price of alcohol - iasspirits wine cider beer stronger wines and ciders have lower duty per unit, as...

Price of alcohol

Factsheets

PRICE OF ALCOHOL FACTSHEET

What determines the price of a drink?

CostsIncluding:

LabourRaw materials

PackagingTransport

RentMarketing

Retailer profit

Producer profit

Excise duty

Value Added Tax VAT is 20% of pre-tax price / 17% of post-tax price

Excise duty varies between products, but on average accounts for around 25% of the final price*

A 4% ABV beer typically costs:

On-trade Off-trade£3.64

£1.24

43p of the beer price is duty, which represents

12% of the on-trade retail price

35% of the off-trade retail price

Sources: * Bhattacharya, A. (2017) | Alcohol’s impact on the economy. London: Institute of Alcohol Studies** The British Beer & Pub Association | Statistical Handbook


How much do people pay for alcohol?

Source: NHS Health Scotland | MESAS Monitoring Report 2018 – alcohol sales

Off-TradeOn-Trade

£1.78

£0.55

Average price per unit paid in England & Wales(on- versus off-trade)


How much do people pay for alcohol?

Source: NHS Health Scotland | MESAS Monitoring Report 2018 – alcohol sales

Average price per unit paid in England & Wales

(by product)

0.99

Cider

Perry

Wine

Beer

Spirits

0.98

0.82

0.78

0.29

How does price vary between alcoholic products?PRICE OF ALCOHOL FACTSHEET

Source: NHS Health Scotland | MESAS Monitoring Report 2018 – alcohol price and affordability

Spirits WinePerry

40-49p

50-59p

60p+

<25p

Cider Beer

25-39p

Total

100%

20%

100%

27%

25%

100%100%

31%

100% 100%0%

29%

3%

9%

29%

2%

13%

14%

33%

55%

22%

45%

3%

23%

39%

12%

46%

1%

25%

28%

17%

21%23%

1%

3%

Share of volume sales in the off-trade by price per unit, England & Wales 2017

Who buys cheap alcohol?PRICE OF ALCOHOL FACTSHEET

Proportion of alcohol purchases below 50p per unit, England, 2011

Note: Higher risk drinkers are men consuming over 50 units per week and women consuming over 35; increasing risk drinkers are men consuming 15-50 units and women consuming 15-35 units per week

Quintile 1 Quintile 2 Quintile 5Quintile 3 Quintile 4

15%

9%

42%

36%

28%

34%

47%

39%

53%

25%

20%

57%

19%

31%

58%

Increasing risk

Moderate

Higher risk

Higher income

Source: University of Sheffield | Analysis of Living Costs and Food Survey data 2010-15 (combined with market research data from CGA Strategy and Nielsen)

Alcohol is 64%more affordable

today than in 1987

Source: NHS Digital | Statistics on Alcohol England

How has alcohol affordability changed over time?PRICE OF ALCOHOL FACTSHEET

161 162153

164

154 151 152161

148

136 140

150 153

142 145

156161

116113

124 127118 122

111116

111 111100

112

105

60

160

180

20

100

40

80

120

140

02004 20061998 2000 2002 2014 2016 20182008 20121988 1990 201019961992 1994

159 153

Duty EscalatorBetween 2008 and 2014, alcohol taxes were raised by 2%

above inflation

UK Alcohol Affordability Index, 1980-2015 (Indexed, 1980=100)

The rise in affordability has been driven by off-trade prices, particularly beer

How has alcohol affordability changed over time?PRICE OF ALCOHOL FACTSHEET

Sources: NHS Digital | Statistics on Alcohol EnglandOffice for National Statistics (2019) | Consumer Price Inflation time series dataset

0

300

100

150

200

250

50

20042000 2002 20102006 200819901988 19981992 1994 2012 20181996 20162014

133

204218

128121

245246

143

244

135

291

129

168

134159


above inflation

UK Alcohol Affordability Index, 1980-2015 (Indexed, 1980=100)

