Tennessee Testimony

8/9/2019 Tennessee Testimony

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Public Action Management, PLC P.O. Box 4364Scottsdale, AZ 85261 P. (503) 936-0443 [email protected]

Public Action Management

Testimony of Pamela S. Erickson, Former Executive Director of the Oregon LiquorControl Commission and current President/CEO of Public Action Management

Before the Joint Study Committee on Wine in Grocery Stores

December 8, 2009

Mr. Chairman and members of the Committee I am a former alcohol regulator

who left to join the alcohol and drug abuse prevention community. As a prevention

advocate, my admiration of our various states regulatory systems increased as Iimmersed myself in the research on how to combat underage drinking and other alcohol

problems. Our alcohol regulatory systems are pretty effective in keeping problems undercontrol. My unique expertise is in marketplace regulation (supply side measures) andunderage drinking. I operate a public education campaign called the Campaign for a

Healthy Alcohol Marketplace.

Today I will address these issues:

1. Why selling alcohol in a free market scenario invariably leads to problems.2. How deregulation of alcohol in the United Kingdom led to an alcohol

epidemic.

3. How the grocery supermarket mass merchandising model could fuelincreased alcohol consumption and social problems.

4. The elements of a regulatory system that effectively control problems.5. How Tennessees alcohol regulatory system performs.First: Just why cant we sell alcohol in a free market setting like other

commodities? The simple answer is that several standard business practicesquite

legitimate for other productswill likely create social problems when used with alcohol.

Let me illustrate: Imagine you decide to purchase a floral business. You would startwith a business plan that identified your best customers, i.e. those people that love

flowers and buy them often. You would develop methods to keep those customers and

get them to buy even more flowers. You would also devise ways to get more people intothat best customer category. You would use promotions, cost reductions, coupons and

other methods to entice people to buy more flowers. And, you would work to gain a new

generation of customers by marketing to young people suggesting they buy flowers forevery occasion. Now substitute alcohol for flowers and you can see the problem. A good

portion of people who buy a lot of alcohol are alcoholics and heavy drinkers. Enticing

more people into this category is not a good idea! Marketing to young people would befostering underage drinking. You can see that these standard practices are not wise for


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alcohol. Thus, I ask you to consider the fact that alcohol is a different product

that should be sold with care and restraint.

Second: Lets see what has happened to a country that deregulated to the

point where alcohol is pretty much sold in a free market. I recently completed a

report, entitled The Danger of Alcohol Deregulation: the United Kingdom Experience.That country had a comprehensive alcohol regulatory system but gradually deregulated to

the point where all forms of alcohol are widely available and can be sold in bars, clubsand grocery stores 24 hours a day, 7 days a week. Alcohol is extremely cheap and often

promoted as a loss leader. Clubs and pubs use sale practices that encourage

intoxication. They have an alcohol epidemic on their hands. The UK now has one of thehighest rates of alcohol consumption in the world and they are experiencing major

increases in alcohol related disease, death, underage drinking and bar violence. In 10

years, hospital admissions for liver disease and acute intoxication have more than

doubled. Underage drinking rates are over twice that of the US and youth as young as 8are hospitalized for alcohol intoxication. Girls and women are drinking at high rates.

Law enforcement is overburdened by excessive bar violence and public nuisance offensesas people drink in bars 24 hours a day. This happened gradually as deregulation began inthe 1960s with consumption increases tracking this regulatory change. Only recently

have we seen minor decreases in consumption after two hefty tax increases and an

economic meltdown.

Third: Global grocery supermarkets have consolidated and use the mass

merchandising model to attract shoppers looking for cheap goods. In the UK, the

wide availability of cheap alcohol is blamed for the epidemic. This could happen

here. Today the grocery business is dominated by large global corporations that have

enormous purchasing power. In the UK, four large supermarket chains have 75% of the

grocery market. They promote alcohol aggressively and routinely use it as a lossleader. In the US, consolidation is increasingbut the domination is not as great. The

top four supermarkets have 54% of the US market (2007 revenue). What is important to

understand is how supermarkets make their money. They have extremely thin margins:less than 2%. In order to make money, they must make it up on volume. They use low

prices to attract large numbers of customers to buy large quantities. Heavy promotion

and high volume go hand in hand. As you can see, these strategies are the very things

that create problems as low prices, heavy promotion and high volume propel increasedconsumption particularly for youth who are especially price-sensitive.

