I am Michel Perron, the CEO of the Canadian Centre on Substance Abuse and the co-chair of the national alcohol strategy advisory committee, whose submission you referred to.
Do Mr Faris and Mr Gregory wish to introduce themselves and speak at this point?
My apologies. We have fallen down on your initial instructions.
Dr Simpson may want to pursue his question with Jeff Newton, who is on the next panel. He has considered the impact on strong beer of a minimum pricing system being introduced or revised. That was done in Toronto to deal with problems to do with street people and panhandlers consuming such beer and causing disruption in the city neighbourhood. The end result of introducing a revised minimum pricing system, which essentially brought 10 per cent alcohol beer under the new SRP, was a decline in sales. A number of products were removed from the store shelves. Members might want Jeff Newton to address that issue.
The example that Ian Faris gave does not involve minimum pricing per se; it is very different.
Our written statement contains the specific qualifier that minimum pricing does not necessarily reduce
Mary Scanlon held up the document in question; we could see it but you could not. I ask her to identify it on the record.
The evidence that I cited is on page 27 of the Scottish Parliament information centre briefing on the Alcohol etc (Scotland) Bill, which was published on 18 February.
It is a good thing that we are not on camera.
I did not want that on the record.
One challenge is to separate minimum pricing from other initiatives that are in place. How do we deal with the confounding factors that are at play? Alberta, for example, has experienced many social changes and much population influx as a result of the oil sands boom. There are economic considerations. Because there are so many other factors at play, it is difficult to show that a specific initiative is directly linked to the social or health situation.
I hate to take the Mediterranean diet discussion line, but the Quebec approach to diet and lifestyle is very European. Michel Perron was right to point out that although Quebec has high levels of consumption, its consumption patterns are different from those of other Canadian provinces. Lots of other factors could be taken into account. I have not seen the research to which Mary Scanlon referred, but other lifestyle factors could lead to lesser instances of liver disease or other forms of ill health.
I want to make one more point clear. I do not want to sound defensive, but we in Canada feel that the system is good for Canada. We certainly would not venture to say that Scotland should implement it. We are happy that you are studying it and that you are doing consultations. We want to make it clear that the measure is part of a suite of policy tools, products or programmes that we find effective and which we call the Canadian model. However, that is not a one-size-fits-all approach and it might not translate to other jurisdictions.
Indeed it is.
Social reference pricing is a Government policy. As members will appreciate, we in Canada have, like you, competition laws that dictate particular pricing behaviour. The industry has had no hand in setting the prices. We support the Government, but it is the Government that has not analysed its own policy. I respectfully submit that your question is a good one to ask the next panel—the witnesses from the Alcohol and Gaming Commission of Ontario and the Liquor Control Board of Ontario.
I concur with that to some extent. To be clear, Canada has had a comprehensive national alcohol strategy only since 2007. Prior to that, it was a compilation of different provincial policy interventions, some of which were co-ordinated nationally but were fairly autonomous in many respects.
That is helpful, thank you. It is clear from some of your evidence that you believe that you require what you described as “a basket of policies” or a suite of tools. Would it be possible to have an effective national alcohol strategy that did not have some sort of tool in the basket to deal with pricing of alcohol?
Thank you for that answer. Another issue that concerns the Scottish Parliament is alcohol smuggling and illegal manufacturing. I understand from a Liquor Control Board of Ontario document that
The figures came from the department of economics at York University in Toronto. They are from a study by the university, which says that
I am troubled by and trying to understand your comment about deep discounting. In the beer sector, we have a vibrant discount sector, which probably approaches upwards of 40 per cent in Ontario. Even in some of our western provinces, it is probably in the 30 to 40 per cent range. That is a moderately priced beer versus a premium brand that might be an import or a domestic premium. Social reference pricing still allows the market to create a discount segment that is appealing to a good portion of the population. I am not sure whether that is what you are asking about.
The manner in which we conceived social reference pricing is that it is, indeed, the floor. Discounted products in the on-trade or off-trade should not drop below it. The floor is the floor. If 28 beers are being sold for the price of 24, and the unit price remains above the agreed social reference price, we have no issue with that, per se. If the product container is such that it would encourage the consumption of alcohol far beyond what is a reasonable amount, particularly with reference to the daily drinking guidelines, we have issues with that.
I wish you were over here. You sound lovely. Perhaps we will get to Canada one of these days.
We would love you to come. You have a wonderful country and city there.
This question is initially for Michel Perron. The CCSA submission mentions two things that the Scottish Parliament cannot really alter: the level of alcohol taxation and the Government’s interest in the distribution and retailing of alcohol, which I presume means that it is possible to prevent those who sell alcohol from using it as a loss leader for other goods. The submission states:
That is an excellent question. I could give you the political answer or the real answer. In the spirit of candour and of hoping to move the debate forward, I will choose to give what I believe to be the real answer.