Off-trade beer is almost three times more affordable than in 1987

Off-tradeOn-trade

BeerWine/spirits

As a rule of thumb, for every 1% increase in the price of alcohol,

consumption falls by 0.5%

How does alcohol affordability affect consumption?PRICE OF ALCOHOL FACTSHEET

Two major meta-analyses each combining estimates from over 100 studies found:

The effect of a 1% increase in prices (Gallet, 2007)

The effect of a 1% increase in prices (Wagenaar et al, 2009)

The effect of a 1% increase in income (Gallet, 2007)

0.68%

0.36%

0.70%

0.50%Overall alcohol consumption:

1.00%

0.39%

1.10%

0.69%

0.80%

0.46%

0.69%Wine

Beer

Spirits

Consumption, by beverage type

Sources: Wagenaar, A. C. et al, (2009) | ‘Effects of beverage alcohol price and tax levels on drinking: a meta-analysis of 1,003 estimates from 112 studies’, Addiction 104:2, pp. 179-90Gallet, C. A. (2007) | ‘The demand for alcohol: a meta-analysis of elasticities’, The Australasian Journal of Agricultural and Resource Economics 51:2, pp. 121-35

How does the price of alcohol affect levels of harm?PRICE OF ALCOHOL FACTSHEET

A meta-analysis combining 50 studies found that doubling alcohol taxes reduces:

Alcohol-related mortality by 35% Traffic collisions by 11%

Sexually transmitted diseases by 6% Suicides by 5%

Violence by 2% Crime by 1%

Sources: Wagenaar, A. C. et al, (2010) | Effects of Alcohol Tax and Price Policies on Morbidity and Mortality: A Systematic Review, American Journal of Public Health100:11, pp. 2,270-8

Source: Ally, A. K. et al, (2014) | ‘Alcohol tax pass-through across the product and price range: do retailers treat cheap alcohol differently?’, Addiction 109:12, pp. 1,994-2,002

What is the relationship between taxes and prices?PRICE OF ALCOHOL FACTSHEET

UK alcohol duties are charged toproducers, not consumers.

Alcohol producers and retailersmay choose to pay an increase intaxes out of their own profits (orretain any cut in taxes).

In general, the price of cheaperproducts tends to change by lessthan the tax and the reverse forexpensive products.

In this example, the price of the cheapest beers tends to change by less than the change in tax (< 1)

But the price of more expensive beers rose by more than the full tax increase (> 1)

What is the relationship between taxes and harm?PRICE OF ALCOHOL FACTSHEET

Natural experiments• In 2004, Finland reduced alcohol taxes ahead of neighbouring

Estonia joining the European Union

• Tax on spirits was reduced by 44%, beer 32% and wine 10%• As a result, consumption rose by 10%, alcohol-attributable deaths by 19%,

deaths from liver disease by 29% and alcohol-related hospitalisations by 9% (see charts)

• In 1999, World Trade Organization regulations required Switzerland

to reduce tax on imported spirits, leading to a 30-50% price drop

• As a result, consumption of spirits rose by 29%, with no significant change in wine or beer consumption

Sources: Mäkelä, P., and Österberg, E., (2009) | ‘Weakening of one more alcohol control pillar: a review of the effects of the alcohol tax cuts in Finland in 2004’, Addiction 104:4, pp. 554-63

Heeb, J. L., (2003) | ‘Changes in alcohol consumption following a reduction in the price of spirits: a natural experiment in Switzerland’, Addiction 98:10, pp. 1,433-46

What is the relationship between taxes and harm?PRICE OF ALCOHOL FACTSHEET

One off 1%increase in allalcohol taxes

One off 10%increase in allalcohol taxes

Reintroduce dutyescalator for five

years

351

35

605

The Sheffield Alcohol Policy Model contains two elements:

• Econometric analysis to estimate the effect of changes in prices on consumption

• Models of the relationship between alcohol consumption and different types of harm, based on the best epidemiological evidence

Putting these together, theSAPM can estimate thelikely effects of different taxpolicies

Reduction in alcohol-attributable deaths in England

Reduction in alcohol-attributable hospitalisations in England

(% change)

-0.3%

-2.9%

-5.0%

16,309

1,642

29,507

-0.2%

-2.0%

-3.7%

Source: Angus, C., Holmes, J., Pryce, R., Meier, P., and Brennan, A., (2016) | Alcohol and cancer trends: Intervention Studies. University of Sheffield and Cancer Research UK

