UK supermarkets shifting alcohol taxes

27th June, 2014 by Melita Kiely

UK supermarkets are responding to increases in alcohol taxes by subsidising cheaper products and shifting more of the tax hikes onto more costly products, new research claims.


UK supermarkets are subsidising prices on cheap alcohol in response to hikes in alcohol taxes, new research shows

The study  – published in the journal Addiction – was led by the University of Sheffield’s School of Health and Related Research (ScHARR), with business experts from the University of East Anglia (UEA) and Loughborough University and funded by the Medical Research Council.

Researchers used weekly product-level supermarket prices for 254 alcohol products to analyse how prices shifted in response to tax changes, examining drinks sold at different price points in four categories: spirits, beers, ciders and wines.

The results revealed retailers are tackling rises in alcohol taxes by “under-shifting” their cheaper products (raising prices below the level implied by the tax increase) and “over-shifting” more expensive products (raising prices below the level implied by the tax increase).

While under-shifting affected approximately one in six product lines, these drinks accounted for 38% of total spirits sales, 68% of beer and 31% of cider.

“The Government has identified the ready availability of cheap alcohol as a key influence on the UK’s high rates of alcohol-related harm,” said Professor Petra Meier, principal investigator from Sheffield Alcohol Research Group at the University of Sheffield.

“Alcohol duty increases can be part of a mix of measures to tackle this problem. Our new research shows that after a tax increase, supermarkets appear to subsidise those cheaper products and pass more of the tax inxreases onto the mid-range and more expensive products.

“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 ScHARR reported that the Government’s ban on below-cost selling, which would prevent retailers selling alcohol cheaper than the cost of the tax payable on the product, would have a negligible impact on the consumption of alcohol, in comparison to a 45p minimum unit price of alcohol.

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