Examination of Witnesses (Question Numbers
779-799)
MR ANDY
FENNELL, MR
SIMON DAVIES,
MS DEBORAH
CARTER AND
MR GRAHAM
OAK
9 JULY 2009
Q779 Chairman: Good morning and welcome
to what is our fifth day of taking evidence on our inquiry into
alcohol. Can I ask you for the record to give us your name and
the current position you hold?
Mr Davies: My name is Simon Davies;
I am marketing director of Molson Coors.
Mr Fennell: I am Andy Fennell,
chief marketing officer for Diageo.
Mr Oak: I am Graham Oak, marketing
director for Halewood International.
Ms Carter: Deborah Carter, marketing
director at Beverage Brands.
Q780 Chairman: I have a question
to all of you. You will be aware that the Royal College of Physicians
estimate that the number of deaths caused by alcohol misuse in
the UK is about 40,000 a year and with the social cost put at
billions of pounds. Last week the British Medical Association
called for a complete ban on alcohol advertising and the introduction
of minimum unit pricing. Do you think the time has come to restrict
the availability, price and promotion of alcohol?
Ms Carter: One of the first things
we would like to pick up on, particularly with regard to an advertising
ban, one of our overriding thoughts would be that an alcohol advertising
ban would not actually stop people going out to pubs on a Saturday
night, having alcohol with their barbeques or dinner parties.
So I think one has to look at the wider marketing mix of alcohol.
Additionally there are other alcohol categories that are not big
alcohol advertising spenders but actually see strong growth. The
wine industry would be an industry in which we have seen some
phenomenal growth in the last 15 years but in relative terms has
actually been a small alcohol advertising spender. So you have
seen that there are lots of different dynamics in the marketing
mix that could affect that. So we would say that you would have
to look at all the elements together and an advertising ban would
not really help. We would also be worried about the potential
unintended consequences of that and might it push some producers
to shift some of that money in their competition to gain volume
share into more price activity, not necessarily in terms of depth
of deal but maybe frequency of it.
Mr Oak: Adding to what Deborah
has said, ultimately the advertising industry is heavily regulated
already. Price and advertising are just but two elements within
that and if you ban advertising you then have to look at all the
other elements like PR, sponsorship, etcetera and there is no
guarantee and no evidence to state that if you ban advertising
you will prevent misuse, which is ultimately what we are all here
talking about today. I think in terms of minimum pricing, yet
again it has been clearly documented that pricing can help reduce
per capita consumption—I think that came out in the Sheffield
Report, but it did not say that it could help reduce misuse. One
of the concerns I particularly have with regard to Lambrini is
that Lambrini is consumed by everyday women, hardworking women
and a lot of those women are on a low budget—62% of them
earn £17,000 a year and I would have the concern that minimum
pricing could make alcohol become quite an elitist product, and
that is not the case and should not be the case for people drinking
it responsibly.
Q781 Chairman: But it is a lot cheaper
now in real terms than it was 30 years ago for all social classes,
is it not?
Mr Oak: I cannot comment on that
in terms of the numbers.
Mr Fennell: The majority of the
British people drink alcohol responsibly and I think we should
acknowledge that, and there is some misuse—specifically
underage, binge drinking and some older males who drink too much
at home. I believe we need to tackle the issues that we face in
our culture. I think we should tackle them with targeted rather
than population wide activities. So with specific regard to advertising
restrictions we have a strong code and we need to live by that
code and we need to make sure that that code is up to date. I
do not subscribe to further restrictions because I do not think
it will work against the issues that we face. If you look at the
experience of some countries which have more liberal advertising
regimes and lower incidents of alcohol misuse, places like Italy,
for example, and some other countries—Sweden introduced
an advertising ban in 1979 and unfortunately the issues which
they face are proving very difficult to reduce. So the majority
of our citizens treat this product responsibly and we need to
target the misuse. But I do not think that population wide initiatives
are the best way to do that.
Mr Davies: If we were to first
of all to acknowledge absolutely that alcohol is not like other
categories. We work for a family business and we recognise and
we take our responsibilities very seriously. Alcohol is a category
that needs to be treated with a great deal of respect. We believe
that advertising has a role to play in the building of that respect
by building long term brand relationships with our consumers and
building those brand reputations. We also agree that education
has a role to play and we believe that price has a role to play
in the building of respect for alcohol.
Q782 Chairman: You have all said
that banning advertising would not have the effect in terms of
binge drinkers but what effect would it have on sales? What lessons
can be learned from the restrictions of alcohol advertising in
countries like France with their Loi Evin? Presumably you have
looked at that?
