Evaluating the Impact of Alcohol Minimum Unit Pricing in Scotland: Observational Study of Small Retailers
A study conducted on behalf of NHS Health Scotland (now Public Health Scotland) as part of the wider Monitoring and Evaluating Scotland’s Alcohol Strategy (MESAS) evaluation of minimum unit pricing.
Research report
Executive Summary
Introduction
Minimum Unit Pricing (MUP) came into effect in Scotland on 1st May 2018, and mandates that beverages containing alcohol must have a minimum sales price of £0.50-per-unit of alcohol. This study is one of several commissioned by NHS Health Scotland (now part of Public Health Scotland) to evaluate the implementation and impacts of alcohol minimum unit pricing in Scotland through the Monitoring and Evaluating Scotland’s Alcohol Strategy (MESAS) programme of studies. The MUP studies are organised around four themes: (1) implementation and compliance; (2)the alcoholic beverage industry; (3) alcohol consumption; (4) and health and social harms. This study falls under the alcohol alcoholic beverage industry theme, although the findings also add to the evidence around implementation and compliance.
The aim of this study is to evaluate changes in alcohol price, marketing practices,and product range in response to the implementation of MUP in Scotland in small retailers. Small retailers were defined as small owner-operated businesses, usually comprising a single store or small number of stores owned and operated by an individual or family. Such stores can be affiliated to a symbol group (e.g. Nisa,Premier, and Best-One) or independent (also known as non-affiliated).
Method
An observational study was conducted, comprising three work packages. These are summarised in the table below, and described in greater detail in the report. Five case studies were also conducted examining key alcohol brands, triangulating data from all three work packages. These were for Buckfast 15% ABV fortified wine,Frosty Jack’s 7.5% ABV cider, Glen’s 37.5% ABV vodka, Tennent’s 4% ABV lagerand Strongbow Original 5% ABV cider*.
Main findings
Alcohol products sold below £0.50-per-unit: Alcohol products previously sold below £0.50-per-unit either increased in price to be in line with MUP or retailers stopped selling them.
Alcohol products sold above £0.50-per-unit: Alcohol products sold above £0.50-per-unit generally appeared to increase in price, to varying degrees, although it was not always clear tow hat extent (if at all) these increases were associated with MUP versus other contextual determinants of price. The study found no consistent evidence of prices decreasing towards MUP.
What happens to the price differential between alcohol products at different points in the price distribution: Price changes following MUP implementation resulted in a narrowing of price differential, both within and between some product categories, and congestion in the number of products sold at, and immediately above, MUP.
What happens to the alcohol product range offered to consumers: Several changes were observed in the alcohol product range following MUP implementation, although not all these changes were necessarily related to the policy. There was some evidence of product changes that appeared to be directly related to MUP, with the introduction of some lower strength (ABV %) and smaller container sizes for products which had previously been sold below £0.50-per-unit.
What happens to low-cost, high-strength (‘cheap’) alcohol once it becomes significantly more expensive: Alcohol products that had previously been sold below £0.50-per-unit either increased in price to be MUP-compliant or were delisted. Somenew lower ABV and smaller size variants, which could be sold at a lower price point, were introduced.
What happens to the way in which previously low-cost, high-strength(‘cheap’) alcohol is marketed: The main observed change in how alcohol products were promoted following MUP was a reduction in the use of price marking, particularly for ciders and perries. Although minor changes were observed in use of other types of promotion, it was not clear to what extent, if at all, these were associated with MUP.
Other findings
In the retailer audit interviews, retailers had varying perceptions of the impactof MUP on their overall alcohol sales, with some feeling there had been littlechange overall, some perceiving a negative impact, particularly on sales oflower price cider, and others feeling that sales had improved in somecategories such as beer and lager multipacks and spirits.
In the retail trade press, prior to MUP implementation, both positive andnegative predictions were made about the impact of MUP on small retailersand consumers. Positive predictions were much more common in Scottishpublications than in UK-wide ones. Negative reports – such as MUP beingdescribed as a form of excessive government control – were also found.
Conclusions
This evaluation of the implementation and impact of MUP in the small retail sector suggests that the policy has been implemented as intended and has produced expected impacts on alcohol products previously sold below £0.50-per-unit. The data suggest that implementation of MUP was straightforward,with little or no adverse effect on small retail businesses.
There have been shifts in both pricing and product range among the cheaper alcohol products sold by small retailers in Scotland following MUP implementation. This includes products that were priced under MUP either ceasing to be sold by small retailers altogether or increasing in price in line with MUP.
Price increases, in particular for higher-strength ciders and perries, led to congestion in the number of alcohol products sold at, and immediately above, the MUP threshold. This congestion reflected the compression (or elimination) of the price differential among products previously sold below MUP, reduced price differential between some previously ‘cheap’ products and their more expensive competitors, and reduced price differential between some product categories.
Some observed changes in customer buying behaviour were reported in the retailer interviews and in the trade press, with customers moving from higher to lower strength alcohol products or to alcohol products in smaller container sizes. Retailers also reported that price increases, and reduced price differential between products, had led some customers to switch to other alcohol products, perceiving them to now offer better value at similar prices in comparison to the previously lower price alcohol products.
Alcohol products that were already sold above MUP also appeared to increase in price, albeit the size of any change varied between different product categories and products, and it is plausible that these increases were driven by other economic and contextual factors, such as inflation, rather than by MUP implementation. There was no strong or consistent evidence that the price compression resulted from higher-priced products decreasing in price towards the MUP.
The most frequent form of promotion used by small retailers was price marking on packaging, and there was a reduction in this promotional activity after MUP implementation. Reductions were particularly evident in the cider and perry categories, two categories which had the lowest sales price-per-unit elsewhere in the study and the largest price increases following MUP implementation.
Some small retailers felt that MUP had improved their profit margins for some products, and also their ability to compete with supermarkets for alcohol sales, and there were reports in the retail trade press that the policy had increased small retailer alcohol sales (by value) and improved profit margins.
The study has a number of strengths and limitations, which are discussed in the report. It is important to note that not all the trends reported will have been directly related to MUP implementation. Some will have been influenced, at least partly, by wider contextual factors relevant to alcohol products sold by small retailers in Scotland.