So, you are saying that the alcohol industry is fighting for social reference pricing because it does not like the vast increase in Government taxation.
Yes, it has much more of an impact.
I am a bit troubled by the language that is used in the Government report. I echo what Michel Perron said: I see SBIR as being more targeted than a population-based measure. Time and again, in dealing with public policy issues, our industry keeps asserting the need to have targeted interventions—not just SBIR, but targeted programming, too. We see social reference pricing as a targeted intervention that primarily targets the bad behaviour of groups of alcohol misusers.
Good morning to Toronto. This is our second panel, which consists of four witnesses. The purpose of our discussion with them is to examine alcohol policy in the province of Ontario, which operates social reference pricing for alcohol sales.
Yes, we can.
It is partly historical. The mark-up structures and minimum prices are long standing, having been based on different product categories. In the case of beer, as Mr Newton from the National Brewers has just noted down for me, there is a per-litre-of-absolute-alcohol basis to the minimum price structure. Products in other categories, including the majority of the distilled spirits that are sold in the marketplace here, are sold at the 40 per cent alcohol level, and the minimum price is consistent across those products.
No, there are three bands for products with an alcohol content of below 5.6 per cent. A minimum price is set for products with an alcohol content of less than 4 per cent; there is a slightly higher minimum price for products with an alcohol content of between 4 and 5 per cent; and there is a third band for products with an alcohol content of between 5 and 5.5 per cent. The progressive increase in the minimum price in those three categories is not related to the alcohol concentration. Only beers with an alcohol content of above 5.5 per cent get into the high-alcohol minimum price category. In that category, of beers with an alcohol content of 5.6 per cent or more, the minimum price increases as the alcohol concentration rises. It is set at $1 per litre of absolute alcohol and, as the alcohol concentration rises, so does the minimum selling price.
But that happens only for beers with an alcohol content of above 5.6 per cent.
That is fine, thank you.
Probably the best example of that was when the high-alcohol minimum price was introduced here about four or five years ago for brand leaders in the category of beer that is 5.6 per cent alcohol and above. The minimum price for that category was introduced because in certain downtown neighbourhoods of the city of Toronto we were experiencing a surge in sales of beers with high concentrations of alcohol—7, 8, 9 and 10 per cent alcohol beers—which were selling at a cheap price point.
The concerns that we heard expressed from the local community groups prior to the introduction of the high-alcohol minimum price for beers of 5.6 per cent and above were virtually eliminated. We have not had any significant concerns expressed about those products since the introduction of the minimum price.
Ms Klas does not look lonely at all to me.
I have lovely people around me and am not lonely, but thank you for asking.
Before we move on, I ask Ms Kruzel to move a bit closer to the microphone. You do not look lonely now either.
That is an extremely useful description of what is happening with people who are bevvying up before they go into hostels; it is just the same in Scotland. That information would be useful to us.
Smuggling activity has been influenced as much as anything by changing exchange rates between Canada and the United States. Ontario has border crossings not only with the adjoining provinces of Manitoba and Quebec but with the states of Michigan, at Detroit, and New York, at Niagara Falls. Given the large volume of traffic on those border crossings and the fair degree of cross-border commerce, there will always be some volume of smuggling activity but, as Kathy Klas noted, it has come down in recent years.
Has the internet affected the situation in Canada? After all, from my armchair at home, I can purchase things from outwith Scotland and have them delivered directly to my door, often at no additional cost. Are you able to comment on the Canadian experience in that respect?
I am intrigued to know what is being ordered door to door on the internet, but we will leave that for a less public session. We do not want the whole of Canada to know.
Our previous panel of witnesses said that very little research has been done into the impact of social reference pricing. We were told that you would probably have more information on that. Has that impact been tracked through national statistics on consumption?
One of our concerns is that while there is a lot of evidence showing a link between consumption and price, it relates to a falling price, not a rising price. That is where we have some difficulties. It would have been interesting to see the difference in consumption. You seem to be saying that people have changed their consumption pattern but perhaps not their consumption level.
We have fairly recently begun to see more analysis in population health research. Rather than just considering litres of absolute alcohol for the population 15 and over, based on recorded beverage alcohol sales, national organisations and health expert organisations are starting to look more at understanding drinking patterns. As with many jurisdictions, we are at an early stage of gaining a more sophisticated understanding beyond just gross sales data. The issue is not just the total amount that is consumed; the drinking pattern is critical to understanding the effect on morbidity and mortality.
