Thursday, 5 May 2022

The impact of minimum pricing

I've summarised the results of my recent research into minimum pricing for Cap-X...

From an economist’s perspective, the unusual natural experiment of minimum pricing offers a chance to see how human beings respond to floor prices. The sale of wine stayed more or less unchanged, but the sale of fortified wine rose by 25%. Much of this came from a surge in the sale of the notorious tonic wine Buckfast which was never sold below 50p per unit to begin with. 

Spirits sales fell overall, but the sale of whisky rose by 11%. The Scotch Whisky Association, who delayed the introduction of minimum pricing through a series of legal challenges, must be wondering why they bothered.

Another interesting finding from our research is that consumers often shifted to significantly more expensive drinks after minimum pricing began. Perhaps this is not so surprising. Minimum pricing effectively wiped out the bottom end of the market and pushed consumers towards the mid-range. It encouraged many consumers to experiment with mainstream brands that they might not otherwise have bought, such as Famous Grouse whisky or Gordon’s gin. If you’re going to spend more money on alcohol, why not buy a brand you recognise? Mid-range brands have never competed purely on price and do not cluster around the 50p per unit price point. 

On a different note, I've written about Ronnie O'Sullivan for Spiked.

No comments: