WHO Alcohol Strategy up for Review

FILED JANUARY 1, 2010

Dear Client:

The World Health Organization (WHO), the United Nation’s public health arm, is considering a draft strategy that recommends that member states raise alcohol taxes and implement tighter marketing regulations to curb over-consumption. WHO’s executive board will examine the draft strategy next week and is expected to approve it. It will then be sent to WHO's annual assembly of health ministers in May for adoption. Note that their decision is not binding but opponents worry that some member countries may feel obligated to adopt WHO’s strategies.

Wine, spirits and beer companies formed The Global Alcohol Producers Group in 2005 to engage WHO on their draft strategy. The industry views the draft as an “important and constructive step forward," but believes "an over-reliance on strict government controls such as over-taxation or advertising bans" could lead to bigger problems such as an influx in illegal alcohol sales, according to Reuters. Just look at what happened with Prohibition in the US.

When it comes to marketing, alcohol producers believe self-regulation – similar to Discus’ code in the US – is an effective method. However, the Global Alcohol Policy Alliance disagrees and is reportedly “disappointed” that the WHO draft strategy recommends self-regulation as one of the marketing interventions.

We took a look at the paper and saw three key points that could greatly affect the alcohol industry or at least ruffle feathers: shrinking the availability of alcohol (that includes online sales); placing certain bans on alcohol marketing; and raising prices through tax increases. Other initiatives they support are positive for the industry and society as a whole. They include community awareness and leadership, improved health services response with treatment and prevention, and tough drunk driving policies to name a few.

AVAILABILITY OF ALCOHOL

The WHO believes programs should be put in place to ensure that alcohol is not easily accessible but not overly controlled. They realize that overly restricted alcohol sales could turn consumers to the black market, similar to Prohibition. At the same time, WHO believes “commercial public availability of alcohol can...contribute to changing social and cultural norms that promotes harmful use of alcohol.” How the country intends on regulating the availability of alcohol depends on “local circumstances, including social, cultural and economic contexts as well as existing binding international obligations.”

Several of their recommendations seem to mirror the traditional three-tier system in the US. For one, they recommend “restricting retail sales to licensed stores or public health-oriented non-profit government monopolies.” It seems WHO doesn’t support online alcohol sales. They also recommend restricting the number of on-premise and off-premise alcohol outlets; regulating days and hours of retail sales; increasing the legal age limit and laws against selling alcohol to a visibly intoxicated person.

On a side note - during a panel at NABCA’s annual event last year, Dr. Peter Anderson, a European public health expert on alcohol issues, told listeners that “any changes that might occur that makes alcohol easier or cheaper would have negative consequences on consumption levels and harm...the U.S. is doing pretty well in how you regulate alcohol...be careful not to change that because it seems to be working quite well at the moment.”

MARKETING ALCOHOLIC BEVERAGES

Similar to the availability of alcohol, WHO believes alcohol marketing should be limited particularly when marketing towards youth. WHO recommends “setting up regulatory or co-regulatory frameworks, preferably with a legislative basis, and supported when appropriate by self-regulatory measures.” Similar to what the industry does in the US, they recommend regulating the content and volume of marketing; regulating sponsorship activities; and setting up public agencies to oversee marketing.

PRICING POLICIES

The big kahuna is raising prices. WHO believes raising prices “is one of the most effective interventions to reduce harmful use of alcohol.” However, the industry argues that if you raise prices too much than you risk hurting individuals who drink alcohol responsibly, risk putting companies out of business and risk turning consumers to illegal alcohol. Here’s what WHO has to say:

“Consumers, including heavy drinkers and young people, are sensitive to changes in the price of drinks. Pricing policies can be used to reduce underage drinking, to halt progression towards drinking large volumes of alcohol and/or episodes of heavy drinking, and to influence consumers’ preferences. Increasing the price of alcoholic beverages is one of the most effective interventions to reduce harmful use of alcohol. A key factor for the success of price-related policies in reducing harmful use of alcohol is an effective and efficient system for taxation matched by adequate tax collection and enforcement.”

They acknowledge that prices increases could affect demand and hurt consumer choice, impact sales and create a black market. To help battle those consequences, they recommend that tax increases “be accompanied by efforts to bring the illicit and informal markets under effective government control” and be supported by “information and awareness-building measures to counter such resistance” from industry members and consumers.