We have not done that analysis. That said, while sales of higher-strength beers at the Beer Store declined following the introduction of the high-alcohol minimum price, there was a slight and modest increase in sales of lower-alcohol beers in the 5 to 6 per cent range. As I said, we have not done the analysis to determine whether people are consuming less alcohol overall, but the clear indication is that people shifted to lower-alcohol products.
Anecdotally, we know that the community issues such as public intoxication and vandalism that focused attention on the matter were eliminated. That is a good indication that consumption was less.
The research supports the former. Individuals who are dealing with alcohol dependence are as price sensitive as the general population.
As price sensitive?
You have very high levels of alcohol taxation in Ontario and in Canada. Why do you not just use that as the mechanism? Why mix the two systems of social reference pricing and alcohol taxation? Surely just by increasing alcohol taxation pro rata to the amount of alcohol in the product, you would achieve the same aim.
I have a couple comments on the choice between tax or minimum price to achieve what is really a price outcome in the marketplace. The advantage of minimum pricing is that, if it is established as a regulation and a law, it is virtually guaranteed that you will achieve the policy outcome that you want. On the other hand, taxation is a very blunt instrument for achieving that outcome. There is no guarantee that if you increase tax that will pass through the supply chain of manufacturers and retailers into the marketplace and affect the price outcome that you wish to achieve. You can increase taxes and still not have price rises, because if someone in the supply chain is looking to maintain market share, they will simply absorb the tax increase. That would mean increasing the tax load—potentially increasing taxes on consumers who are not part of the problem that you want to address—yet never achieving the price outcome that ultimately is your policy objective. The beauty of minimum pricing is that it is a direct mechanism to set a floor price in the marketplace, whereas tax does not guarantee that outcome.
Good afternoon, committee, and good morning, Ottawa. I welcome everyone to the 10th meeting in 2010 of the Scottish Parliament’s Health and Sport Committee. I remind everyone to switch off their mobile phones and other electronic equipment.
I am Ian Faris. I agree with Mr Perron about the lack of academic evidence that supports the use of social reference pricing in Canada or elsewhere.
Yes, please.
It is a unanimous view from the Canadian perspective and the people around the table here that it is a suite of products—
This is Michel Perron. We struggled with alcohol policy in Canada. In my experience the question that countries always face as they dive into the issue of minimum pricing is, “What harm are we trying to redress?” We need to understand that minimum pricing is part of a comprehensive suite of interventions or tools. It might be particularly effective with, for instance, younger drinkers or those who are more price sensitive. It will not necessarily deal with chronic drinkers because they will go and find another type of beverage, but we would have another intervention in place for them.
The example from Ontario shows that social reference pricing can be a good policy instrument, but it is not all-encompassing. Obviously, it was used in that example in the beer category, but it is used at a particular tier—alcohol that is above 5.6 per cent by volume. The Government recalculated the way in which it created the minimum price for that category, basing it entirely on the alcohol level. The pricing for the three tiers below that—beer at lower than 4.1 per cent ABV; between 4.1 and 4.8 per cent ABV; and between 4.9 and 5.5 per cent ABV—is based on the volume of the product. It is a completely new way to calculate minimum price, although it is not an all-encompassing or one-size-fits-all approach. It links in with the Scottish proposition, but I want to make clear that Scotland is moving towards a per-unit charge, which is completely different.
I found your comments on screening and brief interventions very helpful. I will narrow my question down to minimum pricing. For the legislation to be competent in the European Union, we have to prove that minimum pricing will reduce alcohol consumption and deliver health benefits. In your written evidence, you state:
It is social reference pricing.
Michel Perron has put it well. He spoke well to the phenomenon of trading down by those who are price sensitive versus reduction in consumption by moderate consumers. Heavy consumers tend to trade down and to change their alcohol preference, either by volume or by switching to a cheaper brand, whereas more moderate consumers reduce their consumption. There may not be academic evidence for a linkage, but there is anecdotal and some research evidence that minimum pricing can have a positive effect on that targeted community, as opposed to the population in general.
I am trying to pin down the relationship between minimum pricing, consumption and effects on health. I have with me a piece of research that states that the provinces in which minimum pricing has been implemented
I know that you have the document immediately to hand.
It was Mr Faris who said that.
Would Mr Faris or Mr Gregory like to add to what Mr Perron has said?
I am interested in your written evidence and your comments today that no systematic evaluation has been undertaken of the effects that social reference pricing has had in Canada. Given the time for which some provinces have had such policies in place, why has no evaluation been undertaken?
Its inclusion in our strategy was specific to the fact that we think it important. Its absence would have signalled something different to what we are trying to achieve at public health level. If our tobacco products were available for 50p a packet and we were trying to dissuade consumption, that would not work. However, alcohol is an altogether different commodity—it is one that can be enjoyed responsibly and that we know has demonstrated health effects. That said, price is important for us.
We understand that there have been a number of complaints that social reference pricing is simply a device to protect certain state alcohol producers and that it acts against out-of-state wine producers and value-end producers. Would the witnesses like to comment on that? Have there been any consequences since the North American free trade agreement came into force?
My knowledge of that is rather anecdotal. I know that the industry makes it a far greater priority in its daily work to deal with those issues. When we talk about this from a public health perspective, we are talking about minimum price at point of sale for an individual. The manner in which that price is constructed through domestic or international trade matters is somewhat secondary to the public health interest, but of course we know that these are real issues. I know that the industry and the Government have to adhere to those parameters. Ours is really a point-of-sale price, which ensures that there is economic competitiveness between our domestic and international producers. We know that we must maintain it and adhere to the rules of NAFTA and the like.
Again, those numbers come as a surprise to me. It would be appropriate to raise them with the LCBO to gauge its reaction and to determine what the research was and what it was measuring.
I am very interested in the answers that were given to Mary Scanlon about culture and patterns of consumption and harm. Could we get some more written information on that rather than going into it in any great depth today?
There are differences between off-trade and on-trade sales. In the on-premises environment the minimum price is based on volume calculations, so a minimum drink price in some provinces might be $2.25 or $2.50—I think that that is a little more than £1. The price is based on volume, so we might be talking about a 12oz beer, a 5oz glass of wine or a 1.5oz shot of spirits. The approach does not take account of the alcohol level. That is where we maybe fall down a little, in that a 10 per cent alcohol beer or a 5 per cent alcohol beer could both cost $2.50. There is an implicit discount on the amount of alcohol that someone is getting for the price.
I should underscore the fact that our alcohol strategy, which was created in 2007, is still very much in its implementation phase. I would not want members of the Scottish Parliament to think that everything is perfectly rosy in Canada or that it would not be possible to find examples that go outside our recommendations. Our alcohol strategy attempted to bring together very disparate entities—from public health bodies to industry to different orders of Government—in common alignment. The strategy is a long-term exercise that needs to be vigilantly managed, if I may use that term, over a long period. Some of our recommendations remain recommendations at this point and are not necessarily reality, but we are working our way towards implementing them. An important aspect in formulating any plan is in creating a sense of where we need to be. Ultimately, we then need to get ourselves there as soon as possible, but we should also understand that it will not necessarily all happen tomorrow.
Let me move on to another issue. Our committee has received evidence that minimum pricing might be a regressive policy, in that people on lower incomes will be affected in a much harder way than those on median and high incomes. Has there been a similar experience with social reference pricing? If so, how has that been dealt with?
We would be happy to do that. I will note that you have attributed eloquence to Michel Perron. Thank you.
It is always helpful to find a win-win situation. It is not accurate to say that the alcohol industry is fighting for social reference pricing; rather, the public health industry and ourselves deem social reference pricing to be an appropriate intervention to reduce alcohol abuse. I will not speak for the industry—it is represented at the table, so it can defend itself—other than to say that it agreed that social reference pricing is an effective means by which to mitigate harmful alcohol consumption.
The average tax rate for the beer sector across the various provinces and territories in Canada is about 50 per cent, which is the second highest in the world. I think that Norway is close to 65 per cent, but the rate in Canada is more than anywhere else; it is fairly high.
We move to our last witness—sorry, I am losing my thread. I should have said that we move to our last set of questions, with Ross Finnie.
Good morning. I am not sure whether being a witness is a promotion or demotion, but I will take it as a promotion.
Good grief. Rather you than me. I suspend the meeting for five minutes.
Good morning to you. We have established that social reference pricing is quite different from minimum unit pricing, but I want to understand a bit better how you approach the problem of creating a floor price for different products. How does that differ from taxation? Is your taxation in Canada based on the units of alcohol, irrespective of the category of drink? Does social reference pricing distinguish between different categories of drink, or is some other mechanism involved? I want to get a basic understanding of the system.
In the province of Ontario, both the mark-up structure for different categories of beverage alcohol and the minimum price for those various categories are established under powers that are granted by the Liquor Control Act to the board of directors of the Liquor Control Board of Ontario. Those are established separately, depending on the product category. We have different mark-up structures for distilled spirits, wine and beer products. Similarly, different minimum prices are established on a unit or volume basis for distilled spirits, wine and beer.
What is the purpose of having those different elements? In relation to the proposed minimum unit pricing for Scotland, we have been discussing the fact that the price would apply to the unit of ethanol—alcohol—irrespective of the type of drink. Why have you opted to make a distinction? What is the objective of that? What effect does that have?
