Thursday, 23 August 2018

Amateur hour in alcohol research

The hired guns at the Sheffield University Alcohol Research Group have lowered the bar again. In making a relatively simple back-of-the-envelope calculation, they commit so many howlers that you wonder how it is possible for six people - all self-professed alcohol experts - to know so little about the business of selling alcohol.

Their aim was to prove that it is impossible for the booze industry to remain profitable if every drinker consumed the 14 units recommended by the Chief Medical Officer (after a corrupt process in which the Sheffield mob were culpable). The industry says that it is happy for people to drink less but better, ie. consume more expensive - and more profitable - drinks. Indeed, that is exactly what Britons have doing in recent years.

The Sheffield muppets, in collaboration with the so-called Institute for Alcohol Studies, want to demonstrate that people would be faced with unfeasibly high prices for industry profits to remain at their current level. They work out how much the industry would lose from people drinking less and then work out how much prices would need to rise for profits not to fall.

But they don't look at profits. They don't even look at turnover. They look at total consumer spending on alcohol (£35 billion in England) and slice off 38 per cent of it because this is what they estimate sales would decline by if everybody drank 'moderately'.

This is where they go wrong. As almost anybody could have told them, that £35 billion is not the alcohol industry's money. A very large chunk of it - more than £10 billion - goes to the taxman and billions more go to retailers, pubs and restaurants.

Moreover, only a sliver of what's left is profit and so the loss to booze industry profits would be only a fraction of what the authors claim, particularly since their overheads would be much lower once they are producing less product. Alcohol producers would not put up prices by £13 billion, as they claim, but by a relatively small amount (assuming they were able to - the authors admit that this is only a 'thought experiment').

If they did raise prices by £13 billion to make up for the supposed shortfall, they would become fabulously rich because they would be pulling in the same money for shifting 38 per cent less product. Any price rise would be pure profit with no marginal cost of production to worry about. There is no reason whatsoever for raising prices by such an amount and yet the authors claim that it would be 'financially ruinous' for them to do anything less.

It is the sheerest, blithering nonsense. If they had done their sums properly, the research would have demonstrated that an alcohol market in which people drink less but better is perfectly possible.

This is really, really basic stuff and yet it seems to have floored them. I have written about it for Spectator Health so do have a read.

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