Stuart McCallum

Written by: Stuart McCallum

Stuart McCallum

Partner

Disruptive direction of travel for food and drink sector

  • May 2018
  • 3 minutes

The introduction of minimum pricing for alcohol this week is the latest step from the Scottish government to influence change and improve the health and well-being north of the border. 

Following the introduction of the ‘sugar tax’ in April across the whole of the UK, the minimum pricing for alcohol measures aims to end Scotland’s ‘unhealthy relationship with alcohol’. However, the move will mainly target ‘cheap’, ‘strong’ alcohol products. So, as of 1 May a bottle of strong cider which did cost £2.50 will now cost £7.50, as 50p is charged for every unit of alcohol. 

It won’t necessarily impact mid or premium brands except it will affect the potential for offers and deals; but many, particularly the Scottish Whisky Association, are concerned about the direction of travel. Is this just the starting point and will the government increase the unit charge which would then impact a wider product portfolio; will more jurisdictions such England, Wales and Northern Ireland adopt a similar approach; and will the move be effective at tackling alcohol harm?

If a higher charge was implemented in the future this would be particularly concerning for products, such as whisky, vodka and gin, as producers would maybe look to change the recipe and distilling process to limit the alcohol content - fundamentally changing the product. We could see distillers introducing ‘light’ products to produce a cheaper option for consumers. 

Without reducing the alcohol content, consumers will have to foot the bill for paying more for the same product. This may feel like a tax to many, and indeed there will be more VAT paid by the consumer on the increased retail price, but it’s potentially the retailers that will benefit from improved margins. This uplift could replace the shortfall in revenue from product deals as the retailer will have limited scope to launch competitive offers. Although producers could see this as an opportunity to increase the trade price. 

One thing is for sure - consumers will bear the brunt of the measures, which could lead to many embarking on ‘booze cruises’ south of the border to stock up at a much-reduced rate, or indeed possibly increased internet sales, which would not support the Scottish Government’s ‘healthy’ rationale. It could also adversely hit the Scottish retail sector by placing more pressure on the high street. 

Ultimately, the direction of travel through government intervention to influence consumer choices is unsettling for the food and drink sector – it could be disruptive for the industry without having the desired effect on consumer behaviour. This is another sign of the increasing role of government in ‘nudging’ consumer behaviour in a healthier direction. 

The Food and Drink sector is actively involved in shaping discussions around the impact that products can have on health and well-being and it is unlikely that the new ‘regulations’ will be the only mechanism used. Ultimately it is the individual who decides what they eat and drink, and how much exercise they take (or not as the case may be). 

Government, industry and key stakeholders are working together to raise awareness of the choices that consumers can make and lifestyle changes that could improve the health and well-being of the UK population in the coming years – highlighting a more sustainable approach to future change. 

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