Saturday 22 July 2017

Drinks brands fear new bill will hurt Ireland's R&D role

New study examines the economic impact of plans to curb alcohol marketing, writes Simon Rowe

The study warns that proposed measures on 'minimum unit pricing' would incentivise cross-border shopping to the detriment of the local economy. Stock photo
The study warns that proposed measures on 'minimum unit pricing' would incentivise cross-border shopping to the detriment of the local economy. Stock photo

Simon Rowe

Plans by international drinks firms to use Ireland to trial and launch new alcohol brands may be hampered by the proposed Public Health Alcohol Bill, a new study has warned.

The study by DKM Economic Consultants was commissioned by the Irish drinks industry to examine the economic impact of the planned government bill.

The legislation, which has been delayed following heated political debate, aims to ensure that alcohol is regulated effectively to reduce alcohol harm in Ireland and improve public health.

Prof Frank Murray, president of the Royal College of Physicians, said last week: "Every night, 1,500 hospital beds are occupied as a result of alcohol use, which directly contributes to the number of patients who are forced to wait on trolleys to access hospital care."

However, the DKM report outlines the economic consequences of the proposed measures, which include incentivising cross-border shopping, stifling growth and product innovation in the sector, and negatively impacting small producers and retailers, particularly in rural Ireland.

Proposed restrictions on marketing and advertising would "impact the ability of large and small producers to innovate and launch new products", warns the report. "Ireland is currently a popular test market for alcohol products, as a small, English-speaking market with an already highly-developed regulatory structure," it notes.

The report warns that recent high-profile product launches such Diageo's Hop House 13 craft-style beer, Heineken Light and Jameson Caskmates would have been jeopardised by the proposed new restrictions.

"Diageo's Hop House 13 craft-style beer, developed and brewed in Dublin, was successfully launched in Ireland and is now exported to the UK and beyond.

"Heineken Light, a low-alcohol and low-calorie beer brewed in Ireland, available in the US for a number of years, was launched in Ireland before a full launch in Europe," said the report's author DKM director John Lawlor.

"Similarly, Jameson Caskmates, an innovative whiskey product aged in craft stout casks, was developed and test-marketed in Ireland and has since been launched globally.

"There would be a question mark over whether this aspect of the Irish market would survive these proposals, which would have a detrimental impact on more innovative firms seeking to test out their new products here, as well as those new entrants in whiskey and brewing looking to build export businesses out of Ireland", said Lawlor.

"Sterling has depreciated by approximately 16pc since the Brexit vote last June, and experience confirms that consumers are willing to react in response to differences in cross-border prices," said Lawlor.

"If Minimum Unit Pricing is implemented in the Republic but not in the North, then there will be a permanent shift in price levels, which will be to the detriment of the retail trade, consumers, and the Exchequer in the Republic."

The study also highlights what it describes as the "detrimental impact on rural Ireland" if the measures are introduced.

"The bill would unduly impact rural Ireland," it warns. "In particular, small retailers may decide that it is too costly to adapt their premises to comply with the structural separation proposals. This could result in them no longer selling alcohol which would result in a loss of revenue, as well as reducing product availability and choice for their customers."

Commenting on the impact on small shops in rural Ireland, John Lawlor said: "The bill would give a competitive advantage to pubs and stand-alone off-licenses vis a vis mixed retailers. The latter have obtained licenses under the current regulatory regime, and have invested in their alcohol sales business in good faith.

"This investment is now being undermined, and could be an unwarranted interference in the marketplace."

In conclusion, Lawlor said the bill would impose potentially substantial costs on producers, particularly small local producers, new market entrants and smaller and rural retailers, placing jobs in those sectors in jeopardy.

The Irish drinks industry exported goods valued at €1.1bn in 2015 and employs more than 90,000 people, both directly and indirectly.

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