Promotion of discounted alcohol beverages
Of all supermarket products, alcohol is the most sensitive to price promotion
Discounting is a common strategy used to encourage alcohol sales, particularly within off-licences but also in bars and restaurants through the use of ‘happy hours’ etc.
In New Zealand, the majority (55%) of drinkers purchased their alcohol when sold on promotion (cited in the 2014 Ministry of Justice Report).
Supermarkets are more reliant on promotions to drive sales when compared to specialist liquor stores (e.g. bottle stores). In supermarkets, almost 6 in every 10 dollars spent on all items (including alcohol and groceries) in 2018 were sold on promotion, compared to 2 in every 10 dollars spent in liquor stores. In the year ending March 31 2018, 71% and 70% of dollars spent in supermarkets on beer and wine sales respectively, were for products on promotion. This compares to 23% and 31% in liquor stores.
Off all items in supermarkets, sales of alcohol have been shown to be the most sensitive to price promotion, particularly cask wine and beer followed by bottled wine. Simply put, shoppers are very responsive to discounted alcohol. Compared to alcohol sold in supermarkets, individual grocery items (e.g. coffee, toilet paper, confectionery) are less sensitive to promotion in price.
Price-based promotions are the key types of promotion activities for alcohol products
A study of 24 off-licences in Perth and Sydney found that there were 427 unique forms of promotion used across the alcohol outlets. The study found:
- Price-based promotions (including but not limited to discounts) represented 61% of all the types of promotion activities;
- Supermarkets had a higher number of price promotions compared to liquor chain stores;
- The most common form of price promotion was offering multiple items for a discounted price; and
- Wine had the highest number of price promotions, followed by spirits, beer and RTDs.
Effects of price promotions of alcohol in point-of-sale
A US study found that alcohol products in larger-volume packages (e.g., 12-pack) were more likely to be promoted than smaller packages (e.g., 6-pack). This finding has significant implications for reducing the harm from heavy episodic drinking.
An Australian study found that drinkers who participated in point-of-sale promotions report purchasing a greater quantity of alcohol than those who did not participate. This is particularly evident for beer purchases (average of 26.8 standard drinks vs 16.4), followed by RTDs (11.5 standard drinks vs 8.9) and wine (16.1 standard drinks vs. 13.8). Young drinkers were found to use descriptors such as ‘Price’ and ‘Cheap’ as the main reason that they purchased wine.
Another study also found that young people are very aware of in-store sale promotions in order to maximise their alcohol purchases within their budgets. Cheap alcohol may also facilitate social get-togethers, that would not have occurred otherwise.
NZ laws on the discounting of alcohol
New Zealand law stipulates that any person commits an offence if they advertise discounts of 25% or more, where the advertisement can be seen or heard from outside of a licensed premise. Discounts of 25% of more are permitted inside a licensed premise or in an off-licence price catalogue. It is important to note that it is only the advertising, not the offer of the discount, that is prohibited. In other words, heavy discounting activities (e.g., 60% discounts) inside supermarkets (and other premises) continue to be seen in New Zealand, especially during the Christmas and New Year holiday period.
Note that it is illegal to offer free alcohol. Read more in the next section - GET PREPARED