MUP: The Devil You Know

With the recent judgement of the Scottish courts, the Scottish Government is one step closer to implementing minimum price for alcoholic beverages based on their alcohol content. As for the beer marketplace, the approximately £1 per 500ml of 4% ABV is not expected to cause massive changes. However, a report on 45p minimum unit price in England suggests that almost half of off-trade beer sales in England would be affected. In addition, the consequences of the implementation of this measure are reaching further than one-off price adjustments.

The rate currently serving as basis for calculation was set in a bill passed in 2012 and will probably invite immediate change to actual value when implemented, furthermore, once in place, the level of MUP can be escalated at basically any time. Regulation of price at the bottom end of the market will also have unintended consequences in terms of consumption distribution between and within product categories.

One potential major concern with minimum unit price (MUP) is related to enforcement. Administration of price levels for all alcoholic beverages at all points of sale will be rather difficult. In addition, secondary trade from other parts of the UK or from elsewhere in the EU where cheap drinks remain cheap is likely to occur.

The situation is further complicated both in terms of ‘illicit’ alcohol trade and potential legal challenges by any changes brought on by Brexit. Still, as argued in the Beer Means Business book, it could be worse with other alternatives to MUP.

Theoretically, the minimum unit price in Scotland would only have affected the very bottom of the alcohol beverage market. The price increase would have squeezed the gaps between price categories, which might have been looked at by the involved businesses as an opportunity to persuade consumers to trade up to higher price categories. However, cheap alcohol would have remained cheap and available in other parts of the UK and could have instigated (secondary) trading in these products. It would also have created a precedent in Europe and a system that could further escalate minimum unit price any time. Considering that excise duty rates are set in Westminster, if Scotland is determined to curb problem-drinking, other available instruments, such as restrictions of consumption in space or time, will need to be considered which could have even worse implications for the entire supply chain in the alcoholic beverage industry, including reduced sales or higher operating costs.

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http://beermeansbusiness.com/2016/10/24/mup-the-devil-you-know/
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