Health Committee - The Government's Alcohol StrategyWritten evidence from Diageo (GAS 34)

Executive Summary

Alcohol beverages bring pleasure to millions of adults, all over the world, as they have done for thousands of years. We are proud of the unique part that alcohol plays in the social lives and celebrations of many cultures. However, Diageo is aware of the sometimes negative role alcohol can play in the lives of individuals and in society. We agree with the Government that it is vital that we tackle irresponsible drinking and that alcohol-related harm must be reduced.

Diageo actively promotes responsible drinking and works with Government, police, communities and other stakeholders on a range of targeted interventions aimed at reducing alcohol misuse. We are a founder member of The Portman Group and a longstanding funder of The Drinkaware Trust, and play an active role in, and fully support, the Government’s Public Health Responsibility Deal.

However, whilst we agree with the Government that a rebalanced relationship with alcohol is needed for some groups and individuals in Great Britain, we do not agree that minimum unit pricing is the way to achieve this. Diageo believes such a policy would: disproportionately penalise the majority of the population who drink responsibly, particularly affecting those on modest incomes; be ineffective in tackling alcohol misuse among the minority; jeopardise the competiveness of the alcohol industry based in Great Britain; have the unintended consequence of increasing the prevalence of counterfeit, and potentially be in breach of UK and EU Competition Law.

There is no strong evidence as to the effectiveness of minimum pricing as a policy to reduce alcohol-related harm.1 It is often portrayed as a targeted measure having greatest impact on problem drinkers with limited impact on moderate drinkers. A recent report from the Institute for Fiscal Studies rejected these assertions, finding that minimum unit pricing will hit responsible drinkers and, in particular, those on lower incomes at a time when household budgets are already under extreme pressure.2 The Government carried out little to no consultation with industry before announcing its intention to introduce a minimum unit price and we would strongly dispute the evidence on which it bases its support for such a market-distorting intervention.

Rather than introduce a minimum price, we believe the Government should focus on enforcing existing laws designed to prevent alcohol misuse and continue to work with industry and other partners to help consumers make informed choices about how they drink. Government should continue to deliver targeted and impactful interventions for those individuals and groups who drink irresponsibly—there is no one solution for the differing types of irresponsible drinker. Such measures are a proven and effective response to the problem and are already delivering results shown by the decreasing levels of total alcohol consumption in Great Britain as well as the falling rates of binge drinking, underage drinking and most importantly, alcohol related deaths.3

Tackling Alcohol Misuse: the Roles of Industry and Government

1. Diageo recognises that there are issues of excessive and irresponsible drinking in Britain. We believe the solution lies in: (i) sustained education and awareness; (ii) strong enforcement of existing laws applying to drinkers and drink retailers; and (iii) targeted interventions aimed at those who misuse alcohol or are at risk of misusing alcohol. In addition, every alcohol drinker has to take responsibility for their own actions.

2. Industry has an important role to play. The Responsibility Deal taps into the potential for businesses and other organisations to work together to improve public health. Diageo has signed up to all eight collective pledges on alcohol (ranging from health information on labels to removing one billion units from the market to the prevention of under-age sales). We have also made an individual pledge to fund the training of 10,000 midwives, over three years.

Education and Awareness

3. Diageo fully supports the Government’s proposals to educate young people and families about responsible drinking. We have been supporting initiatives for a number of years designed to do just this, for instance “Smashed”, an educational play/workshop performed in schools by Collingwood Learning, seen by almost 200,000 pupils. We also communicated responsible drinking messages to 100,000s of Londoners over the 2011 festive period through our sponsorship of Transport for London’s “Free travel on New Year’s Eve” initiative.

Impact and Enforcement of Existing Measures

4. As the Government states in its Strategy, it has “already taken action to tackle the availability of heavily discounted alcohol” making significant changes to the alcohol excise duty system such as introducing a new higher rate of duty for high strength beer over 7.5% ABV and a new lower rate of duty for beer at 2.8% ABV.4Other initiatives are being delivered through the Responsibility Deal. Their impact should be fully assessed before new policies are introduced.