The approach that is taken for beer, for which the minimum price is based on alcohol content, is different from the approach used in the pricing of wines and spirits. The vast majority of spirits have an alcohol content of 40 per cent. There is some variation in the alcohol content in the spirit and wine categories, but not the same variation as there is in the beer category. The vast majority of wines have an alcohol content of 11, 12 or 13 per cent, whereas the alcohol content in the beer category ranges from 3 per cent all the way up to 10 per cent; hence, in the beer category, a banded approach is taken. The first band is for products with an alcohol content of below 4 per cent; the second band is for products with an alcohol content of between 4 and 5 per cent; and the third band is for products with an alcohol content of 5 to 5.5 per cent. Products with an alcohol content of above 5.5 per cent get into the high-alcohol minimum price category, which is tied to litres of absolute alcohol. As the alcohol concentration rises, so does the minimum price. So, the different approaches that are taken in setting the minimum price on the basis of alcohol concentration are largely due to the unique characteristics of each category and the distribution of products of different alcohol concentrations within the wine, spirit and beer categories. There tends to be a lot more variation of alcohol concentration in the beer category than there is in the wine and spirit categories.
The written submission that the Brewers Association of Canada provided to the committee in advance profiles specifically the decision by the Liquor Control Board of Ontario to implement the high-alcohol beer category that Mr Newton has just described.
It also dealt with the community and neighbourhood issues that had been experienced because the higher alcohol beers had been available at a lower price.
What I am really trying to get at is what happens when there is little difference in price between a cheaper brand and a premium product that has the same alcohol concentration—in other words, when a blended whisky becomes similar in price to a single malt with the same alcohol concentration. Is the discerning customer not likely to go for the known premium brand with the same alcohol concentration? Is what is recognised as the cheap blend not likely to fall off the shelves?
An additional point is that in Ontario we have a graduated licensing programme. When people start to learn to drive at the age of 16, they go through a fairly rigid programme and have different entitlements as they move through graduated licensing. There is a requirement that they have a zero blood alcohol concentration while they are in the programme. So those policy measures have acted in concert.
I have a very brief final question. I quote from the Centre of Addictions Research in British Columbia, which states:
Thank you, convener, and good afternoon ladies and gentlemen—
I will try to respond somewhat to that question.
We work closely with the Canada Border Services Agency, which is the federal agency that looks after all matters relating to customs. The LCBO will also collect amounts on any beverage alcohol shipments that come into the province as what are known as direct shipments.
No. We have not seen changes that correlate directly with the increases in floor prices, for example for spirits. A proper analysis is required.
Such steps are not within the purview of the organisations that we represent. That said, as I highlighted earlier, when a floor price is increased, the typical commercial activity that we see in the marketplace is not only an increase in the lowest-priced products but a corresponding lift in more expensive, premium products. That seems counter to the notion that the effects are regressive in some way.
My questions are on the increase in the price of 10 per cent beer, after which sales fell considerably. I have a simple example for your consideration. Did people who previously drank 10 per cent beer simply drink two bottles of 5 per cent beer for every bottle of 10 per cent beer that they previously drank or was the increase in sales of cheaper beer not in proportion to the alcohol differential?
After the high-alcohol minimum price was introduced, we did not experience the same level of dialogue with local community groups or the police about alcohol consumption in public places. The measure is not a panacea, but it seems to have had a notable effect. It has reduced many of the problems related to alcohol consumption in public places that local citizens complained about.
Obviously, the measure reduced alcohol consumption. If it had not, the problems would have remained after the change.
Yes.
Yes.
Good morning, gentlemen. I am Dr Richard Simpson.
We see minimum pricing as part of what we call the Canadian model. It is supplemented by other legislative and regulatory initiatives or controls on impaired driving, the licensing of retailers and what you call on-trade premises, and advertising. Minimum pricing fits within that system.
Sorry, but can I halt you? I think that Mr Gregory answered and then we heard from Mr Faris. Is that correct? If you could keep on naming yourselves that would be helpful.
That is a dangerous thing to do with me. [Laughter.]
This is Ian Faris. To return to the second part of Dr Simpson’s question, there are other measures that can be taken. One that we have embraced in Canada, through the national alcohol strategy and financially supported by the beverage alcohol industry, is the establishment of a screening, brief intervention and referral—SBIR—training programme that physicians and other health professionals can implement at the patient level. The programme gives medical personnel a suite of products that they can use to identify misuse among their patients.
We have written evidence from Kent Verlik of the Alberta Gaming and Liquor Commission, who states:
I cannot speak about the numbers to which you refer, but in Canada screening and brief interventions are seen as an effective way by which we can ramp off early problematic alcohol use. However, a person needs to be in front of a physician, who needs to be trained in delivering that modality. Should there be a determined level of consumption that is beyond what we think is reasonable—again, that speaks for having national drinking guidelines and a population that is aware of those guidelines, which brings in a wraparound of policies—the type of problem drinking pattern must be identified and effective intervention must then be put in place. That is an effective means of mitigating longer-term, chronic harm.