Scenario modelling

Source: Gov.uk (February 2019) | Rates and allowances: Excise Duty – Alcohol Duty

Current UK rates of alcohol dutyPRICE OF ALCOHOL FACTSHEET

As of 1 February 2019

Source: HM Revenue & Customs (2019) | ‘Alcohol Bulletin’

Duty per unit by productPRICE OF ALCOHOL FACTSHEET

50

45

40

20

25

15

5

0

35

30

10

17% 18% 19%14% 15% 16% 20%4% 5% 6%2% 7% 11% 12% 13%8% 9% 10%3%

Spirits

Wine

Cider

Beer

Stronger wines and ciders have lower duty per unit, as they are taxed by volume

of liquid rather than alcohol content

Beer

Cider

Wine

Spirits

Pence per unit

ABV %Note: General beer duty, still 1.2-6.9% ABV cider and perry; 5.5-15% ABV wine.

Source: HM Revenue & Customs (2019) | ‘Alcohol Bulletin’

How have UK alcohol taxes changed over time?PRICE OF ALCOHOL FACTSHEET

UK nominal alcohol duty rate by product, 1995–2019 (Indexed, 1995=100)

140

100

120

160

40

180

60

200

80

0

20

220

20021995 2003 200520041997 1998 1999 20011996 2000 2016 20172014 2015 2018 201920132008 20092006 2007 201220112010

170

140

212

176

Beer

Cider

Wine

Spirits


above inflation

Since 2013, only wine duty has seen

significant increases

Between 1995 and 2007, alcohol duty failed to keep up with inflation.

Spirits duty was 5% lower in nominal terms

Note: General beer duty, still 1.2-6.9% ABV cider and perry; 5.5-15% ABV wine.

Source: HM Revenue & Customs (2018) | Policy Paper: Alcohol Duty Uprating // HM Revenue & Customs (2019) | Alcohol BulletinOffice for Budget Responsibility (2018) | Economy Supplementary Tables

How have UK alcohol taxes changed over time?PRICE OF ALCOHOL FACTSHEET

UK real alcohol duty rate by product, 2013–2020 (Indexed, 2013=100)

85

105

100

90

0

95

110

2012/13 2013/14 2018/19 2019/202017/182014/15 2015/16 2016/17

102

100

979595

89

98

101 101

98

100 100

103102 102

87

92

84

87

82

90

92

90

95

100

Adjusting for inflation, compared with 2012/13:

Beer duty is 18% lower

Cider and spirits duties are 10% lower

Wine duty is 2% lower

Minimum unit pricingPRICE OF ALCOHOL FACTSHEET

Minimum pricing involves the government setting a ‘floor price’, below which it is not permitted to sell alcohol

Under minimum unit pricing (MUP) the floor price is set according to the alcohol content of the drink. For example, under a 50p MUP, a drink containing one unit could not be sold for less than 50p

It is not a tax, and any additional revenue from raising prices goes to retailers rather than the government

Seven countries have some form of minimum alcohol pricing:

Certain provinces / states

Minimum pricing legislation nationwide

First nation to introduce minimum pricing per unit in 2018

Have legislated for minimum pricing per unit – awaiting finalisation

Examples of minimum unit pricingPRICE OF ALCOHOL FACTSHEET

Volume Alcohol By Volume/ Strength (%) Units Price (£)

70cl 40 28 14

70cl 37.5 26.3 13.13

3l 7.5 22.5 11.25

75cl 12 9 4.50

1.76l (440ml x 4) 4 7 3.52

568ml 4 26.3 1.14Beer

Cider (x4)

