Examination of Witnesses (Question Numbers
1100-1119)
MR PAUL
KELLY, MR
NICK GRANT
AND MR
GILES FISHER
15 OCTOBER 2009
Q1100 Chairman: I think you have.
Why do British people drink so much more alcohol than they did
20 years ago, and to what extent is this increase down to the
actions of supermarkets?
Mr Grant: I think there are probably
conflicting trends in terms of total consumption. The figure I
have is that since 2004 there has been a net reduction in alcohol
consumption. I think perhaps what might be happening is that the
consumption of alcohol is being concentrated in fewer and fewer
hands. I know there is a statistic that 7% of the people in this
country consume 33% of the alcohol, which does suggest that alcohol
is being consumed in fewer and fewer hands, and I think that would
be our general observation on the trend, so we do not see a great
uptake in total alcohol consumption as a recent trend.
Mr Kelly: I would echo that, and
certainly we have seen a 6% decrease in consumption since 2004,
but, yes, if you look at the longer term trends, consumption has
increased. As Nick says, what we see with 7% of the population
being responsible for consumption of 30% of the alcohol suggests
that we need to be looking at targeted solutions around that 7%
of the population.
Mr Fisher: I would go along with
that.
Q1101 Chairman: Do you think there
is any cause and effect between what actions supermarkets take
in terms of selling alcohol?
Mr Grant: I think there are lots
of things the supermarkets can do to improve the situation and
there are lots of things that supermarkets are currently doing
to improve the situation. Through my chairmanship of the Retail
of Alcohol Standards Group I know first hand that over the past
three years or so we have taken a number of measures in the industry
which I am absolutely convinced have improved the position on
the ground. One example would be the move firstly to Think 21
to prevent under-18s buying alcohol, to improve that position,
and just this year the industry has moved again to best practice
position in Europe, as I understand it, of Think 25. The other
main initiative that we have taken through the Retail of Alcohol
Standards Group is through the Community Alcohol Partnerships,
which I think the Committee has had some evidence about. It is
something that I am very passionate about because I have been
to the meetings of residents and stores and police and head teachers
which establish the parameters and what might be usefully done
in a community collaboratively. Starting from St Neot's onwards,
which was our first trial two and a half years ago now, I think
it is, those are really bearing fruit. There will always be discussions
as to how you measure the fruit that they are bearing but we are
working on that with the University of Kent as well at the moment.
I am very keen and very passionate about it. I have seen it work,
I have seen the energy that can be created by communities coming
together and looking at the issue that alcohol creates for them,
which is very different community by community, which is the other
key point, and working out what they need to do and what are the
right and proper links to be made between retail and the communities.
There are lots of things we can do and there are lots of things
we are doing, Chairman.
Mr Kelly: We have seen a shift
in where alcohol is consumed which is driven by social and cultural
factors. We are seeing a shift away from consumption in the on
trade to consumption at home. I think all supermarkets, as Nick
said, have programmes in place which look to work with local communities
where we are getting very strong feedback, and certainly we took
some steps 18 months ago when we said that we were going to go
to Challenge 25 in stores where we are going to stop retailing
alcohol between midnight and 6.00 am in town centre stores where
we can see very clearly that link between purchase and consumption
which we do not see during the rest of the trading day. As always,
we are willing to play a role in looking at how we come up with
targeted solutions that tackle the particular issues, the particular
problems.
Mr Fisher: There is definitely
a cultural issue around alcohol and the relationship that we have
in the United Kingdom with alcohol which is different from some
of the other countries across Europe, and that is a key factor
in determining how we deal with the issue of problem and harmful
drinking going forward. Having said that, we appreciate that as
a retailer we have a responsibility to play our part and there
is lots that we do which is unique and different in the way that
we trade alcohol and the way that we communicate to our customers
around the potential health harms of alcohol.
Q1102 Dr Naysmith: Could I just ask
Mr Grant a small supplementary question since he talked about
having meetings with residents and so on? We understand that in
New Zealand local people can have some sort of say stronger than
we have in what licensed premises do and whether they have a licence
or not. Would you welcome that kind of thing, because sometimes
when you go to planning meetings residents say, "There is
nothing we can do about it. What can we do about it?".