5. The Government should ensure that existing laws designed to tackle alcohol misuse are fully enforced before introducing new ones. The Alcohol Strategy notes that it is an offence to knowingly serve alcohol to someone who is intoxicated and that the proper enforcement of this law would have a significant impact on irresponsible drinking. Only 15 individuals were found guilty of serving intoxicated people between 2005 and 2009.5

Targeted Interventions

6. Measures to tackle the irresponsible consumption of alcohol should address specific at-risk populations. We fully support such measures in the Government’s Alcohol Strategy, for instance its commitment to help the 120,000 most troubled families in the country.

7. The strategy emphasises the importance of helping town centres to deal with problems caused by alcohol misuse, which we also fully support. Diageo works with schemes such as Best Bar None, Pubwatch and Purple Flag and we would request that any new programmes complement these existing initiatives.

Alcohol Consumption Levels in Great Britain

8. The Government’s own data demonstrates that this approach is working. Alcohol consumption in Great Britain has reduced by 20% since 2005 and there has also been a consistent decline in misuse. Alcohol consumption in the UK is now at its lowest level since 1999.6 There have also been falls in the proportions of both men and women who drink heavily and binge drinking is down across all age groups except those over 65.7Additionally, in recent years, there has been a steady decline in the proportion of pupils (aged 11–15) who drink alcohol. In 2010, the year on year decline from 2009 was more pronounced than previously; the proportion of children who have never drunk alcohol rose from 39% in 2003 to 55% in 2010.8

9. Government data also demonstrates that awareness raising programmes are working, with increases in the number of people who have heard of the Government’s recommended drinking guidelines.9

The Evidence Base for and Impact of Establishing a Minimum Alcohol Sales Price Based on a Unit of Alcohol

10. If the Government does introduce minimum unit pricing, we would strongly request that it does so with a “sunset clause” so that the impacts of the policy can be properly assessed:

Minimum Pricing Would not Tackle Alcohol Misuse among the Minority

11. And would disproportionately penalise responsible drinkers who make up the overwhelming majority (78.5% of the adult population).10

12. The relationship between price and consumption is complex, as are the causes of alcohol misuse. For instance, the price of alcohol is largely the same in Scotland as it is in England, however alcohol health harms in Scotland are far higher than in England.11

13. There is little evidence to support a direct correlation between the level of alcohol price in a country and the level of drinking. Studies have shown that consumers respond differently to price changes in different countries12and recent empirical evidence from Denmark, Finland, and Sweden indicates that despite predictions to the contrary, the lowering of the price of alcohol did not lead to increased consumption.13

14. Furthermore, there is no strong evidence on the effectiveness of minimum pricing as a policy to reduce alcohol-related harm and indeed some evidence to suggest that decreases in population consumption do not lead to a reduction in alcohol related harm (see 15 below).

15. The evidence on which the Government bases its support for minimum pricing, the University of Sheffield’s report, is flawed. The report claims that a 1% fall in alcohol consumption will result in 3,403 fewer alcohol related hospital admissions per annum. According to its calculations, the fall in consumption of over 6% between 2004 and 2008 should have resulted in around 20,000 fewer alcohol-related hospital admissions in 2008 alone. Official figures for alcohol related admissions actually detail a rise of over 300,000 from 2004 to 2008, apparently disproving the theory underlying the Sheffield report.

16. Furthermore, it is rightly pointed out in the evidence in the Sheffield report that harmful consumers among young people are more price inelastic than moderate consumers. However, when that is entered into the report’s model, that inelasticity is reversed, so a greater outcome is predicted, amongst young people, for harmful consumers than is predicted for moderate ones.