Wine

White cider

Vodka

Whisky

Evidence of minimum unit pricing’s effectivenessPRICE OF ALCOHOL FACTSHEET

Canadian natural experiments

Sources: Stockwell, T., et al, (2013) | Misleading UK alcohol industry criticism of Canadian research on minimum pricing, Addiction 108:6; Stockwell, T., et al, (2012) | ‘Does minimum pricing reduce alcohol consumption? The experience of a Canadian province’, Addiction 107:5, pp. 912-20Zhao, J., et al, (2013) | ‘The relationship between changes to minimum alcohol price, outlet densities and alcohol-related death in British Columbia, 2002-2009’, Addiction 108:6, pp. 1,059-69;Stockwell, T., et al, (2013) | ‘Minimum alcohol prices and outlet densities in British Columbia, Canada: Estimated impacts on alcohol attributable hospital admissions’, American Journal of Public Health 103:11, pp. 2,014-20Stockwell, T., et al, (2012) | ‘The raising of minimum alcohol prices in Saskatchewan, Canada: impacts on consumption and implications for public health’, American Journal of Public Health102:12, e103-10

There was a dramatic fall inalcohol-attributable deaths*

Following a 10% increase in minimum prices in British Columbia…

* British Columbia saw a:• 3% reduction in

consumption• 32% reduction in wholly

caused alcohol deaths (though no significant effect on acute alcohol related deaths

• 9% reduction in alcohol-attributable hospital admissions

In Saskatchewan, a 10%increase in minimum prices was associated with an 8%reduction in consumption


UK modelling – estimated impact of a minimum unit price of 50 pence in EnglandEvidence of minimum unit pricing’s effectiveness

Alcohol-attributable deaths

Alcohol-related criminal offences

Alcohol-related workplace absences

Alcohol-attributable healthcare costs

Total alcohol consumption

Consumption among harmful male drinkers

-2.0%

-2.4%

-4.3%

-1.3%

-4.7%

-2.5%

Source: Angus, C., et al (2016) | Alcohol and cancer trends: Intervention Studies. University of Sheffield and Cancer Research UK

Duty and minimum unit pricing are most effective when combined


Change in consumption at full effect by policy and socioeconomic status (units per year)

Source: Public Health England (2016) | The Public Health Burden of Alcohol and the Effectiveness and Cost effectiveness of Alcohol Control Policies: An evidence review. London: Public Health England

• The Institute of Alcohol Studies Alcohol’s impact on the economy

• British Beer & Pub Association Statistical Handbook

• NHS Health Scotland MESAS Monitoring Report 2018

• University of Sheffield Analysis of Living Costs and Food Survey data 2010-15

• NHS Digital Statistics on Alcohol England

• Office for National Statistics Consumer Price Inflation time series dataset

• Alexander C Wagenaar et al

Effects of beverage alcohol price and tax levels on drinking: a meta-analysis of 1,003 estimates from 112 studies

Effects of Alcohol Tax and Price Policies on Morbidity and Mortality: A Systematic Review

• Craig A Gallet et al The demand for alcohol: a meta-analysis of elasticities

References

• Abdallah K Ally et alAlcohol tax pass-through across the product and price range: do retailers treat cheap alcohol differently?

• Pia Mäkelä and Esa ÖsterbergWeakening of one more alcohol control pillar: a review of the effects of the alcohol tax cuts in Finland in 2004

• Jean-Luc HeebChanges in alcohol consumption following a reduction in the price of spirits: a natural experiment in Switzerland

• University of Sheffield and Cancer Research UK Alcohol and cancer trends: Intervention Studies

• Gov.uk Rates and allowances: Excise Duty – Alcohol Duty

• HM Revenue & CustomsAlcohol Bulletin

Policy Paper: Alcohol Duty Uprating

References

• Office for Budget Responsibility Economy Supplementary Tables

• Tim Stockwell

Misleading UK alcohol industry criticism of Canadian research on minimum pricing

Does minimum pricing reduce alcohol consumption? The experience of a Canadian province

Minimum alcohol prices and outlet densities in British Columbia, Canada: Estimated impacts on alcohol attributable hospital admissions

The raising of minimum alcohol prices in Saskatchewan, Canada: impacts on consumption and implications for public health

• Jinhui ZhaoThe relationship between changes to minimum alcohol price, outlet densities and alcohol-related death in British Columbia, 2002–2009

References

• Public Health EnglandThe Public Health Burden of Alcohol and the Effectiveness and Cost effectiveness of Alcohol Control Policies: An evidence review

References

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