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 

Progress and impact of prohibiting different types of price-promotion

The following countries have implemented restrictions to multi-buy offers:

  • In 2008, Finland prohibited offering several packages or servings of alcoholic beverages at a reduced joint price.
  • In October 2011 Scotland passed legislation to prohibit multi-buy promotion of alcohol in off-licences, whilst other forms of discounting remained permitted.
  • In October 2018, Ireland enacted legislation to prohibit multi-buys (no date currently set for implementation).

Two studies have examined the impact of the Scottish legislation on alcohol consumption. One pre and post implementation study, using household shopping panel data, found no effect of the law on consumption. The other study, utilised aggregated sales data in an interrupted time series design and found the law reduced consumption by 2.6%, but this difference was not statistically significant (p = 0.07). The differences in the results between the two studies may be due to data collection, with shopping panel data being prone to under-reporting and biases relating to representativeness.

In relation to health outcomes, the Scottish law was shown to have no impact on alcohol-related hospital admissions or deaths.

In response to the Finnish legislation, the alcohol industry reduced the price of a single can of beer so that it equalled the price of beer when sold in larger quantities at a reduced price. This strategy had the effect of reducing the price of a single can of beer by 40%. However, it is believed that the law has had the effect of making the most substantial discounts practically disappear.

The impact of restricting the discounting of alcohol products at off-licences has been studied. Results in the UK showed that annual consumption would fall by 3% in Scotland and 2.8% in England, if a total off-licence discount ban was imposed. The policy was estimated to cost an average of £11 per drinker per year and affected wine prices the greatest. Polices that restricted the percentage of discounting permitted had smaller effects on consumption.

The Irish Government first passed legislation in 2003 to make ‘happy hours’ illegal. Scotland enacted similar legislation in 2005.

In the Public Health (Alcohol) Act 2018, the Irish Oireachtas amended the 2003 legislation to prohibit a person from selling or supplying, or causing to be sold or supplied, an alcohol product during a limited period at a price less than that being charged for the alcohol product on the day before the commencement of the limited period.

In Scotland, the law requires that alcohol prices for any particular product are required to stay the same for a period of 72 hours.

The rationale for this length of time was that it would be uneconomic for premises to maintain lower prices for the 3-day period.

In 2008, Finland enacted legislation to require the price to remain the same for at least two months. Mass media advertising for short-term discount prices or happy hours was also prohibited. However, the industry responded by having price discounts that extended beyond two months.