They also recommend that tax increases fall “in proportion to the alcoholic content of the beverage,” which means taxes would be stiffer for wine and spirits than it would be for beer. This goes against the “equivalency” argument in the spirits business that says 1.5 ounces spirits, 12 ounces of beer or 5 ounces of wine constitute a standard drink. They also recommend the use of price promotions (which are huge in the UK) and the establishment of minimum prices for alcohol. The latter measure was considered in Scotland and eventually overturned. And finally, they support overthrowing duty free sales in international airports and imposing the same taxes as though the traveler had purchased the alcohol in that country.

NEW AND IMPROVED WINE STRATEGIES AT RESTAURANTS

There are several ways restaurants are using wine to battle declining traffic and smaller checks as outlined in a new article in Wine Enthusiast. For one, restaurants have started offering more low-to-medium priced wines, such as bottles in the $25-$50 range. They’re ranging from new world countries, such as New Zealand and Argentina, local state producers and wines from lesser known regions in the old world. This goes for champagne and sparkling wine as well.

Nowadays size matters. Restaurants are offering more wines-by-the-glass and smaller bottle sizes, while hoping that patrons “will be more adventurous if they’re buying a less expensive bottle, or better still, a reasonably priced glass of wine.” Another great way to get consumers to think outside the box is to offer wine flights. According to the article, restaurants are beginning to offer less expensive flights or “mini” flights that include 2 or 3 wines instead of 4 or 5. They’re also amping up promotions on wine and corkage fees and getting the word out on social media sites like Facebook and Twitter.

WSD BRIEFS:

LARGEST LIQUOR STORE MAY LOSE LICENSE. Owners of the largest liquor store in the world – DaveCo in Colorado – are coming under fire from state liquor enforcement agents because family members own another liquor store in the state. “Hidden ownership” is illegal in Colorado, which means an individual can only have interest in one liquor store in the state. A lawyer for DaveCo said the family “misunderstood some of the facts,” but state officials say the family was aware of what they were doing. The state is requiring the family to sell or face losing their liquor license, so owners of DaveCo are taking them to court. The case will be heard later this month.

DIME A DRINK PROPOSAL IN MARYLAND. Similar to a bill that failed in California, public health advocates are pushing a dime-a-drink (8 oz) proposal in the state of Maryland. Proponents say it would raise $200 million for the state, which is now facing a $2 billion shortfall. The money would go towards Medicaid expansion, services for the mentally disabled and prevention and treatment programs for alcohol abuse. The bill would add 60 cents to a six-pack of beer, about 55 cents to a bottle of wine and about 75 cents for 1.75 liter of spirits. A similar bill pushing a nickel-a-drink increase failed to pass last year.

RED BULL APPOINTS ALLIED BEVERAGE ON PREMISE. Red Bull has appointed Allied Beverage Group its exclusive on-premise distributor in the state of New Jersey effective February 15, WSD has learned. In a company-wide memo Tom Fandel, corporate director, on-premise sales and marketing, said: “This monumental appointment is another step in our quest to grow, develop and maximize our On – Premise business. The opportunities that come along with Red Bull are numerous and we will examine and pursue all of them.”

JIM BEAM MOVES MARKETING DUTIES TO STRAWBERRY FROG. Jim Beam has reassigned its creative duties to Strawberry Frog three months after splitting with Energy BBDO in Chicago, reports AdWeek. The reassignment includes Jim Beam, Jim Beam Black, and Red Stag by Jim Beam. Major media spending on Jim Beam products totaled $10 million in 2008 and about $6 million in the first 11 months of 2009, according to Nielsen. Those figures don't include online spending.

SAM’S CLUB is closing 10 of its stores that are losing money in Idaho, Texas, Illinois, Colorado, New York, Arizona and California, where 4 stores will be closed. The closures result in 1,500 jobs cuts. They plan on adding 5-10 new clubs in fiscal 2011.

PALM BAY INTERNATIONAL has been named the exclusive U.S. importer for Château Greysac, located in the Médoc hamlet of By, north of St. Estèphe.


Until tomorrow, Megan

“From now on, ending a sentence with a preposition is something up with which I will not put.”
Sir Winston Churchill

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