Mr Fennell: Yes, we have and we
should learn from our experience from all around the world. The
evidence suggests that advertising does not have an effect on
total consumption whether it is present or not. The trends when
legislation has changed have broadly stayed the same. Indeed,
the total alcohol market in this country has been flat or declining
for years. Our job and the role of our advertising place is to
take business off each other. It is a zero sum game. All of our
advertising should promote, as Simon said, responsible consumption
and it is intended to win market share. As a result Smirnoff only
constitutes 3% of the market here in the UK so we see a considerable
growth for our brands without any growth in the market. The Loi
Evin was introduced in 1991—I know the Committee is aware
of that. There was already a decline in the consumption per capita
in France prior to the introduction of the Loi Evin and actually
that reduction of per capita consumption slowed down post the
introduction. I have read a couple of reports recently which suggested
that they are concerned in France about the increase in binge
drinking. So looking at France particularly you cannot see any
correlation of the introduction of further restrictions and the
resolution of the issue. If you come back to an example like Italy,
a liberal regime across a broad base of regulatory practices and
it is just not cool to be drunk. Somebody told me that there is
not even a word for hangover in Italian. The society in a deep
way has a much greater respect for alcohol than some other European
countries, and that is the kind of culture that we need to link
in here.
Q783 Chairman: Anything to add on
sales and what happens in France, Deborah?
Ms Carter: We have also looked
at the French example and I believe that the official evaluation
was inconclusive. We also do trade in the Republic of Ireland
where they have had a less but some broadcast advertising banned
on spirits and our experience in the short term was that we saw
no decrease in our sales at all. That is where you have to bring
in the other elements of the marketing mix that come into play.
Mr Davies: I cannot comment on
any more information specifically with regard to France as that
has been covered to the depth of my knowledge. But certainly if
I look at the beer market within the UK—and the point was
made about advertising earlier—this is a market that has
been in decline for a considerable period of time—it has
declined about 25% in the last 30 years. During that time the
Carling brand, for which I am responsible and which is an advertised
brand, has grown share and has grown volume so we have been successful
in what we set out to do, which was to improve our competitive
position. But the impact of that advertising, beer is a relatively
heavily advertised category in the context of alcohol, has not
been to grow that category.
Mr Oak: The only thing I would
add, the point has been made about Andy Fennell about the actual
law in France and as I understand from the Sheffield Report it
said that the link between advertising consumption was inconclusive,
so there was no direct link that if you ban advertising you will
reduce consumption.
Q784 Chairman: You say that the weight
of Sheffield was on pricing?
Mr Oak: My understanding from
the Sheffield Report where it was more conclusive was that if
you introduced minimum pricing you reduce overall consumption
of alcohol; it will not necessarily prevent the misuse of alcohol.
Q785 Charlotte Atkins: The industry
always talks about how they want to support responsible drinking
but clearly as an industry you benefit from excess drinking because
obviously your profits are affected. Have you worked out that
if drinkers kept to government drinking guidelines how much you
would actually lose in your revenue as companies? Because if you
look at the figures in 2007 alcohol sales were high enough to
put virtually every British adult over government guideline drinking
levels.
Mr Fennell: It is not a calculation
that certainly we have done but what I can say is that we want
a society where everybody drinks responsibly. Actually a couple
of ways of thinking about it, I mentioned Italy where their per
capita consumption of alcohol is about the same as the UK—it
is a responsible consumption. Perhaps more important for us commercially,
our success or failure is determined by the ability to compete
effectively with each other because the markets will grow, and
in the case of beer, as Simon suggested, it has declined quite
markedly and yet for some companies and for some brands there
can be success in this market if we are effective in persuading
consumers that when they are thinking about an alcoholic drink
they should choose our brand instead of somebody else's.
Q786 Charlotte Atkins: You do not
have figures in terms of your sales revenue in terms of adults
keeping to drinking guidelines, but do you have any idea at all
what proportion of your sales is accounted for by binge drinking
sessions? Do you have any indication of that?
Mr Fennell: I do not have any
data on that.
Mr Davies: Data of that nature
would be very difficult to collect.
Q787 Charlotte Atkins: Simon, you
have been involved very much with this Project 10, the alcohol
industry's response to government pressure to address irresponsible
drinking. Does that mean that your company is in favour of minimum
pricing?
Mr Davies: Any public position
that we have taken previously—and certainly I would reiterate
that, so it is not a new position for us to make, we have talked
about it over the course of the last 12 to 28 months.
Q788 Charlotte Atkins: So when did
you adopt your position of being in favour of minimum pricing?
Mr Davies: It has been primarily
based on our experience within the Canadian market. Molson Coors
is a business that has a market share in Canada and has specific
experience of that. My chief executive worked until the end of
2007 in the Canadian market for three years—he has personal
experience of that—and it has been his personal experience
that has led us to advance our position with regard to minimum
pricing as we have been able to learn more.
Q789 Charlotte Atkins: Could you
elaborate or would you have to go to your managing director about
the Canadian market because clearly there is not minimum pricing
in every part of the Canadian market.
Mr Davies: No, there is not.
Q790 Charlotte Atkins: Are you able
to elaborate on that?