Disproportionately Penalise the Majority of the Population Who Drink Responsibly

17. A minimum price set at around 40p per unit would affect the majority of responsible drinkers with 45% of all alcohol sold in the off-trade in England and Wales having its price increased, and disproportionately impact those on a modest or low income. According to the Government’s own data, those living in the lowest income households are already far less likely to drink beyond the recommended daily guidelines than those in the richest households, 22% (households on less than £200 pw) compared to 45% (households on £1,000+ pw).14

18. A recent report from the CEBR also supports this,15 outlining how a price of 40p or 45p has a negligible impact on hazardous and harmful drinking levels among the richest 20% of households in England & Wales.

Potentially Breach EU Competition Law

19. Diageo agrees with the Wine and Spirit Trade Association that it is inconsistent with the operation of a free market for the state to intervene on price.

20. The Public Health Minister, Anne Milton MP, also recently suggested that the UK Government has legal advice which indicates that the policy is probably illegal.16 In addition, Andrew Lansley MP, Secretary of State for Health, has cast doubts over the efficacy of such a measure, stating “Are we really saying that because a bottle of vodka isn’t £8 but £12.50 they are not going to preload with a bottle of vodka for a night out when they are in clubs where they pay £5 for a drink? That is absurd. They are still going to do this binge drinking because that is a behaviour issue”.17

21. We are disappointed that the Government will not publish the legal advice it has so far received on minimum pricing.

Impact on Competitiveness and Other Unintended Consequences

22. John Fingleton, recently CEO of the UK’s Office of Fair Trading, has stated that a minimum price “has a number of undesirable effects… It would reduce the incentives of firms to compete, innovate and cut costs. So the dynamic benefits of competition are lost… such a short term fix can have serious and long-lasting negative effects.”

23. There is also a risk that if some people are priced out of the legitimate market, they will simply turn to illicit sources from which to obtain their drinks. There is very strong evidence to suggest that price increases illicit production or cross-border trade in alcohol.18

Responsible Marketing and the Effects of Marketing on Alcohol Consumption

24. Diageo’s own Global Marketing Code is designed to ensure that wherever in the world our brands are marketed, they are done so responsibly and that they also promote responsible drinking.

25. Diageo markets its brands for three principal reasons: (i) to maintain their integrity, credibility and image; (ii) to maintain the loyalty of existing customers; (iii) to gain market share by encouraging consumers to switch from other brands to one of ours. Our marketing is not designed to increase overall consumption of alcohol and, as the UK consumption rates recently published by the ONS demonstrate, it has not.19

26. All of our marketing is targeted at people over the legal drinking age (18 in UK).

27. International examples of the effects of marketing on alcohol consumption suggest that advertising does not have an effect on total consumption. For instance, Sweden introduced an advertising ban in 1979 and yet continues to have significant issues with immoderate consumption. Italy, by contrast, has far fewer marketing restrictions for alcohol yet does not suffer the same problems with irresponsible consumption as countries like Sweden. Dr. Alain Rigaud, President of the French National Association for the Prevention of Addiction and Alcoholism (ANPAA), concluded in his analysis of the highly restrictive alcohol advertising ban—The Loi Evin, that no effect on alcohol consumption could be established.20 In Norway, where there is also a long-standing and rigorously enforced ban on alcohol advertising, the National Statistics Office figures show that alcohol sales increased by 27.7% between 2000 and 2010.21

International Examples of Tackling Harmful Drinking

28. In Great Britain and throughout our global markets we run and support initiatives designed to promote responsible drinking and we would be happy to share details of these with the Committee if they are of interest.

About Diageo

Diageo is the world’s leading premium drinks business and a top-20 FTSE 100 company. We employ more than 22,000 people worldwide, in more than 80 countries, including over 5,000 people in the UK, in more than 50 sites. Our brands include: Bell’s, Johnnie Walker and J&B whiskies as well as a range of malt whiskies from our 29 Scottish distilleries alongside Smirnoff vodka, Captain Morgan rum, Baileys liqueur, José Cuervo tequila, Tanqueray and Gordon’s gin, Guinness beer and Blossom Hill wines.

May 2012