Pamela S. Erickson, President Public Action Management, PLC April 28-29, 2010
Why do we need d special ial regula re ulati tions ons fo for b r busin inesses esses that sell ll alc lcohol? l? 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.
As an il illu lustra rati tion, on, im imagin ine you decide to buy a floral business…
Yo Your r busin iness ess pla lan would ld in inclu lude: e: 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
Your business plan calls for: 1. Marketing to heavy drinkers and alcoholics. Estimate ates indicate te the alcohol ol market t includ udes: 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 wars.
US Supermarkets have Deregulation by Lawsuit cheap alcohol The he cour urt t foun und d no ―persuasive evidence that the e purpose ose 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
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 Net profit for food retailers is dime markup.‖ 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 of 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 occur through taxation, minimum price levels and three- tiered system controls. Prom omoti 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 on: purchase, possession and drinking age Drun unk k driving ing measure res: sobriety checks, random breath testing, BAC limits, driver’s license suspensions Enforc orcement: ent: tools for law enforcement and attention to serving practices Source: ce: World Health Organizati tion on
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
Percentage of MT students using before the age of 13: 50 Cigarettes 40 U.S. Survey 30 Alcohol 20 U.S. Survey Marijuana 10 U.S. Survey 0 1993 1995 1997 1999 2001 2003 2005 Source: YRBS 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.
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. ol. 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.
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