Excessive drinkers boost UK alcohol industry by £13 billion

29 August 2018 Authored by Consultancy.uk

The UK’s alcohol industry would take a colossal £13 billion hit if customers complied with recommended drinking guidelines, according to a new study. Despite the UK experiencing some 24,000 alcohol related deaths each year, however, the government remains reluctant to impose regulations on an industry which has already demonstrated a fearsome lobbying power.

While the UK economy continues to languish in a sustained period of slow growth, the alcohol industry is one of the few consumer sectors in the country that could genuinely be said to be booming. Despite a succession of high-street closures and a floundering casual dining scene, adult beverage sales are at historic highs.

The UK is Europe’s second largest beer producer, with 5.1 billion litres produced, or 13% of the EU’s total alcoholic output. Meanwhile, 2017 saw UK gin sales surpass 50 million bottles for the first time, a haul worth £1.2 billion – double that of the £600 million the fabled elixir brought in in 2011 – and estimated to have gone toward making more than a billion gin and tonics. Despite flagging consumer demand in other sectors – thanks to stagnating wages, rising inflation, and Brexit anxieties, among other issues – everyone still seems somehow to always have enough spending power to invest in their own favourite ‘poison’.

Unfortunately, the usually playful term for describing someone’s drink of choice was recently shown to be slightly more apt than a mere joke, however. A large new global study, published in the Lancet medical magazine in late August, confirmed previous research which has shown that there is no safe level of alcohol consumption, with the researchers admitting to the commonly reported benefit that moderate drinking may protect against heart disease, but adding that the risk of cancer and other diseases made more likely by the same amount of consumption outweighs these protections.

UK alcohol revenues boosted by those exceeding government guideline levels

The news came as part of a double blow for the reputation of the alcohol industry, with a second report, this time from the Institute of Alcohol Studies (IAS) and the University of Sheffield’s Alcohol Research Group, finding that the sector was ramping up its profit margins through excessive drinking, and had exerted pressure on government policy to prevent this changing. According to the researchers, one quarter of the UK’s population flout the recommended guidelines of alcoholic consumption, but this same group accounts for an astonishing 68% of the alcohol industry’s revenue in the UK. The study also noted that this portion includes the 4% drinking at harmful levels (more than 35 units a week for women and more than 50 units a week for men), with drinkers of this kind accounting for 23% of sales revenue, close to a sparse 32% which is derived from ‘moderate’ drinkers.

Break down

Britain’s latest guidelines on the consumption of alcohol came when the UK Government’s Chief Medical Officer (CMO) recommended that both men and women should not drink more than 14 units a week. This is the equivalent of six pints of beer (4% alcohol), six glasses of wine (13%), or 14 glasses of spirits (40%) per week. The CMO also warned that surpassing this limit could make a range of health issues more likely, including cancers of the mouth, throat and breast, the likelihood of which increase threefold when consumers drink on a regular basis.

However, according to the evidence produced by the academics of the Alcohol Research Group, if all the UK’s drinkers had kept to these levels, the alcohol industry as a whole would stand to lose an estimated £13 billion of potential business. In figures rounded to the closest billion, researchers approximated that off-trade (off-licenses and supermarkets) and on-trade (bars, pubs, clubs, hotels and restaurants) benefit more or less equally from this, at close to £7 billion each.

While neither figure is a particularly pleasant one, this is something which could be seen as especially problematic for either arena. For the on-trade segment, it suggests that those over the guidelines in such establishments, a portion of whom will statistically be inebriated, are still being served, even while it remains illegal to knowingly sell alcohol, or attempt to sell alcohol, to a person who is drunk. However, on-trade revenues derive higher amounts from moderate drinkers than off-trade establishments do, with off-trade deriving 81% of revenues from those exceeding recommended limits. This suggests that the sector is only able to exist at all thanks to the surpassing of those limits.

Drinkers who consume more than government guideline levels as industrial source of revenue

Beer is the largest beneficiary of this state of play, by some distance. 77% of revenues for the sale of beer come from individuals surpassing the weekly 14 unit guideline, representing an estimated £6 billion. Cider follows, at £3 billion, or 70% of its revenues. At £2 billion, 66% of wine’s revenues come from excessive drinking, while £1 billion of the spirits industry’s revenues (which include gin, vodka, whisky and many more) accounts for the lowest percentage. However, at 50%, it still suggests that without excessive drinking, the booming UK spirits scene would see more struggles in line with the likes of Botl Wine and Spirit Merchants, which went bust earlier in the summer.

If this were to change, the researchers found that the alcohol industry as a whole would experience sales declines of 38%, with the price rises required to offset this unrealistic, placing the cost of an average pint at £6.15, and the cost of an average bottle of spirits to £26.68, meaning revenues and profits would almost certainly be hit. As a result, the authors of the study warned against the lobbying power of the alcohol industry, which will be keen to throw its weight behind efforts to avoid state-backed measures to reduce alcohol consumption, putting profits before the welfare of the public.

Reaction

Commenting on the findings, lead author Aveek Bhattacharya, a policy analyst at the Institute of Alcohol Studies, said, “Alcohol causes 24,000 deaths and over 1.1m hospital admissions each year in England, at a cost of £3.5bn to the NHS. Yet policies to address this harm, like minimum unit pricing and raising alcohol duty, have been resisted at every turn by the alcohol industry. Our analysis suggests this may be because many drinks companies realise that a significant reduction in harmful drinking would be financially ruinous… The government should recognise just how much the industry has to lose from effective alcohol policies, and be more wary of its attempts to derail meaningful action through lobbying and offers of voluntary partnership.”

Meanwhile, business representatives from the sector dismissed the researchers’ criticism, suggesting major gains had been made over recent years, and that these had been thanks to the alcohol industry’s help.

John Timothy, CEO of the Portman Group, said, “In the last decade or so binge drinking has fallen by nearly a quarter and alcohol-related violence, drink-driving casualties and acceptance of drinking among children have also fallen significantly. Drinks producers have contributed to this decline through their commitment to encouraging moderation through the development of a wide range of low and no alcohol products and the removal of over one billion units of alcohol from the market.”

As was the case with the tobacco industry, the alcohol industry has often railed against the agendas of health campaigners, the medical profession and charities, which have pushed to reduce excessive drinking. Instead of government sanctions, producers and retailers have championed self-regulation, part of which saw the industry set up its own “responsible drinking” organisations, the Portman Group and Drinkaware, but these efforts have repeatedly been criticised for allegedly placing the interests of the profitable sector above public health considerations.

At the same time, the industry has been accused of leveraging its position in government initiatives, such as the coalition government’s Public Health Responsibility Deal, to veto policy which might impact on revenues. The chief example critics point to in this regard is the U-turn on minimum unit pricing by then Prime Minister David Cameron. Having introduced plans for a minimum alcohol price just a year before, the initiative was discarded, despite support from doctors, children’s charities, the police and the government’s own health advisers. On top of the steadfast lobbying from the alcohol industry on this front, the sector also resisted calls for legally-mandated graphic cigarette-style health warnings on bottles and cans of alcohol.

Minimum unit alcohol pricing has been introduced by Scotland’s devolved government, however, coming into play in May, and it is expected to be implemented in Wales next year. Pressure looks set to continue growing on the government to take action, and a government-commissioned review, published in 2016, found that alcohol was the biggest killer of people aged between 15 and 49 in England, accounted for 167,000 years of lost productivity each year and was a factor in more than 200 illnesses.

Related: PwC administrators complete Conviviality sale to save thousands of jobs.

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