At the same time, the proposed measures would have a detrimental economic impact on an industry that generates €3 billion in GDP annually.
The report, commissioned by the Alcohol Beverage Federation of Ireland, which represents alcoholic drinks manufacturers and suppliers in Ireland, examined proposals contained in the Bill including Minimum Unit Pricing as well as regulations and restrictions around labelling, marketing, advertising and retailing of alcohol.
The report assesses the Bill’s impact on reducing harmful drinking while outlining the economic consequences of the proposed measure, which include incentivising cross-border shopping, stifling growth and product innovation in the sector and negatively impacting small producers and retailers, particularly in rural Ireland.
It also found that per capita alcohol consumption has been in decline in Ireland since the early 2000s and youth drinking also continues to decline.
Incentivising cross-border shopping
The report’s author, John Lawlor of DKM, notes, “Sterling has depreciated by approximately 16% since the Brexit vote last June and experience confirms that consumers are willing to react in response to differences in cross-border prices. If Minimum Unit Pricing is implemented in the Republic but not in the North, then there will be a permanent shift in price levels, which will be to the detriment of the retail trade, consumers and the Exchequer in the Republic.
“For example a one litre bottle of spirits at 40% ABV would attract a minimum price of €31.56”.
The reality of the cross-border dimension of MUP was emphasised by the former Minister for Health Leo Varadkar in December 2015 when he declared that it was the Government’s intention to “go ahead with minimum pricing at the same time as Northern Ireland,” noting that “it would be totally counterproductive if people just went North of the Border”.
Increasing producer costs
The report also found that the proposals contained in the Bill would increase costs on producers, particularly small local producers and new entrants to the market while having a lesser impact on established players.
For example, requirements under the Bill for an Ireland-only health label would be costly for small producers.
The severe restrictions on marketing and advertising proposed in the Bill would also impact the ability of large and small producers to innovate and launch new products.
Ireland is currently a popular test market for alcohol products as a small, English-speaking market with an already highly-developed regulatory structure.
Recent high profile examples include:
- Diageo’s Hop House 13, developed and brewed in Dublin, successfully launched in Ireland and now exported to the UK and beyond
- Heineken Light, a low alcohol low calorie beer, available in the US for a number of years, but launched in Ireland before a full launch in Europe. The draft beer is brewed in Ireland.
- Jameson Caskmates, an innovative whiskey product aged in craft stout casks, developed and test-marketed in Ireland and now launched globally.
“There would be a question mark over whether this aspect of the Irish market would survive these proposals” pointed out John Lawlor, explaining that it would have a detrimental impact on more innovative firms seeking to test out their new products here as well as those new entrants in whiskey and brewing looking to build export businesses out of Ireland.
Detrimental impact on rural Ireland
The report also found that measures contained in the Bill would unduly impact rural Ireland. In particular, small retailers may decide that it’s too costly to adapt their premises to comply with the structural separation proposals.
This could result in them no longer selling alcohol which would result in a loss of revenue as well as reducing product availability and choice for their customers.
Commenting on the impact on small shops in rural Ireland John Lawlor said, “The Bill would give a competitive advantage to pubs and stand-alone off-licences vis à vis mixed retailers.
“The latter have obtained licenses under the current regulatory regime and have invested in their alcohol sales business in good faith. This investment is now being undermined and could be an unwarranted interference in the marketplace.
“Our findings show that there’s little evidence that measures contained in the Bill would reduce harmful drinking. However, it would impose potentially substantial costs on producers, particularly small local producers, new market entrants and smaller and rural retailers, placing jobs in those sectors in jeopardy.”
He also pointed out that the proposals would stifle innovation in the Irish market as new product launches or test launches would be impacted.
“The drinks industry exported goods valued at €1.1 billion in 2015 and employs over 90,000 people both directly and indirectly. Given these negative impacts, the lack of evidence of the effectiveness that it would tackle harmful drinking and given the long-term downward trend in alcohol consumption and youth drinking in Ireland, the measures proposed in the PHAB in question are not justified,” he concluded.