Supermarkets ‘subsidise cheaper drinks’

UK supermarkets are responding to tax increases by subsidising the price of cheaper drinks, and raising prices of their more expensive products beyond the level of increased tax. This could be hindering efforts to reduce harmful drinking, according to a new study from Sheffield University.

The research, led by the University’s School of Health and Related Research, found that retailers appear to respond to tax increases by “under-shifting” their cheaper products. The authors of the study, funded by the Medical Research Council, and published today in the journal ‘Addiction’, conclude that supermarkets could be hindering efforts to reduce harmful drinking by diluting the impact of tax rises.

Researchers used weekly reports of product-level supermarket prices across 254 alcohol products and at different price points, analysing how those prices changed in relation to tax changes. The products ranged across beer, cider, spirits and wine. They found that price rises for the cheaper products were up to 15% below the level expected if the tax increase had been passed on fully.

The “under-shifting” was shown to affect around one in six of all products lines, but accounted for a larger proportion of total sales: approximately 68% of beer, 38% of spirits and 31% of cider sales.

The study concludes this will have a likely implication for health, as previous research indicates the heaviest 5% of drinkers in the UK buy 33% of all shop-bought alcohol, and tend to favour cheaper supermarket products.

Professor Petra Meier, Principal Investigator from Sheffield Alcohol Research Group (SARG) at the University of Sheffield said: “The Government has identified the ready availability of cheap alcohol as a key influence on the UK’s high rates of alcohol-related harm. Alcohol duty increases can be part of a mix of measures to tackle this problem.”

Professor Meier warns that subsidising cheaper products can be damaging. She adds: “Because these cheaper products are the ones which tend to be favoured by high risk drinkers, the implication is that this could hinder efforts to reduce harmful drinking”.

Last year Sheffield University reported that the Government’s introduction of the ban on below cost selling, preventing retailers selling alcohol at below the cost of duty and VAT, would have a negligible impact on the consumption of alcohol compared with a 45p minimum unit price for alcohol.