Mr Grant: I am not aware of the
New Zealand situation, I am sorry, but the meetings that I go
to really are meetings full of energy trying to identify and get
agreements on what the problems may be. What you would then do
is work with the grain of the people who are there. When I went
to the first such what I call town hall meetings, probably romantically
and in a misplaced way but they do have that feel of people getting
together with slightly different interests but all living in the
same place and trying to find a common solution, I was very surprised
at how distant certain elements of the same community were, and
this is not to criticise anybody; I think it has just happened—the
trade from police, police from residents' groups, schools from
health authorities, so on that analysis one of the most powerful
things we can do in this country to start to work on problems
that alcohol does cause is to start to knit some of those people
back together again. As for whether it needs a regulatory change,
I would suspect not. I think it needs a bit of passion, a bit
of commitment, and for some people in each community stand up
and start asking for it.
Q1103 Chairman: I think you said
earlier that there has been a decline recently in total per capita
alcohol consumption and yet the volume sold by supermarkets has
continued to increase. Has the value of your sales—and this
is to all three of you—increased or have you had to discount
heavily to maintain increases in volume?
Mr Fisher: Our value of sales
over the last few years has increased, certainly, and we have
been gaining market share as a retailer, so you would expect our
value share to grow on alcohol along with other categories. What
we do not do is trade alcohol very heavily and offer big bulk
discounts on beer. You will not see pallets of beer as you walk
into Waitrose. It is not something we have ever done; it is not
something that we ever would do, so we have not gained our market
share figures of late by trading alcohol very heavily. It has
been part of an overall strategy of people coming to Waitrose
for things like the Essential Waitrose range.
Mr Kelly: To look into the underlying
figures, if you are growing your market share in total, as we
have done over the last 18 months to two years, then you will
see your share of alcohol sales increase. Our alcohol sales, if
you baseline them on an index, would have naturally increased
because prices overall across alcohol are running ahead of RPI.
To that extent we are seeing growth in our alcohol sales but it
is against growing our market share and against an overall upward
pressure, particularly in the last two years, in alcohol pricing.
Mr Grant: I think discounting
of alcohol is a product of a fiercely competitive market. We are
an industry that has had at least two major sectoral inquiries
from the competition authorities and in both cases, in relation
to our day-to-day competition, we have come up with a clean bill
of health. The prices that we are able to offer customers are
partly a response to each other's desire and need to attract more
market share, so that is where the prices come from.
Q1104 Chairman: Paul, you said earlier
about the increase in off-sales consumption. Do you think that
the extent of the rise in supermarket sales has destroyed the
traditional pub?
Mr Kelly: I do not think you can
isolate any single incident and say that that has been the issue
for pubs. I have a lot of sympathy with landlords about the challenges
that they face. Their cost of doing business is higher and smoking
has had a big impact. I think the drift away from town centres,
the strength of Saturday night television, a whole series of factors,
home entertainment in general, has done that. When we talk to
customers one of the things they say to us is, "We are much
more liable to consume at home because we see that as being a
safer and more friendly, more relaxed environment", but I
do not think you can say it is all the fault of supermarkets.
There are lot more complex factors going on underneath that.
Q1105 Chairman: Do you agree with
that, Nick?
Mr Grant: I think pubs are very
different businesses. Often we are compared in this debate because
alcohol is a common feature. If you think about it, buying alcohol
from a supermarket is bound to be a different thing from buying
it in a pub just in the way that buying a pre-prepared meal in
a supermarket is always going to be different from going to a
restaurant and having a meal there. In general you are talking
about very different business models, price structures, overheads.
The whole thing is very different. They are almost different industries
linked with a common product.
Q1106 Chairman: Have you got anything
to add to that, Giles?
Mr Fisher: We have seen the trend
in pubs reflected in town centre restaurants as well and that
is a wider consumer trend than simply alcohol.
Q1107 Charlotte Atkins: Moving on
to minimum pricing, there has been a Sheffield University study
which argued that minimum unit pricing would result in hazardous
drinkers drinking less and as a result of that Tesco told us that
they supported minimum pricing. What is your view?
Mr Fisher: As far as minimum pricing
is concerned, there have been various different levels talked
about in regard to so much pence per alcoholic unit. Broadly speaking,
I do not think it would have a big impact on our business. Our
average price for a bottle of wine is £6.80, so if there
are 10 units in a bottle of wine that is 68p a unit, so I do not
think it would really affect our business hugely. Having said
that, we are not calling for the introduction of a minimum price
because we do not think that is the most effective way to deal
with harmful drinking. Price is just one part of the problem.
As I said earlier, it is a broader cultural issue within the UK
which overarches why we have the relationship we have with alcohol
in this country when you look at harmful drinkers. If you look
at Sweden, for example, where they have high duties and a problem
with harmful drinking, or Spain where they have lower duties and
fewer problems with it, that says to me that it is a cultural
issue, so we are not calling for a minimum price because I do
not think that is the sole answer to the problem.
Q1108 Charlotte Atkins: So what would
be a better solution?
