Presentation on theme: "By Pamela S. Erickson, M.A., CEO Public Action Management, PLC, 2009 December 8, 2009 Nashville, Tennessee."— Presentation transcript:
By Pamela S. Erickson, M.A., CEO Public Action Management, PLC, 2009 December 8, 2009 Nashville, Tennessee
Why can’t alcohol be sold in a “free market” like other products? Because some normal business practices — quite legitimate for other commodities — may produce social harm when alcohol is sold. Why do we need special regulations for businesses that sell alcohol?
Your business plan would include: 1. Efforts to retain and increase customers who are “frequent buyers”. 2. Discounts and promotions to gain new customers. 3. Advertising to young people to build a future customer base. As an example, imagine you own a floral business
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. Estimates indicate the alcohol market includes: 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 are at very high rates, according to the European School Survey.
Percent of 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). Serving practices promote rapid intoxication. “Predrinking” at home increases bar intoxication. “The barwoman recognized our faces and thought the drinks were for the two of us. But she never stopped serving-enough alcohol to kill each of us.” Anushka Asthana, reporter for The Observer, who was sold 12 rounds of drinks.
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 UK has no laws against volume discounts, promotions that induce heavy consumption or minimum prices. The large chains are locked in price wars. “The Competition Commission have found that five leading grocery retailers sold 38.6 million pounds (about $63 million) worth of alcohol at below-cost during the 2006 World cup.” Institute of Alcohol Studies, 2008.
◦ Deregulation would open the door to strong global forces particularly at the retail level. ◦ The grocery business is extremely competitive with most operating at razor thin margins. ◦ Large supermarket corporations have the ability to capture market-share with low prices. ◦ Well-funded promotions often use alcohol as a loss leader to lure shoppers.
“Low markup to stimulate high volume is the fundamental principle of mass merchandising…” Food Marketing Institute Net profit for food retailers is less than two pennies on each dollar of food sales How can supermarkets survive? “To earn a dollar, supermarkets would rather sell a $1 item 100 times, making a penny on each sale, than 10 times with a dime markup.” Food Marketing Institute Mass marketing pushes prices lower
“ Top US Supermarket and Grocery Chains” (By 2007 Grocery Sales) Wal-Mart/Sam’s $138.2 m26.4% Kroger$ 65.6 m12.6% Safeway$42.3 m8.1% Costco$35.3 m6.8% Others$241.2 m46.1% Source: Food Marketing Institute
Price: 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. Promotion: restrictions on price-related promotions (“two for one”) Availability: hours of sale, limits on number of outlets Age restriction: purchase, possession and drinking age Drunk driving measures: sobriety checks, random breath testing, BAC limits, driver’s license suspensions Enforcement: tools for law enforcement and attention to serving practices Source: World Health Organization
Tennessee Adult Alcohol Consumption: ◦ The 3 rd lowest alcohol use rate in the US (30 day use) ◦ Heavy drinking and binge drinking are all lower than the national average Tennessee Underage Drinking ◦ Second lowest underage drinking rate (30 day use) ◦ Lowest underage binge drinking rate ◦ Sources: BRFSS Fact Sheet, Tennessee Department of Health and “State Estimates of Underage Drinking, the National Survey on Drug Use and Health”, US Department of Health and Human Services
Most Tennesseans don’t drink! Only 35% reported drinking in the past 30 days compared to 56% in the US as a whole. Many customers are underage: 21.5% of those admitted they drank in the past month. Young customers are often binge drinkers: Female binge drinking is higher than male’s in and age category. Alcohol is harsher on a woman’s body due to lower body weight and water content. Source: BRFSS Fact Sheet, Tennessee Department of Health
Alcohol consumption and social problems will likely increase due a large increase in alcohol availability and lower prices. Large out-of-state supermarket chains will be the primary beneficiaries as they have the ability to offer low prices and undercut everyone else. Large, out-of-state, wineries will benefit by much greater availability in Tennessee; local wineries are unlikely to gain much, if anything. Local control over alcohol in grocery stores will be eroded and enforcement needs will increase.
1. Tennessee has a highly effective alcohol regulatory system. Major change can bring unwanted health problems and cost to taxpayers. Change is often slow, but very hard to reverse. 2. It must be recognized that alcohol cannot be sold like other commodities due to the potential for social harm. 3. Caution is advised when considering “customer convenience” as it may facilitate drinking by heavy users and youth. 4. There should be careful analysis of the impact of any change on price. For alcohol, low prices increase consumption particularly for underage drinkers who are more price-sensitive. 5. Tennesseans should be very proud of their alcohol control system and the results that have been achieved.
“What are the most effective and cost- effective interventions in alcohol control?” World Health Organization, February 2004 “Competition and Profit,” Food Marketing Institute Website (PDF about grocery business today) “The Dangers of Alcohol Deregulation: The United Kingdom Experience,” by Pamela S. Erickson, available on-line at “Alcohol, A Women’s Health issue,” Us Department of Health and Human Services, National Institutes of Health, National Institute on Alcohol Abuse and Alcoholism. Revised “BRFSS Fact Sheet, Alcohol Consumption”, Tennessee Department of Health. “The NSDUH Report, State Estimates of Underage Drinking, 2006”, SAMHSA Office of Applied Studies.
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