Imports from the EU (Italy) are 5% by sales value and retailed at above 50ppu. The Scottish Government cannot exclude the possibility that there may be niche products from the EU retailing below MUP, but think it highly probable that EU imports will not be affected.
Perry 0.5 96 The Scottish Government does not have detailed information on this category. Products retail at above and below 50ppu, and production is both UK and EU. The Scottish Government cannot exclude the possibility that some EU imports may be affected.

1 Measured in terms of pure alcohol

2 Nielsen is a leading international consumer market analysis company

3 The average price per unit for all alcohol sold in the on trade in 2013 was £1.57, and the average price in the off trade was £0.52. Within each different type of alcohol, the average price in the on trade is as shown in Table 2:

Table 2: average price per unit of types of alcohol in on trade (2013)

Product type Average price per unit (£)
Spirits 2.24
RTDs 2.03
Fortified wine 3.25
Wine 1.55
Cider 1.33
Beer 1.32
Perry 0.82

4 The calculation of the percentage of the market selling at under 50ppu for different types of spirits ( e.g. whisky) or beer (e.g. lager) assumes that the split between the on and off trade is the same as for the overall category (e.g. spirits). We do not have this data by type of product.

5 In the on trade beer is generally sold in volumes as pints and half pints when in draught and in bottles , normally 330mls. In the off trade beer is sold in a wider variety of different packages: these include individual bottles and cans, and multipacks (which are considered as a single purchase). This means that the price per unit of alcohol will vary across an individual brand with the differing packaging. Popular brands often have a wide variety of packaging, e.g. 330ml bottle, 500ml bottle, 440ml can, 500ml can, 4 x 330ml multipack, 4 x 440 mls multipack, , 4 x 500ml multipack, 12 x 330mls multipack, 12 x 440ml multipack, 24 x 440 ml multipack.


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