Mr Fisher: The better solution
is education in my opinion, and that is what we have been trying
to do through education in store, point of sale material, on our
website, our booklets that we produce and put in front of customers.
We found from research that we have done that customers do not
want to be preached at; that is not the answer, so what we are
trying to do is put information in front of them to make them
think and if they are concerned they can go away and find out
about what the safe levels of alcohol consumption are.
Q1109 Charlotte Atkins: Is that not
a much longer term solution and do we have time, given the number
of people who are dying from alcohol related diseases?
Mr Fisher: What we are trying
to focus on is the most effective solution and I believe that
is the most effective solution, changing people's behaviour, changing
the culture around education. Part of what we try and do with
the ranges that we put together on alcohol is focus on quality.
For us selling alcohol is sitting down with a nice bottle of wine.
It is a quality experience. It is not about consuming large amounts
of alcohol to get drunk.
Q1110 Charlotte Atkins: Mr Kelly?
Mr Kelly: I make a number of points.
The first is that the Sheffield study assumes that minimum pricing
would result in an overall 2.6% reduction in consumption. We are
already seeing a reduction in consumption of 6% and the Home Secretary
at the weekend acknowledged that there was a reduction, but we
seem contradictorily to be seeing a rise in the impact of alcohol
on NHS related costs, so there feels to be a bit of a disconnect
there. I am also very aware that minimum pricing is a very blunt
tool because it will have the greatest impact on low income families
and those on fixed incomes who often buy into promotions and the
cheaper forms of alcohol and there is no evidence to link them
with harmful levels of drinking, but I think there is another
issue about minimum pricing which I think voters will struggle
with, which is effectively that that is extra money being taken
out of their pocket and being pocketed by the drinks industry.
Not a penny of that will flow through to the Exchequer to put
into extra measures like early intervention which we know is under-funded
but which has huge impacts in terms of the effect it can have.
I think we need a multi-faceted approach, which is the same as
the Government has adopted to obesity and which has a greater
impact on public health resources than alcohol and does involve
education but has also driven the industry to look at reformulation
around fat and salt, to look at nutrition labelling and to get
the balance right. I would like to see Change for Life, which
is the vehicle through which the Government is doing that, extended
to include aspects around alcohol as it begins to develop looking
at the healthy lifestyles of the adult population.
Q1111 Charlotte Atkins: Mr Grant.
Mr Grant: We are opposed to minimum
pricing for alcohol on some of the bases that have already been
discussed. We find it an untargeted measure that will at the moment
be penalising people on quite low or fixed incomes at a time of
economic hardship. Sainsbury's is in a different position from
Waitrose, I think Giles would accept, in that our market position
is effectively one of universal appeal. That means that we have
to appeal to and cater for affluent customers and the much less
affluent or pensioners, those on fixed incomes. It is very important
that we are free to compete with our competitors in order to offer
a constant valuable basket to those people. Sheffield is a respectable
academic study. I am not an academic. I do not propose to go into
detail and battle against Dr Meier. Plainly there are other reports
which I think have been submitted to the Committee, one by the
CEBR, which I am aware of, not commissioned by this part of the
industry, and the Committee, I think, will feel it necessary to
consider in depth the academic-to-academic response on that. In
terms of better solutions, while I agree that education is a huge
part of this, and that is part of my passion for the work of Drinkaware,
that education can change this, some of the KPIs that the Drinkaware
Trust have are not tomorrow or next year; they are fairly long
term, but there is this ideal, I suppose, that we could aim for
which is a culture which is more relaxed, more sensible around
alcohol, without distorting the market detrimental to customers
in relation to price. France would be the model there perhaps.
Q1112 Charlotte Atkins: We are told
that those people who have liver disease drink on average something
like 100 units per week. Do you accept that if you were to have
a minimum price per unit of something like 50p or 40p that would
have a significant impact on heavy drinkers as opposed to the
relatively modest drinkers? I am talking about people with relatively
low incomes. If you are a modest drinker then the impact, even
if you are on a low income, is relatively small whereas if you
are talking about drinking something like 100 units a week a minimum
price will have a huge impact and therefore is likely to affect
the way you decide to purchase alcohol.
Mr Grant: It is part of our scepticism
about the conclusions of the Sheffield report that I am not convinced
that enough account has been taken in the report of microeconomic
behaviour or personal behaviour in response to those, so I am
not at all sure the level that you are talking about, and I notice
Nick Sheron, my co-trustee at Drinkaware, is in the room. I am
certainly not a liver doctor but I guess you are looking at that
as the consumption at the level of addiction. At the level of
addiction I am not sure what price increase will do and what strategies
an individual human would take in order to carry on consumption.
