It is very important that our most harmful drug in society (i.e. alcohol) is not sold at pocket money prices. Unfortunately, this is not the case as alcohol can be purchased at very low prices from bottle stores, supermarkets, and the internet. In fact, the budget end of the alcohol market in New Zealand has moved very little in price over the past few decades.
The Ministry of Justice found that, in 2011, almost one-quarter (24%) of all products in New Zealand off-licences were sold for less than $1.20 per standard drink. By far, spirits were more likely to be sold cheaply (72% sold <$1.20 per standard drink), despite being taxed at the highest rate in the excise tax structure.
By unit of alcohol (i.e. standard drink), cask wine is the cheapest alcohol product in New Zealand, sold for as little as 68c per standard drink. The second cheapest overall is bottled wine (~85c per standard drink), followed by beer and lights spirits (90c-$1 per standard drink). The cheapest full-strength spirits and Ready-to-Drinks (RTDs) generally retail at around $1-$1.15 per standard drink.
The good news is that we can address the harm from cheap alcohol sales, by setting a minimum or lowest price that alcohol can be sold. This is called Minimum Unit Pricing (MUP) and is a very targeted policy aimed at drinkers who purchase the cheapest alcohol products in the market.
How Minimum Unit Pricing works
Minimum Unit Pricing specifies the lowest price at which any 12.5mL (or 10g) of pure alcohol in a product can be sold. This amount of alcohol is called a standard drink, and it is usually the amount of alcohol in a standard 330ml can of beer or a small (100ml) glass of wine.
Click below to find out the effect on retail prices of a minimum unit price of $1.40 per standard drink.
A MUP policy only affects the price of the cheapest alcohol products being sold. These products are commonly sold at off-licence bottle stores and supermarkets. More expensive products at off-licences (i.e. above the minimum price) would not be affected by MUP, nor would the majority of prices at pubs and bars, because they tend to sell alcohol at higher prices.
However, on-licences may have special promotions whereby the prices of drinks are substantially reduced (e.g. happy hours). A modelling study in the UK has looked into whether a minimum unit price should be introduced at bars, pubs, etc. The study found that introducing minimum unit prices in on-licences as well as off-licences is estimated to be substantially more effective. Implementing minimum prices across all types of premises would also reduce the likelihood of switching from off-licence drinking to on-licence drinking.
MUP in other countries/jurisdictions
Many countries that are similar to New Zealand have enacted MUP legislation. This includes Canadian provinces, Scotland, Wales, and Ireland (implementation date to be determined). The Northern Territory of Australia implemented MUP in October 2018.
Effects of MUP on drinking and harm
MUP policies are very targeted, towards heavy drinkers that purchase cheap alcohol.
MUP policies are very targeted, towards heavy drinkers that purchase cheap alcohol. Results from MUP in other countries or jurisdictions show reduced alcohol consumption, decreased alcohol-related violent offending, and reduced alcohol-related hospitalisations.
Low income heavy drinkers benefit the most from MUP
This group experiences disproportionately higher levels of harm from their drinking and are more likely to purchase cheap alcohol. For this reason, MUP policies are estimated to be one of the most effective alcohol pricing policies to narrow alcohol-related health inequities (between socio-economic groups).
For example, in British Columbia, Canada, MUP was associated with reductions in alcohol attributable hospitalisations, especially for lower income populations. Although the long-term impact of Scotland’s MUP policy is yet to be evaluated, early results (eight months after implementation) showed that the weekly amount of alcohol purchased reduced by 7.6% per adult per household, particularly among low-income households. In the United Kingdom, a modelling study of MUP estimated that 90% of the lives saved from MUP would be from lower-socioeconomic group.
MUP policies should be considered pro-equity : low income heavy drinkers benefit the most.
MUP in New Zealand
The Ministry of Justice, in 2014, estimated that a minimum unit price of $1.20 would reduce overall alcohol consumption by 4.7%, and that a lower MUP (for instance, $1 per standard drink) would not be as beneficial to society. With regards to inequities in New Zealand, MUP effects among different population groups (e.g. among Māori) remains unknown.
The Ministry of Justice also estimated that a $1.20 minimum price would result in net cost savings to society of $86 million in the first year and $624 million over ten years. The greatest savings would be made through reductions in alcohol-related crime.
Impact of MUP on additional alcohol spend
A common criticism of pricing policies is that they have a ‘regressive impact’ – that, because those with lower incomes drink more alcohol, making it more expensive would tend to put them into financial hardship.
Evaluation of the first eight months of MUP in Scotland showed that, overall, households reduced their alcohol purchases, with no significant increase in spending. Australian modelling of a MUP of AUS$2.00 found that the additional alcohol expenditure was negligible over the entire distribution of consumption levels (except for heaviest consumers above the 85th quantile). For light/moderate drinkers in the 50th-80th quantile, the per capita extra spend was less than AUS$5.00 per week (range 96c to $3.24). For drinkers at the 85th quantile, the extra spend was AUS$7.56 per week, increasing to $10.62 for the 90th quantile, and $30.03 per week for the 95th quantile.
In New Zealand, the Ministry of Justice estimated that a minimum price of $1.20 would result in a weekly additional spend of $0.40 for low-risk drinkers, $1.04 for increased risk drinkers, and $2.35 for harmful drinkers.
All else remaining the same, heavier drinkers would be able to buy less alcohol for the money they currently spend.
Other potential benefits of MUP
- reduce the gap in price between pubs and off-licences
- reduce the large gap in price between supermarkets and bottle stores
- help shift drinkers to smaller format alcohol products (i.e. from 18-can packages to 12 or 15 cans)
The majority of New Zealand drinkers would be unaffected by MUP. They would, however, benefit from living in safer communities and from extra public resources being available due to cost savings from reduced harm.
What next? The appropriate minimum unit price in New Zealand would need to be determined by Government. Similar to alcohol excise tax, it needs to be adjusted annually in line with inflation.
MUP on its own will not be enough to reduce alcohol-related harm. Firstly, while alcohol-related harms are unfairly and disproportionately borne by lower-income communities, alcohol harm is a problem throughout our country. Secondly, heavy drinkers also include higher-priced alcohol products in their weekly purchases. For these reasons, MUP should be used in combination with alcohol excise tax increases to raise alcohol prices across the board.