Social Reference Prices for Alcohol: A Tool for Canadian Governments to Promote a Culture of Moderation

Overview

Most provincial liquor distribution and control authorities in Canada set social reference prices (SRPs) for alcoholic beverages, otherwise known as “floor” or “minimum” prices. Published research confirms SRPs can help reduce harmful patterns of alcohol use and related problems. The way SRPs are applied differs widely across Canadian provinces and territories.

In this paper, the National Alcohol Strategy Advisory Committee (NASAC) provides a comprehensive set of recommendations for SRPs for alcohol sold from off-premise retail outlets. Recommendations for Social Reference Pricing in Canada Based on existing Canadian examples of best practice, NASAC recommends that liquor boards and commissions:

 Apply SRPs to all types of alcoholic beverage.

 Ensure SRPs reflect the alcohol content of drinks within each major beverage class.

 Regularly review, maintain and update the value of SRPs relative to provincial consumer price indices (CPI).

 Close existing loopholes that allow the sale of alcohol below SRPs.

Background

In 2007, the Canadian Centre on Substance Abuse led the development of the first National Alcohol Strategy (NAS) for Canada and produced a document entitled Reducing Alcohol-related Harm in Canada: Towards a Culture of Moderation (NASAC, 2007).

A wide variety of representatives from civil society, public health, transportation safety, First Nations, criminal justice, law enforcement, liquor administration, academia and the alcohol industry were involved in the process. NASAC continues to oversee the implementation of the 41 recommendations in that report. The current report focuses on the following NAS alcohol pricing recommendations:

Recommendation 26: Adopt minimum retail social-reference prices for alcohol and index these prices, at least annually, to the Consumer Price Index (CPI).

Recommendation 28: Create incentives, whether through tax or price adjustments, to promote the production and marketing of lower-alcohol content beers and coolers, with the overall goal of reducing the volume of absolute alcohol consumed per capita in Canada.

These recommendations from the NAS are based on evidence that the price of alcohol can have a significant relationship with level of consumption, albeit sometimes offset to a degree by increased cross-border purchases and home production. Nonetheless, impartial reviews of published studies estimate that a 10% increase in the average price of alcoholic beverages leads on average to a 4-5% reduction in total consumption (Gallet, 2007; Wagenaar, Saloi, & Komro, 2009). These recommendations also recognized that SRPs were likely to have a greater impact on those experiencing alcohol-related harms and less impact on individuals who drink within low-risk drinking guidelines.

Researchers have estimated the impacts of setting different floor prices for a given “unit” or “standard drink” of alcohol on different types of drinkers both in European jurisdictions (Purshouse, Meier, Brennan, Taylor, & Rafia, 2010) and Canadian provinces (Hill-McManus et al., 2012). These studies estimate minimal impacts on moderate drinkers, but reductions in consumption, alcohol related deaths, crimes and hospital admissions for those drinking above low-risk drinking guidelines.

Recent Canadian research found evidence of an inverse relationship between alcohol-related deaths and hospital admissions, on the one hand, and changes in SRP rates on the other. For example, in British Columbia it was estimated that increases in the average SRP for alcohol were associated with reductions in alcohol-related hospital admissions (Stockwell et al., 2013). Other research has shown that frequent heavy drinkers are more likely to drink the cheapest alcohol (Kerr & Greenfield, 2007) and, further, the consumption of cheap alcohol is more responsive to price increases than is consumption of expensive alcohol products (Gruenewald, Ponicki, Holder, & Romelsjo , 2006).

While the evidence has grown that the use of SRPs can be a well-targeted strategy for reducing alcohol-related harm, it has also been highlighted that practice in setting SRPs varies substantially from province to province (Thomas, 2012). Giesbrecht et al. (2013) highlighted the following best and promising practices in some provinces:

1. Indexation of SRPs to the cost of living (e.g. Quebec and Ontario);

2. Application of higher prices for higher strength varieties within beverage types in Saskatchewan (e.g., 8.5%+ strength beers have higher SRPs than 5% beers);

3. Higher overall SRPs in some Atlantic provinces, such as Nova Scotia and Newfoundland, when calculated per Canadian standard drink (i.e., 13.45 g ethanol or the amount in a 12 ounce 5% beer, 5 ounce 12% wine or 1.5 ounce 40% spirit-based drink), mostly in the range of $1.50 to $1.75.

More recently, further examples of good practice have emerged. Manitoba announced the introduction of a sliding scale for beer SRPs according to exact alcohol content, starting June 2, 2014 (Lambert, 2014). New Brunswick and Manitoba imposed stricter conditions on SRPs by disallowing heavy discounts on product lines that were not selling well. However, many provinces do not regularly update SRPs with inflation, and many allow loopholes that permit the sale of alcohol below SRPs.

Local economic and cultural factors will incline Canadian provinces and territories to develop their own unique alcohol pricing strategies. Variation in the rates of provincial liquor sales taxes is a particularly important factor determining final retail prices over and above SRP rates. Giesbrecht et al. (2013) noted considerable potential for strengthened public health policy in this area by applying existing best practices in Canada across all jurisdictions. In this document we offer guiding principles rather than exact prescriptions.

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