I did notice a little while ago that there was a heavily reported
seizure of illicit production of vodka in this country. I do not
know if the Committee has had evidence from Customs on that side
of things, but it seems to me logical that if there is a single
gross increase in the price that will naturally incentivise illicit
production, and I think it has been the experience in some other
countries. I do not know the answer to that question. It seems
to me intuitively that people would adopt strategies to avoid
that.
Q1113 Charlotte Atkins: Mr Kelly,
in the ASDA evidence you suggest that because the Scots drink
more than the English alcohol sales are not sensitive to price.
Why do you think that? Do you think the laws of supply and demand
do not affect the sales of alcohol?
Mr Kelly: I think you have to
look at the elasticity of pricing in relation to alcohol, particularly
for those who drink to harmful levels. Our concern is that those
who drink to harmful levels are unlikely to be impacted by the
price rises, that they will simply look to spend less in other
areas. Also, if you look at the baskets in which alcohol is bought
in supermarkets and then talk about our own case, alcohol-only
sales are less than 1% of transactions, so in 99% of transactions
where alcohol is bought it is along with food and core staple
items; people are buying it as part of the weekly shop. If you
look particularly at those who are buying into the lower priced
offers, which would be the products which would be most affected
by minimum pricing, they are also the people who are buying the
value lines of bread and eggs and bacon and coffee and tea, so
they would be disproportionately impacted. What we are not seeing,
and I do not think Sheffield creates the link between, is harmful
drinking and the purchase of that alcohol in supermarkets.
Q1114 Charlotte Atkins: If you are
buying something like 100 units a week from your store you would
need a pretty big basket to put that in alongside your bacon and
eggs.
Mr Kelly: But if you look at the
average transaction of the Value lines in our case, small prices,
the average basket is around £28, the average basket with
alcohol in is around £40 including those other items, so
people are not on that basis buying 100 units of alcohol in those
transactions, given that it is part of the weekly shop.
Q1115 Charlotte Atkins: Are you assuming
then that those people come in every day to buy a couple of bottles
of vodka or whatever it is?
Mr Kelly: If you look at our business
versus some of our competitors', we do not have a convenience
store/corner shop type of offer; it is the larger supermarket,
people come there to do the weekly shop. We lose out and under-index
on people doing top-up shops in our stores. People come to ASDA
to do the whole shop and be able to buy everything under the one
roof.
Q1116 Charlotte Atkins: Why do you
think, from your research, the Scots drink more than the English?
Mr Kelly: It is not just our research;
it is the Scottish Government's own conclusion that alcohol consumption
in Scotland is higher. We do not believe that minimum pricing
will solve the issues that the Scottish Executive want solved.
We think again it is a multi-faceted approach, and already Scotland
has taken some action that was introduced on 1 September right
across the on and off trade and we need to see whether that is
going to have an impact as it may well begin to address some of
these issues without the need to look into pricing.
Q1117 Dr Naysmith: Mr Kelly, there
are a couple of things that you have been saying that I want to
take up with you. One is this idea that alcohol is less price
sensitive than other products, which is what you seem to be saying.
There is no doubt, for instance, that there is a clear relationship
with tobacco pricing and the consumption of tobacco. I know tobacco
is not the same as alcohol but there is lots of evidence that
price increases do stop people purchasing. Are you suggesting
that the Sheffield study is wrong and, if so, what is your evidence?
Mr Kelly: If you look at the Sheffield
study, the Sheffield study talks about the impact on moderate
drinkers being a matter of pence per week but it is based on the
assumption that a moderate drinker is five units. When we talked
to customers they expressed some surprise at that. They see moderate
drinking as being within the Government's guidelines.
Q1118 Dr Naysmith: Then it would
be 22p a week.
Mr Kelly: In our case it is the
equivalent of about 68p a year, so it goes above a pound a week
for those who are dinking around the Government's guidelines.
The evidence to us would seem to suggest that if you look at minimum
pricing it would make a pint of beer round about a pound at 50p
a year. Is that going to make a huge change? There certainly comes
a point at which you can set a minimum price that will change
consumption but that is going to have serious impacts on those
who drink moderately and it seems to me that what that would be
doing is taxing responsible, hard-working families in order to
address the issues of a small part of the population. It comes
back to what is a sensible price. Stop me when you think it is
right. Is it £3 a pint, £4, £5, £6?
Q1119 Dr Naysmith: You said—and
I cannot remember your actual words—that the average basket
is more than £40 if it includes alcohol in the basket.
Mr Kelly: That is an average basket
spend.
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