A recent report from the Prevention Research Center has found that increasing alcohol taxes and, hence, prices may not reduce consumption and may even lead to increases.
The study, by Dr. Paul J. Guenwald and associates, determined that as prices for alcohol beverages are increased, consumers will often simply switch to less expensive brands, and may in the end wind up consuming more of the cheaper brands.
Further, Gruenwald wrote, consumers facing a price hike in a low-alcohol beverage may revert to beverages with a higher alcohol content. For example, beer drinkers may switch to spirits to get "more bang for their buck."
The study was based on an analysis of price and consumption data from Sweden over a 10-year period.
But rather than dwell on the fallacy of controlling consumption through pricing, the researchers suggested that instead of increasing prices across the board to deter consumption, it might be more effective policy to increase prices (through tax increases) on lower priced brands, dampening the tendency to purchase downward.
Source: American Beverage Licensees Leader, March, 2006, published monthly by Continental Communications, 800-406-5698, 125 W. Granite St., Suite 102, Butte, MT 59701.