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Industry Guidelines

5.7 AREA 7: Pricing policies

5.7 AREA 7: Pricing policies

WHO position as outlined in the strategy
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, halt progressions toward drinking large volumes of alcohol and/or episodes of heavy drinking, and influence consumer preferences. According to WHO, increasing the price of alcoholic beverages is one of the most effective interventions to reduce harmful use of alcohol, and 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.
Factors such as consumer preference and choice, changes in income, alternative sources for alcohol in the country or neighboring countries, and the presence or absence of other alcohol policy measures may influence the effectiveness of this policy option. Demand for different beverages may be affected differently. Tax increases can have different impact on sales, depending on how they affect the price to the consumer. The existence of a substantial illicit market for alcohol complicates policy considerations on taxation in many countries. In such circumstances, tax changes must be accompanied by efforts to bring the illicit and informal markets under effective government control. Increased taxation can also meet resistance from consumer groups and economic operators, and taxation policy will benefit from the support of information and awareness-building measures to counter such resistance.
Policy options outlined in the strategy
(a)    Establishing a system for specific domestic taxation on alcohol accompanied by an effective enforcement system, which may take into account, as appropriate, the alcoholic content of the beverage
(b)   Regularly reviewing prices in relation to the level of inflation and income
(c)    Banning or restricting the use of direct and indirect price promotions, discount sales, sales below cost, and flat rates for unlimited drinking or other types of volume sales
(d)   Establishing minimum prices for alcohol where applicable
(e)   Providing price incentives for non-alcoholic beverages
(f)     Reducing or stopping subsidies to economic operators in the area of alcohol

Brief comments from an industry perspective

Industry members support open, fair, and responsible pricing policies, with a variety of free market conditions and external factors determining how alcohol beverages are priced. As a general rule, tax increases that consumers believe to be unreasonable will have the unintended consequence of encouraging consumers to seek lower price options rather than reducing the overall amount of alcohol consumed. In many countries, there is also the possibility that price increases for commercially produced alcohol may encourage consumers to turn to the informal or illicit sectors, which are untaxed. Promotional activities including flat rates for unlimited drinking and price promotions should be incorporated in the relevant self-regulatory codes where possible. This does not mean that common types of promotion such as “the happy hour” should be banned, but that such activities should be subject to reasonable restrictions, such as limits on the time period during which they are available.
How can industry members support the above policy options?
  • Ensuring that self-regulatory codes of practice have provisions about promotional activities, including price promotions and flat rates for unlimited drinking
  • Supporting efforts to bring the illicit and informal markets under government control
What ICAP tools are available to support this work?
What other tools are available?

Next - Section 5.8: AREA 8: Reducing the negative consequences of drinking and alcohol intoxication