Tuesday, 31 May 2011

McWilliams promotes cider & Obama in world’s biggest Guinness ad: the economics of alcohol

What are the real economics of alcohol?  Are the industry’s claims of a decline in alcohol consumption really down to a change in methodology?  As they say in the joke about alcohol research and the body, the results are staggering.

David Poley, chief executive of UK & Ireland drinks industry body the Portman Group, said last week "It is surprising that hospital admissions have apparently doubled over a period in which alcohol consumption has significantly declined”.  Something isn’t adding up.  Downing a pint of Guinness was so important to Barrack Obama that he risked a helicopter ride in dangerous winds to get to the Moneygall pub in time.  He was of course following in the well trodden footsteps of every successful American president of recent times looking for a second term – a booze up with the Paddys is still apparently worth a lot of votes, as Irish-American journalist Harry Browne explains in Counterpunch.

David McWilliams doing the sums
David McWilliams on the other hand has earned his fame as one of ‘the peoples' economists’, correctly predicting the wrecking of the economy to the benefit of those he calls the ‘insiders’.  And without the luxury of an insider’s salary, some alcohol industry cash must have made economic sense.  As the Irish Times puts it, ‘With all this doom and gloom, at times David McWilliams would turn you to drink. So it’s a neat fit that cider brand Bulmer’s has turned to the pundit to front its new advertising commercial”.  

But are public figures wise to promote booze of all things to earn a wider public?  The alcohol industry already spends an enormous 68 million per year in Ireland and 950 million in the UK on advertising, with a further undisclosed sum on sponsorships at many university and sporting events.  Ireland alone is meanwhile saddled with an annual alcohol related debt of 3.7 billion.  Nevertheless, the industry claims to be having a hard time, what with the recession and all, but the chief evidence of a downturn in alcohol consumption comes from the apparently reliable UK Office of National Statistics (ONS), presenting the census findings that alcohol consumption in the UK is down by a few per cent in the last two years.  We know this not least because these figures are being proudly boasted by the industry itself.  As Simon Litherland, Managing Director of spirits firm Diageo GB, said:
"These figures are encouraging news for England. They confirm that alcohol misuse continues to decline and show clear progress in awareness of units and drinking guidelines. The statistics reveal that weekly alcohol consumption is down, the number of people who drink at all is down, the number of people drinking on five or more days a week is down, binge drinking is falling and alcohol related deaths are also down."
Mr. Litherland’s laudable delight at his falling sales is echoed by British Beer and Publican’s Association (BBPA) Chief Executive Brigid Simmonds who comments that “These figures will confound many pundits, as yet again they confirm that as a nation, we are not drinking more. Those who suggest otherwise need to focus on the hard facts”. And David Poley chief executive of the Portman group comes to the rescue of poor misguided Alcohol Concern Wales whose survey inconveniently shows that older people are drinking more at home. "Overall trends shows a positive and continuing decline in the rates of excessive drinking” Poley says. “Trying to get people to adopt safer behaviour does not justify misrepresenting statistics in this way. We would urge Alcohol Concern Cymru to use alcohol statistics responsibly”. Opportunities to be sanctimonious must be rare in the alcohol industry so Poley can be forgiven his moment of weakness. But is he right?

If alcohol consumption is down, why are profits still so good?

'In 2010 Diageo earned 1.63 billion pounds in the year ended June 30, compared with £1.61 billion a year earlier, while sales excluding excise taxes rose 5% to £9.78 billion.  Results in Europe were mixed, with good sales growth in Britain offset by weaker results in Ireland and Spain …Diageo ramped up marketing spending by around 14% to achieve … 2% organic volume growth over the year’. 
These figures don’t support the claimed fall in sales.  Are people buying alcohol and keeping it in the cupboard?  Or is the change in drinking patterns really a reflection of a change in methodology?  The method by which the ONS data was collected changed in 2007, and found its way into the 2009 General Lifestyle Survey (formerly General Household Survey) which coincided with the recorded lowering of alcohol use in the UK.  The devil is in the detail as they say, and the paper which explains the new methodology needs careful examination.  There are essentially three things wrong.  They don’t know how much alcohol is sold, they went to the industry for advice about it and their new recording system underestimates ABV and volume.  Strangely they signal all three problems in the document which explains the new methodology.

We don’t know how much alcohol is being sold

“Ideally” the researchers say “judgements about the most appropriate alcohol by volume (ABV) to assign to a particular type of drink would be based on sales data showing the average strength of that drink.  Detailed data are not, however, available, so a judgement must be made”. [My emphasis]
Ponder that for a moment.  Nobody, not even the ONS, knows how much booze is sold, or its strength.  This is echoed in the University of Huddersfield report which tried to set up a database on alcohol sales and drew a blank.  ‘Despite substantial efforts towards multi-partnership working, data collection and intelligence sharing on Alcohol Supply Points is fragmented’. 

This is not the fault of the BBPS, but of the new giants in the alcohol sales chain, the supermarkets.  Tesco, the second largest retailer in the world, doesn’t mention alcohol once in its annual report, and as the Irish Times reported, Ireland’s chief retailer ‘Dunnes Stores does not disclose any financial information for its 116 grocery and textiles stores in the Republic as they form an unlimited entity’.  But the outlets continue to promote alcohol at every opportunity in stores, on TV and in advertising, and as we all know, as a two-for-one or special offer loss-leader to get us into the shop.  As Alcohol Concern reported in March 2011 ‘abundant alcohol displays were normalising alcohol as an everyday commodity, reducing recognition of it as a potentially harmful drug’.

