When speaking of alcoholic goods, we usually refer to beverages. The price refers to the value at which the beverage is sold to the consumer.
Prices of alcoholic beverages are regulated by the state. The rationale for doing so is supported by a significant body of evidence suggesting that pricing policies (in particular taxation, on which much research has been conducted) can be one of the most effective (and cost-effective) levers at governments’ disposal to reduce alcohol consumption and related harms.*
The differences between the prices of alcoholic beverages are largely determined by 2 common factors; the costs of production and the duties levied on those costs. Duties on alcohol are usually set by the Chancellor of the Exchequer in the annual Budget.
Alcohol duties make a substantial contribution to state revenues. HM Revenue and Customs (HMRC) received approximately £10 billion from alcohol duties in the financial year 2012/13, 2% of total tax receipts.
However, big retailers can still circumvent the costs of selling alcohol products by adopting below-cost sale tactics such as Buy-One-Get-One-Free offers in order to attract custom. This undermines the public health purpose of taxation as an instrument for altering consumer behaviour.
Governments have therefore been exploring alternative ways in which they can influence the price of alcoholic goods sold. The Scottish Government is currently in the process of introducing one such measure (minimum unit pricing), subject to a challenge from industry players.
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[*] Hunt, Priscillia., Rabinovich, Lila., Baumberg, Ben (June 2010), 'Preliminary analysis of the economic impacts of alcohol pricing policy in the UK', RAND Europe, p. 13; from Babor, Tom., et al (2003)