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Minimum unit pricing for Scotland to go ahead – who will benefit?

Following the UK Supreme Court’s decision that the Scottish Government’s plan to introduce minimum unit pricing for alcohol (MUP) is a proportionate means of achieving a legitimate aim, the Government now plans to activate MUP from 1st May 2018.  The effect of the legislation will be to insert in every alcohol retail licence in Scotland a condition prohibiting the sale of any alcohol product at below the statutory minimum price.  A final consultation on the proposed minimum price of 50p per unit of alcohol is now under way.

Effect on drinkers

50p per unit will be the minimum retail price, inclusive of VAT and excise duty, so retailers will have to increase the price of all products currently selling below that price.  The Scottish Government says this will impact mainly on cheap, strong drink – mostly “value spirits” and “white cider” sold in the off trade.  It believes that the higher price will make harmful drinkers buy fewer of those products, and therefore drink less.  Whether that will be so remains to be seen.

A windfall for retailers?

It is predicted that retailers will sell fewer target products, but at higher prices, and that this will probably increase their revenue from those sales overall.  The multiple supermarkets have the lion’s share of off trade sales, so they will get the bulk of that revenue.  (Although Scottish convenience store operators are excited about being able to compete more closely on price with the multiples.)  No-one knows what the additional profits made as a result of MUP will be, or whether any of them will make their way up the supply chain (although many think this unlikely).  The Supreme Court noted that the Scottish Government has power to impose a social responsibility levy on retailers on social and health grounds, and use the proceeds to tackle health issues.  But it will be difficult to quantify precisely the windfall profits made, and who is making them.  It will be interesting to see how this aspect of it develops.

Effects on the wine market

Most of the target products are non-wine, and domestically produced.  At a unit price of 50p, the minimum price of a 750ml bottle of wine would be between £4.50 (at 12% abv) and £5 (at 13.5%).  If the wine is already selling at a higher unit price than 50p nothing will change.  Promotions resulting in lower than minimum prices will be prohibited.  But those are unlikely to have been profitable for producers, and what the retailers lose on the swings they may make good on the roundabouts.

Only the beginning?

Notwithstanding that MUP in Scotland will only be for an initial experimental period of 5 years, and then reviewed – which for the Supreme Court was an important factor in its favour – plans to introduce MUP in Wales now appear likely to proceed, although the unit price is yet to be decided.  Renewed calls to introduce MUP in England as well will probably follow, not least to help minimise the problem of cross-border sales within the UK.