Backgrounder: BC Policies To Restrict Cheap Alcohol Have Curbed Consumption

March 14, 2012

BC is one of a handful of places in the world that sets minimum prices for the sale of beers, wines, spirits and other alcoholic beverages in government liquor stores. Other countries with a partial government monopoly over control of prices include Sweden, Norway, Finland, Iceland and the Faroe Islands. In other countries it is necessary to introduce new legislation to establish minimum prices for alcohol.

There is increasing interest worldwide in using alcohol pricing strategies to reduce the substantial burden of injury, illness and premature death associated with alcohol use. There is overwhelming evidence that all drinkers respond to price changes, whether or not they are light, moderate or heavy users. There is particular interest in minimum pricing in a number of countries as it is seen as less objectionable to the majority of people who use alcohol and it may be more politically viable. Pricing strategies are the most effective way of reducing the more than 20,000 hospital admissions and 2,000 deaths from injuries and illnesses caused by alcohol in BC each year (see: www.AODmonitoring.ca).

The BC Liquor Distribution Branch sets minimum prices for the sale of its products in government liquor stores and when they distribute these for resale to bars, clubs and restaurants. Alcoholic drinks are sold for resale to private liquor store-owners at 16% below minimum pricing to allow store owners a profit margin. Previous CARBC research has shown that private stores typically charge between 10 and 15% more than government liquor stores, though for a small number of products they also undercut government liquor store prices.

The minimum pricing is set at the following fixed rates per litre of alcoholic beverage: spirits—$32.66; wine—$7.20; beer—$3.54. Because the rate does not vary with the strength of the particular product, the minimum price per standard drink is much lower for stronger varieties. For example, a standard drink of strong rum (75.4% alcohol/volume) costs 72 cents for a Canadian standard drink while a standard drink of 8% alcohol beer costs 75 cents and a drink of 22% alcohol-fortified wine costs 56 cents.

BC has relatively low minimum prices per standard drink compared with other provinces. As reported in a 2010 CARBC bulletin (see Table 4, http://www.carbc.ca/Portals/0/PropertyAgent/2111/Files/385/CARBC_Bulletin7.pdf) minimum prices are lower in BC for most types of alcoholic beverage prices than in Saskatchewan and Ontario—the only other provinces for which comparison prices are available.

Analysis in the new CARBC study suggests that a 10% increase in the minimum price of an alcoholic beverage reduces its consumption rate, relative to other beverages, by 16.1%. Typically, the consumption of other beverages increases due to substitution effects. The study also estimated the effect of minimum prices on each beverage type and on total alcohol consumption. These analyses indicate that a 10% increase in minimum prices significantly reduces consumption of spirits and liqueurs by 6.8%, wine by 8.9%, alcoholic sodas and ciders by 13.9%, beer by 1.5% and total consumption by 3.4%.

The main recommendation from the CARBC paper—that there should be a single minimum price per standard drink for all alcoholic beverages and that this should be adjusted at least once a year to account for inflation—was also made by BC’s Provincial Health Officer Dr. Perry Kendall in a 2008 report (http://www.health.gov.bc.ca/library/publications/year/2008/alcoholpolicyreview.pdf).

The Scottish government recently tabled a parliamentary bill that will set a minimum price for a standard drink of alcohol. The recommendation for this policy was the result of a UK think tank where Dr. Tim Stockwell was a member of the advisory committee. Direct reference to CARBC research was made during the parliamentary debate that led up to tabling the bill.

The study Does minimum pricing reduce alcohol consumption? The experience of a Canadian province is available at the Addiction journal website http://onlinelibrary.wiley.com/journal/10.1111/%28ISSN%291360-0443/accepted