Mr Davies: My specific knowledge
is to a degree limited and my responsibility is to the UK and
we have a greater level of expertise within our organisation.
Having said that there are probably some questions I could answer
within the depth of my knowledge, but if the Committee would be
interested we would be more than happy to follow that up, either
through our chief executive or indeed if you wished us to arrange
for somebody to travel over from the Canadian market we would
be more than happy to do that.
Q791 Charlotte Atkins: We would certainly
be interested in looking at your position in relation to your
experience in Canada—that would be fantastic. Given that
I have raised that issue, I wondered whether other members of
the panel would like to indicate their business' position on minimum
pricing? Mr Oak, you made it fairly clear that you were not in
favour of minimum pricing in terms of the Lambrini brand?
Mr Oak: I believe that minimum
pricing will reduce overall consumption but I do not believe that
it will prevent the misuse of alcohol. As I say, with particular
regard to Lambrini it is very much positioned and sold to everyday
hardworking women. Many of those women drink it very responsibly—88%
of them drink less than one bottle a month. A lot of those women
are on incomes of less than £17,000 a year. And for them
it is a lower alcohol alternative; it is 40% less units than a
bottle of table wine. I think if you were to create minimum pricing
that then put alcohol out of the reach of certain elements of
society when they are drinking responsibly it is quite dangerous
and you start to make it almost elitist.
Q792 Charlotte Atkins: What about
you, Deborah?
Ms Carter: Minimum pricing, if
we look very specifically at our business and our brand it would
not actually from what has been suggested so far affect our business.
WKD especially and RTDs in general are actually very expensive.
WKD's cheapest is 77 pence a unit, which actually is as expensive
as Chablis—not that everybody would maybe believe that,
but it is. So in terms of minimum pricing from what has been said
so far it really would not affect our business.
Q793 Charlotte Atkins: That is not
what I asked; I asked if the company was in favour in minimum
pricing, not whether it would affect your business.
Ms Carter: We would say that minimum
pricing on its own we do not feel would be an appropriate step
forward; there would have to be a lot of alcohol education to
go with it for it to have any effect.
Mr Fennell: We do not support
it simply because we think that we should focus on the mis-users
and those vulnerable to misuse and we have not yet seen any evidence
to suggest that minimum pricing will tackle the issue at hand.
Q794 Charlotte Atkins: So it is okay
to have water being sold at a more expensive price than some of
the cheap lagers and ciders in supermarkets?
Mr Fennell: The key issue we face
today is how do we tackle the minority of British people who misuse
alcohol or who are vulnerable to misusing alcohol? In that context
population wide activities I do not think will work.
Q795 Sandra Gidley: A quick point
on the Lambrini. If you walk round almost any town it seems to
be quite a favourite of underage teenage girls, so would not minimum
pricing help reduce that market? You probably do not make an assessment
of what teenagers drink because they are not supposed to be drinking.
Mr Oak: We do not support or promote
drinking to underage girls. For many of those people that you
described that may be drinking alcohol very often that alcohol
has been purchased by someone else. I do not believe in that sense
that you are talking to the consumer or the purchaser of the alcohol,
so price has a different bearing in that instance.
Q796 Sandra Gidley: So who buys teenage
girls their alcohol then?
Mr Oak: The people to whom you
are referring ultimately are under the legal drinking age and
therefore cannot buy alcohol legally, so it is going to be purchased
by people of legal drinking age—I do not know who they might
be.
Q797 Sandra Gidley: I think there
are people who purchase to order.
Mr Oak: We know that that happens
in the UK. Society is aware that that happens in the UK and it
is something we need to change but the solution to that is not
just minimum pricing, it has to be a completely joined-up approach.
One of the issues that we have to solve is that we are a heavily
regulated industry and one of the key things is actually enforcement
of the existing legislation, combined with education and a joined-up
approach across government and across schools, across family and
across the individual to solve the problem.
Q798 Jim Dowd: Mr Davies, you say
that you are in favour. Depending on how minimum pricing were
to be introduced, if it was simply saying to companies that they
had to charge a minimum amount for this then all it would do is
increase profits. Is that what has happened in Canada?
Mr Davies: I think it is very
difficult to assess the impact that it could have on it commercially;
it would entirely depend on what the pricing would be. In principle
Molson Coors would support further investigation of minimum pricing;
we believe that it may form part of a solution. As we stand at
the moment we do not have a developed view on what that minimum
pricing should be and indeed exactly where it should be applied.
But from our experience in Canada we have found that it is a market
where there appears to be less alcohol abuse than there is in
other markets and we are drawing a correlation. We do not yet
know the detail of causality.
Q799 Jim Dowd: Was that the case
before and if so has that been subsequent to the introduction
of minimum unit pricing?
Mr Davies: It is my understanding
that it has had some impact but my expertise in that area is probably
not to the full satisfaction of this Committee. We can certainly
provide people who know more about that market than I do.
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