So who do the ONS turn to for advice with this problem of lack of data?  Astoundingly, they went to the vested-interests within the alcohol industry itself:  ‘...guidance is provided by the BBPA’ and in particular ‘the BBPA Statistical Handbook 2007: a compilation of drinks industry statistics’. And in several places the report quotes a ‘BBPA personal communication’.  Fox, hen-house anyone?   As Claire Harkins wrote in the BMJ:

“The final [alcohol] strategy ignored government commissioned testimony from a group of 17 independent experts who called for restrictions on alcohol pricing and availability. Instead the Portman Group was the only “alcohol misuse” group cited in the final report. Alex Stevens, at the European Institute of Social Services at the University of Kent, said that the strategy adopted the “language and ideas of the alcohol industry . . . This seems a clear example where external pressure on government by a powerful group has influenced the use of evidence in policy”.
Is this now a case of influence over the hardest currency of all, official statistics?

The new ‘methodology’ uses the BBPA supplied ABV figures multiplied by how much people record that they are drinking.  This sounds sensible, but is questionable on two counts.  Firstly the figures for ABV supplied by the BBPS state that ‘for beers an ABV of 4.5% will be assumed  But as Gargle Nation has reported before, sales of super strength beers of 5% and more are now common, particularly in off licence and supermarket sales of super lagers which are now rising in the UK and have already over- taken pub sales in Ireland. 

And for wine, which now makes up 40% of the drinking for women in particular, the ONS use a surprisingly low average ABV of 12.5%.  The ONS themselves say that the big selling new-world wines are between 14 or 14.5 %.  A survey of the shelves in Dunnes this week revealed not surprisingly that eight out of the ten  wines on promotion were at 13.5% by volume as described on the labels.   Further, this may not tell us the true ABV.  The San Fransisco Chronicle conducted a survey in April,  sending samples of 19 wines to an independent wine lab in for ethanol testing.  Only one wine ABV was accurate, with 18 showing an alcohol content of  between 1% to 2% above that claimed on the label. 

This isn’t an isolated case. The Robert Mondavi institute has found a consistent 9% rise in sugar levels in wine overall over the past twenty years. ‘Since sugar converts essentially directly into alcohol, a 9 percent increase in the average sugar content of wine grapes implies a corresponding 9 percent increase in the average alcohol content of wine’.

Closer to home the situation is similar, and attributed to a deliberate policy of harvesting later to create stronger wines for the market.  Decanter magazine reports in France that ‘in both the 2010 and 2009 vintages it was common to see Merlots surpass 15% alcohol.  Later picking – sometimes even after the Sauternes harvest in October – was becoming more common’. As one influential wine critic said, ‘There is a race towards concentration, to please many critics.  I have been a consultant for 30 years; I have spent 20 years telling people not to harvest too early. In the last 10 years I have told them not to harvest too late.”  Just to be clear, the alcohol content is the addictive and dangerous component of drink - why would the industry want to increase it? 

The 'Standard Glass'

The third problem with the new ONS methodology is the issue of the ‘standard glass’.  Respondents are asked to note what measure they used to drink alcohol in the last week - a small, standard or large glass.   The scope for inconsistency and unreliability is obvious.  Astoundingly, while the researchers recognise the problem themselves -  ‘Respondents did not appear to find it difficult to give the glass size, but labelling the 175ml size as ‘standard’ may have encouraged those who did find the question difficult to choose that answer – almost 60 per cent did so’, - but they did nothing to adjust the results accordingly. 

Hospital admissions triple

The findings of a survey which the Portman group, Diageo and the BBPS have all used to claim a fall in alcohol consumption are potentially an underestimate in terms of quantity and strength.  And if the methodology is the only real change, and the results are at odds with the facts, isn’t it Mr. Poley who should be ‘using alcohol statistics sensibly’?
 
Let's take another perspective on the statistics that Poley et al have used the ONS survey to deride.  Hospital admissions are surely a good indicator of when alcohol consumption has gone wrong, and the figures are telling a very clear story.  Tim Straughan, chief executive of the NHS Information Centre, said this week that "Today's report shows the number of people admitted to hospital each year for alcohol-related problems has topped one million for the first time” and ‘alcohol dependency cost the NHS £2.41 million in prescription items last year, an increase of 1.4% on the amount spent in the previous year’.

The Independent continues- “Figures compiled by the NHS Information Centre for the year 2009-2010 revealed 1,057,000 hospital visits in relation to alcohol, a 12% increase on the previous year and more than double the amount recorded in 2002-2003”. And in Ireland the picture is the same. As Jennifer Hough writes in the Irish Examiner of alcohol related deaths, ‘the mortality rate per 100,000 population aged 15 years or more who died while in hospital was 2.6 in 1995, and rose to 7.1 in 2007 — an increase of 173%’.  And in the journal Alcohol and Alcoholism Bobby Smyth of the Irish College of Psychiatrists writes ‘Analysis of data from Ireland's Hospital In-Patient Enquiry scheme has revealed a considerable increase in alcohol liver disease…. The rate increased by 190% from 1995 to 2007’

Who should we believe?

President Obama enjoys the craic in Moneygall

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