Your question is whether there is any evidence that minimum pricing affects consumption and therefore leads to health benefits; is that correct?
Yes, thank you.
Can you point us to the piece of research to which you are referring? It is a challenge to establish a causal relationship between any social intervention or taxation policy and a particular behavioural effect. At best, we can look at an attribution of causality, as opposed to a direct conditioned response. The province in Canada that consumes the greatest amount of alcohol—Quebec, our French-speaking province—has the lowest reported harm. The issue is not so much consumption as the manner in which and the purpose for which alcohol is consumed. A level of sophistication is needed in alcohol policy; I know that members are seeking clarity in that area. Unfortunately, some of the evidence will remain equivocal. Despite the strong anecdotal evidence of a relationship, there will not be the level of causality that we would like to see. If there is a specific piece of evidence on which you would like us to comment, it would be helpful if you could point us to that.
I do not think that the Scottish lifestyle could be called “very European”, but I stand to be corrected.
I thank the witnesses for their evidence. A minimum price might or might not be competent in the single market—the free trading market in the European Union. I am sorry if I focused on one issue, but I wanted to examine whether the minimum price and health benefits are connected.
I am trying to step back a little, as I am beginning to appreciate more subtly the challenge that is before you because the United Kingdom is a member of the European Union. The first point is that members of the Scottish Parliament should take comfort that a body of evidence speaks to a relationship between price and consumption. That can be demonstrated on a variety of consumer-good products. A well-established cadre of such evidence exists. There is also anecdotal and some scientific—but not academic—evidence of price sensitivity to the price of beverage alcohol among heavy drinkers.
From our perspective, certainly in the beer sector, we are primarily a domestic industry. We sell upwards of 23 million hectolitres a year, 86 per cent of which is domestically produced. Imports are an important segment of the market, but they are not a large volume. I do not think that that has traditionally been the case. There has not been a up-tick, or a downward trend in the number of imports. Our exports have increased over the years. We have data going back to about 1990 through to 2008, which show increased exports. I think that we took a bit of a dip in the recent recession. I suggest that there has not been a negative effect on the economics of the industry or the trade of the industry with respect to imports. I hope that that answers your question.
From a brewer’s perspective, those numbers are a bit startling to me. That is certainly not my understanding. From a beer perspective, there is very little counterfeit product. I would suggest that it is just not economical to make counterfeit beer overseas and bring it into Canada—it is even less economical to produce it in Canada. We also have a fairly vibrant U-brew and U-vin system, which is within the regulatory control of the Government and is not considered illicit alcohol. I understand that the LCBO is on your next panel, so I respectfully submit that you ask that question of it. Perhaps the problem is in the spirits industry and the wine industry—it is certainly not in the beer industry.
Yes, indeed.
That said, the intent and recommendation of the national alcohol strategy advisory committee is that we adjust for that through volume after taxation within the beverage category, for retail and for on-premises sales. That is more difficult to implement, but we do not seek a situation in which someone can buy a beer that has twice the alcohol content for the same price.
The evidence has clarified the position a little. Here, there is deep discounting for people who buy in quantities. For instance, if someone buys two bottles of wine they might get another one free. They can buy one can of beer at a certain price, but the price per can is much lower if they buy 24 cans. Such deep discounting encourages people to buy in volume. Has your pricing mechanism dealt with that problem?
I am not sure that what I will say will help you. I was looking at some of the provincial liquor boards’ and retailers’ websites recently, which showed the opposite situation to be the case. If someone buys a single can of beer, it will cost less than one twenty-fourth of the cost of a 24-pack of beer, or less than one twelfth of the cost of a 12-pack. We do not have the practice of deep discounting or giving away free products through “buy two, get one free”, although there is at least one jurisdiction in Canada in which the liquor board was giving away a small bottle of whisky with a 12-pack of beer, which was found to be below the minimum price—so a Government body was going against the spirit of its own rules.
Our paper speaks to that somewhat, but I am not qualified to answer whether there is any evidence on that question. I am happy to take a note of that and to revert back to the committee with any other information that we might have.
There is no need to worry about your eloquence, which has been given very high marks here in Scotland. Feel free to provide any additional information once you have seen our Official Report. Indeed, given that we are using this very artificial form of communication—with which I think we are all coping rather well—if committee members have any additional questions, our clerks might send those via e-mail for answer. Would that be satisfactory to you?
