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Raising Alcohol Prices Unlikely to Curb Demand

January 6, 2006

NEW YORK — Increasing the price of beer, wine, and liquor has been proposed as a way to reduce alcohol consumption, and hence problems related to drinking alcohol. But research published this month suggests that “across-the-board” price increases may not reduce alcohol sales, and might even increase them.

In general, there is evidence to suggest that as taxes on alcohol go up and alcoholic beverages become more expensive, people do tend to lower their alcohol intake. But it may not be that simple, according to Dr. Paul J. Gruenewald from the Prevention Research Center in Berkeley, California and colleagues.

They gauged the effect of cost on alcohol consumption by analyzing Swedish price and sales data over a 10-year period. The data suggest that, when faced with a price hike in their favorite spirit, consumers respond not only by altering their total consumption but also by varying their brand choices.

Rather than simply drinking less alcohol in response to price hikes, people may switch to lower-cost brands in order to keep drinking the same amount of alcohol.

“These quantity/quality tradeoffs appear to be substantial both within a beverage type (i.e., moving from a higher-quality wine brand to a lower-cost wine in the face of a price hike) and between beverages (i.e., switching from wine to spirits),” the authors report in the journal Alcoholism: Clinical and Experimental Research.

In some situations, raising the alcohol prices may backfire, Gruenewald’s team warns. A price hike on the most expensive brands, they explain, may simply lead consumers of these brands to switch to cheaper alternatives — and with the money saved, they buy more alcohol and end up drinking more.

The researchers suggest that it might be more effective to increase prices on low-cost alcoholic beverages as opposed to raising prices equally across all beverages. This would afford drinkers the least opportunity to respond to a price change by cutting quality rather than quantity.

“If younger or heavier drinkers tend disproportionately to consume low-quality brands, price increases focusing on these low-cost beverages might be particularly useful for preventing alcohol problems among these groups,” Gruenewald and colleagues point out.

SOURCE: Alcoholism: Clinical and Experimental Research, January 2006.


Source: reuters



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