Why Is There A Minimum Price on Alcohol?

Today, we are going to explore the truth about minimum pricing on beverage alcohol to the public in Saskatchewan. 

I’m going to start with a disclaimer: in writing this, I am not trying to change the world, nor am I saying that you must do this or that (or that you’re a horrible human if you don’t agree with me). I just want to open up some dialogue around the subject and get people thinking. 

Individuals often think that setting minimum pricing on alcohol, often referred to as the “lowest legal price” is a secret plan for the government to make more money. Well, that is simply not true. The government makes very little extra money off of alcohol sold at the lowest legal price. Instead, having a higher minimum price actually puts money into the producers’ and retailers’ pockets because a lot of the time, the manufacturer would be willing to offload it for much less.

So why, then, would the government force manufacturers and retailers to sell their products at or above that minimum price? Why are they literally forcing them to make more money? It just doesn’t make sense. 

Unless, of course, you think of it this way: the government’s job is to protect its people when they feel that they need protection. They are paid to make decisions that will benefit everyone. So with that in mind, how are the people of Saskatchewan protected by having the lowest legal price on alcohol?

Let’s step back for a minute and talk about alcohol consumption as it stands today. The negative effects of alcohol abuse are long standing, and something that society pays the price for. Numerous health organizations have pinpointed the group of people who are at the highest risk of alcohol abuse: young adults and people that become heavy drinkers as they get older. This high-risk group is the focus of much of this conversation. There is no groundbreaking discovery. Everyone has seen kids at a bush party drinking like they just came out of the desert, or have seen or heard of the town drunk. Everyone has seen somebody drunk on the street. 

It is no secret that these people don’t have a lot of money; I’ve heard the term “budget-conscious consumers” used to describe this group of people. Take, for example, the kid at the bush party. You won’t see them chugging a bottle of $80 scotch to impress their friends. Why? Because they could buy four bottles of cheap vodka for the same price. So using this as an extreme example to make an obvious point, who do you think would be at the highest risk of overdoing it and getting black-out drunk, possibly causing harm to themselves and society: the person with one bottle of $80 spirits or the person who has four bottles of cheap vodka? 

The fact is that the majority of humans will use an item more responsibly if they pay more money for it. That’s just human nature. Responsible use comes with perceived value. A lot of people believe that it’s not the government’s job to put law into place in order to curb or alter a person’s actions, or that the government should not be telling its citizens what or how much they should drink. Well, given that the government utilizes tax dollars for health care, public property such as roads, and oversees public safety, they do have a say in how we conduct ourselves. When someone acts irresponsibly, society pays the bill. There are a whole host of laws in place to protect people from other people, and to protect people from themselves. That’s just how modern society is designed. 

There are lots of jurisdictions around the world who have utilized minimum pricing on alcohol as a tool to try and lessen the impact of alcohol abuse. Saskatchewan made ground-breaking advancements in the minimum pricing laws put into place in 2010. This has been used as a model by many other jurisdictions around the world. Many studies have been done to find out whether or not Saskatchewan’s laws have lessened alcohol abuse. 

Now what responsibility do distilleries have, if any? Now, I’m not going to tell you what I think your responsibilities should be, but I will tell you what I feel my responsibilities are as a manufacturer of beverage alcohol, some of which are bound by law and some are based on my own personal opinion and conscience. 

There are many legal responsibilities that our distillery must adhere to, such as not over-serving alcohol, not selling alcohol to minors or to those we feel are intoxicated, following advertising laws that pertain to the overuse of alcohol, and encouraging the responsible use of our products, etc. The list could go on for pages, but the bottom line is that we are manufacturers of a product that could cause harm to people and/or society if our product is abused. I can’t stop people from abusing our spirits any more than the government can. Even total prohibition didn’t stop the consumption or abuse of alcohol. That said, there are still things that we can do that will make a difference. 

One of the things that we can do is respect the minimum pricing laws as well as the reason behind the law. How do we do this at our distillery? We don’t target high-risk groups through our pricing or our advertising. That means that we don’t sell our products at the lowest legal prices, and that we also don’t use ‘lowest legal pricing’ as a marketing gimmick. We produce a product that appeals to responsible alcohol consumers. 

To join in on any of these Saskatchewan marketing trends would be, in our opinion, irresponsible as a distillery and detrimental to our company. In the past two years, we have seen the Saskatchewan craft industry fight more and more to sell the cheapest alcohol. This is known as “the race for the bottom shelf”. For us, being on the bottom shelf is like being at the bottom of the barrel. As a craft producer, our goal is to do whatever we can to continue to gain respect for our products and our distillery. Having a measure of pride in what we do, we do not make it all about money. We focus on creating products that are made from the quality of grist we use, the processes we use to make unique spirits, our packaging, and our advertising, which, taken together, represents the goals of our distillery. 

So this adds up to trying to be as high end as we can with the resources we have. By striving to be as high end as possible we feel that we are doing a small part to encourage the responsible use of alcohol. How do we come to this conclusion? By having the proper price points and packaging, we are targeting a type of consumer that is at a lower risk of abusing alcohol, while also not pricing ourselves out of the market by staying out of the race to the bottom. 

I’d like to take a second to talk about the market trend that I mentioned, the “race for the bottom shelf”, using our Aurora Vodka as an example.

Our Aurora Vodka is on the vodka side of our malt barley spirit line. It entered the market with mid-range pricing within the Saskatchewan craft spirit and, having been on the market for over two years, has remained unchanged. At the time of its introduction, there were a few bottom-priced vodkas on the market, made from sourced alcohol. In the past two years, we have seen more and more bottom-priced beverages made from sourced alcohol enter the stores. Prices on the shelf have dropped to the point where the lowest legal price has become a huge gimmick. This has coincided with the increase in the use of sourced alcohol by distilleries, whereby they simply buy bulk ethanol and rebottle it at the lowest cost possible (in depth look on our previous blog post). This practice has become so widely used that the SLGA has had to create a two-tier system to distinguish between the craft producers who are actually making their own spirits and those who are just rebottling cheap sourced alcohol. 

What has this market trend done to the reputation of the Saskatchewan craft industry? And has this resulted in a change in the target group, a shift in who is most interested in buying these products? Is it truly responsible to continue to race to the bottom shelf, given that doing so targets the group of consumers who are at a higher risk of alcohol abuse? These are just a few of the questions that a distillery must consider when following market trends. Every single one of us needs to answer these questions according to our individual social conscience and company goals. Hopefully, the two meet at the same juncture. 

For us, finding the direction that our company wanted to go was a no-brainer. We are a Tier 1 distillery and are proud to be grain-to-glass. Our goals and our targeted consumers have remained the same through the years, and as I don’t anticipate our core values or conscience to change, I’m confident that they will remain the same when my grandchildren are running the place.

If you would like to read an in depth case study, follow this link to the Nation Center for Biotechnology Information!

-Tim Karchut