We have found that a tax increase does not necessarily make its way to price as it works through the supply chain. The advantage of social reference pricing is that the increase is immediate at the cash register or bar. The consumer sees the change right away, while with taxation they do not see the same 1:1 ratio of impact.
Hearing you reread the first section, I would like to make the first comment.
What Mr Faris says is entirely accurate. That said, any further liberalisation or deregulation would not be received favourably by the alcohol strategy group. In fact, we would prefer to keep the system as closed as possible while allowing optimal customer interaction, as is deemed appropriate in a culture of moderation—which is what we are trying to create in Canada, hence the subtitle of our strategy.
Thank you very much for giving evidence to us. Any supplementary questions that committee members have will be passed to our clerks and forwarded to you for responses, if that is satisfactory to you. It is a great pity that we cannot see you. If you are desperate to know what we look like, you will find us on a website somewhere.
Thank you, convener. We have your photos in front of us, so we can see what you look like.
Excellent. I will introduce my committee members. Starting from my right and your left are Ian McKee, Richard Simpson, Rhoda Grant, Ross Finnie, myself, Helen Eadie and Mary Scanlon.
I have read that submission. The minimum price for a beer with an alcohol content of 6 per cent is not twice that for a beer with an alcohol content of 3 per cent; the price increases as the alcohol concentration increases—is that generally correct?
Yes. There are minimum price increases between the lower categories—between, for example, the categories of 4 to 5 per cent and 5 to 5.5 per cent. However, those increases are not linked to the rise in alcohol concentration. It is only in the category of beers with an alcohol content of above 5.6 per cent that the increase in the minimum price is directly linked to the alcohol content of the product.
My first question is for Jeff Newton of Canada’s National Brewers. In your written submission, you said that beer products must meet minimum sales quotas in each store. When a minimum price was imposed and brands that were known to be cheaper became similar or equivalent in price to premium brands, did you find that some of the cheaper brands fell off the shelf? In Scotland, we are looking at perhaps a 37 per cent increase in the price of a blended whisky, which will bring it closer to the price of a malt whisky. There is an assumption that, given the small difference in price, people will go for the premium product rather than for the blended, own-brand products. Did that kind of thing happen in your outlets?
I do not know whether the witnesses can answer that question for Scotland or whether it is relevant to them. If they think that it is, they can answer it.
The question has some relevance from the perspective of the Liquor Control Board of Ontario, partly because we sell distilled spirits. Our general experience has been that, whenever there has been an increase in the minimum price of products that we refer to as having a floor price, there have commonly been corresponding price increases in what we refer to as our deluxe and premium class spirits. The effect has been to encourage price increases in other products. Our experience is that such price increases do not seem to cause a shift towards more premium products, because the differential is maintained.
That is helpful.
I would be glad to provide you with some information on a few programmes that have happened in Canada. Previously, homeless and underhoused people who wanted to go into a hostel could not consume any alcoholic beverage while they were in the hostel so, because they were alcohol-dependent, they would consume as much and as quickly as possible before they went into the hostel. They had very high levels of intoxication while they were in the hostel overnight and hostel staff would have to deal with them detoxing and other potential life-threatening conditions. Therefore, some pilot programmes were introduced in major centres in Canada in which small quantities of alcohol were administered to people while they were staying in the hostel so that they would not detox or experience delirium tremens, and they could then deal with not having high levels of intoxication. The hostels made the choice to provide the product to individuals. Some do a small cost recovery, depending on whether the person has any cash while they are in the hostel.
Good morning.
I am sorry, convener. That is me put in my place.
The material that we have shared also identifies that the province appoints a board of directors made up of citizens from around the province and from various fields of expertise to guide the direction of the LCBO. The board’s objective is to ensure that an appropriate balance is achieved between ensuring the socially responsible and controlled sale of beverage alcohol to discourage immoderate consumption—policies such as minimum pricing that prevent deep price discounting—and generating revenue. We report to the Minister of Finance and are expected to generate revenue to help to fund various programmes that are delivered by the province, including health and education services. In the past fiscal year, we generated approximately 1.4 billion Canadian dollars in revenues that the province then used to fund its various services and programmes.
I note that something like 4.3 billion Canadian dollars comes from the LCBO each year. That is some amount of money.
Certainly. Under the Importation of Intoxicating Liquors Act, which is a Canadian federal statute, each provincial liquor authority, including the LCBO, has delegated authority and serves as the sole legal importer of beverage alcohol into the marketplace in its jurisdiction. There is some internet-based sales activity in Ontario. For example, we have close to 150 wineries based in the province, many of them close to Niagara Falls, which commonly make sales to home consumers via the internet. That activity can occur under the authority of the Alcohol and Gaming Commission of Ontario. However, outside that jurisdiction, it is not legal to make a sale into Ontario—for example, from the United States or another province—unless the goods are first consigned to the Liquor Control Board of Ontario.