Fourth: The alcohol prevention field is blessed by a large body of research to

guide policy makers to select the most effective measures. A good resource is the

World Health Organization which has based its recommendations on research from

around the world. The World Health Organization recommends that systems becomprehensive addressing issues of price, availability, promotion, the drinking

environment, age restrictions and drunk driving. Some countries have attempted to rely

on tax increases alone with poor results. In Russia, a high tax on vodka drove people topurchase unsafe bootleg products. In the UK, the retail sector has been able to get the

suppliers to absorb some or all of the tax increases. Multiple measures to control price


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are necessary. Our states best defense against an alcohol epidemic is a strong,

comprehensive regulatory system. Strong systems are not necessarily detrimental tobusiness. In many states, new wine and microbrew industries are flourishing despite

strong regulation. Local and global businesses can both operate under such systems as

evidenced in many of our states.

Fifth,Tennessee has some of the lowest consumption and problem drinking

rates in the nation. To maintain this excellent record, the alcohol control system

must remain strong. Tennessee has the third lowest adult alcohol consumption rate in

the nation and problem drinking rates are below national averages. Underage drinking

rates are also some of the lowest. In fact, the National Survey on Drug Use and Healthsreport on State Estimates of Underage Drinking found Tennessee to have the lowest

youth binge drinking rate in the Nation! The Committee is advised to consider whether

these excellent rates can be maintained given the proposed changes. Some things to

consider about selling wine in grocery stores are:

Consider the advantages of the current system of retailing high alcoholcontent products (wine and spirits) in specially licensed liquor stores.

Because these stores are designed to sell alcohol and little else, they are ableto specialize in that product. They gain skill in judging age, checking ID,

spotting fake ID, and identifying intoxicated patrons. The food store business

has very high turnover and clerks are often young and inexperienced. Theyalso have many bodies of regulation to learn and administer: tobacco, food

stamps, pharmacy products, etc. Hours and days of sale are limited.

Recognize that increased availability drives increased consumption. Addingwine to over 1,000 locations is a very large change and will very likelyincrease consumption. In fact, increased consumption of wine appears to be

one of the objectives of the legislative proposal. Currently, liquor stores are limited by county determination as to how many

licenses are permitted. This keeps alcohol products reasonably availablebut not so available as to promote increased consumption. Local control is

important given that alcohol problems, when they occur, are invariably local.

Given that Tennessee has a large percentage of its population that does notregularly drink; it does not seem there is a great unmet need for increasedavailability.

The wine category is very broad and usually includes products favored bystreet drinkers and underage youth. Widespread availability of fortified winecould increase Tennessees problems with street drinkers. Wine coolers,

wine-based mixed drinks such as margaritas are favored by underage drinkers,especially girls. Again, widespread availability of these products couldfacilitate underage drinking.

By allowing a large number of new locations to sell wine, you risk marketdestabilization through extreme price competition. Very cheap prices are

undesirable because they increase consumption and social problems. Extremeprice competition also drives small operators out of business. Large, out-of-


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state supermarket chains are likely to come out ahead as they have

the capacity to sell in high volume at low prices.

I appreciate the opportunity to speak with you today. I would be happy to

answer any questions and I have listed some helpful resources below for your

information. My report on the alcohol epidemic in the UK is available on mywebsite at www.pamaction.com. This report and other educational materials

are available on my campaign website, www.healthyalcoholmarket.com .

Sources:

1. BRFSS Fact Sheet, Alcohol Consumption, Tennessee Department ofHealth.

2. The NSDUH Report, State Estimates of Underage Drinking, Issue 13,2006, US Department of Health and Human Services.

3.

What are the most effective and cost-effective interventions in alcoholcontrol? World Health Organization, February 2004.4. Competition and Profit, Food Marketing Institute, Website PDF.5. Effects of beverage alcohol price and tax levels on drinking: a meta-

analysis of 1003 estimates from 112 studies. Alexander C. Wagenaar,Mathew J. Salois and Kelli A Komro, University of Florida, College of

Medicine, Addiction, 2009.

Tennessee Testimony

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