Thursday, 30 September 2010

Who gains from minimum prices for alcohol?

An article in the Guardian in the UK notes,
Large supermarket chains would benefit from a £700m windfall if minimum pricing for alcohol was introduced across the UK, new research indicated today.

Tesco, the UK's biggest supermarket, stands to reap the most rewards, according to the Institute for Fiscal Studies (IFS).

The thinktank researched the likely impact of a 45p minimum unit price for alcohol – the controversial measure which had been proposed by the Scottish government but was recently rejected by opposition parties.

The IFS said such a policy would benefit retailers rather than the public purse, echoing an argument that critics of minimum pricing have used against the measure.

The stores which sell the most alcohol – Tesco, Asda and Sainsbury's – stand to gain the most from the measure.
And yes the article also reports that Tesco (who would gain an estimated £230 million) is backing the plan for minimum pricing. And why not? Currently some supermarkets, and I'm guessing Tesco would be one, use low booze prices as loss leaders. If some nice government was to come along and ban them -and their competitors- from doing so they will not, of course, have to make such losses on these items. And as every firm has to act in the same way there is no competitive pressure to undercut each other. Basically what is happening is that retailers would be given the legal right to set up an oligopoly and thus reap the profits from such. The biggest relative gains would be made by low-price and discount supermarkets, which sell the largest proportion of their alcohol below the 45p threshold.

So producers win, consumers lose. Don't supports of minimum prices see this?

1 comment:

rsw37 said...

Consumers win too, any drinking above minimal quantities is clearly irrational, so by discouraging their drinking they are actually better off! least according to the healthists that promote these kinds of policies