Is that policed or enforced in any way? To what extent are irregularities discovered in the process?
I have not seen a lot of research specifically on the influence of social reference pricing or minimum pricing on consumption levels. We have a great case study, however, in the introduction of the high-alcohol minimum price in Ontario a number of years ago. That provided a good laboratory to assess the effect of minimum pricing in redirecting consumption from higher-risk, higher-concentration products to products with a lower alcohol content. The introduction of the minimum price for high-alcohol beer resulted in the market share of that product in a number of at-risk neighbourhoods declining from 10 to 2 per cent, which indicates that minimum pricing can work if it is properly employed. Although that was not an academic or empirical study—the information basically came from the Beer Store analysing its sales pre and post the introduction of the minimum price—that is one example of how the policy can work.
Over the past four decades, a number of seminal studies have been carried out by health policy researchers and economists into the relationship between price and consumption, which show a clear correlation. Although the level of price sensitivity varies within the population and may be a bit lower within dependent populations, those populations will be at least as price sensitive as the general population. We have some excellent research on the relationship between price and consumption. It may not specifically evaluate Ontario’s experience of minimum pricing, but it is useful and I encourage the committee to read some of the most important research in the area if it has not yet had an opportunity to do so. A robust meta-analysis of more than 100 epidemiological studies on the relationship between alcohol consumption and price was released just last year. The principal investigator was Dr Alex Wagenaar of the University of Florida. I would be glad to forward references to his work and that of others. In turn, the committee may wish to have such individuals as witnesses to help it consider policy measures for Scotland.
Thank you. We have already had some academics before us, but we will certainly follow up on those references if we have not already considered them.
Here in Ontario we saw changing consumption patterns in the case of high-alcohol beer. High-alcohol beer products, with alcohol in the range of 7 to 10 per cent, were a new phenomenon, and initially had little representation in the marketplace, but their sales grew quickly, driven by the high alcohol content and cheap price, such that in about six to eight months, in a number of downtown Toronto stores, their market share went from zero per cent of all beer sold to 10 per cent. When the high-alcohol minimum price came into effect, their share dropped from 10 to 2 per cent, and, as I noted earlier, many of the manufacturers started reformulating their products to lower alcohol concentrations.
As Jeff Newton noted, that was the experience in the Beer Store system that he represents. However, in the case of the LCBO, although we sell a much smaller quantity of beer, we are also a retailer of that high-alcohol product, and our experience—as another large sales channel—was very similar.
Okay, but that has not been effected by your pricing mechanism.
My next question is on the regressive nature of minimum pricing, in that it impacts more on people on low incomes than on people on medium or high incomes. For example, in a family in which someone is alcohol dependent, an increase in price could affect the amount of money that is available for food and clothing. What steps have been taken to mitigate that?
Minimum prices are typically adjusted according to the inflation rate, such that they are kept constant in terms of absolute, or inflation-adjusted, dollars. It is not as if the increases in the minimum price exceed the inflation rate and therefore effectively reduce people’s purchasing power.
Thank you. The last question is from Ian McKee, although there may be time for supplementaries.
What is the favourite beverage of really heavy drinkers at the high-alcohol end of the scale? Is it lots of beer or lots of spirits?
It depends on the community and area. In some segments of the population, fortified wine tends to be heavily consumed. In some cases distilled spirits are consumed, and in other cases beer. The least common beverage is regular-strength wine and lower-alcohol products.
The situation varies greatly. In Ontario, as in many jurisdictions, alcohol dependence covers all socioeconomic groups. What people choose to consume to support their dependence varies greatly. It is certainly not unusual for it to be one type of product. For the homeless or underhoused population—certainly in Ontario—the choice is fortified wine. As part of a self-harm reduction strategy, some people choose to purchase distilled spirit in a smaller format with a correspondingly lower floor price. They maintain their dependency but using a smaller format. In that way, they also try to control the extent to which they experience intoxication and corresponding harm.
In your experience, is that group of people price sensitive in terms of the amount that they consume or are they so addicted to alcohol that they will pay any price?
It has been our experience that the two components work well in union together. The LCBO sources beverage alcohol to bring into this market from approximately 80 countries. Manufacturers in domestic and other jurisdictions can make choices for competitive purposes to achieve greater market share. They might employ practices such as predatory pricing, providing deep discounts to grow market share. We can moderate or mitigate those factors by having a minimum price component alongside the tax structure element.
I will do the same thing that I did previously, because I do not want everybody to ask supplementaries, given the time. Members should e-mail any supplementaries that they have to the clerks, and we will send them over to our witnesses, if that is all right. We will ask them to respond as soon as practicable.
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