1. Alcohol affordabilty in South Africa Alcohol affordabilty in South Africa Evan Blecher, PhD evan.blecher@cancer.org

2. Background Economists promote excise tax increases as an appropriate and effective tobacco and alcohol control strategy Higher taxes increase the retail price and reduce the demand for products Supported by a vast literature – significantly more for tobacco than alcohol In recent years many low-and-middle-income countries (LMICs) have experienced rapid economic growth  Resulted in higher incomes and greater purchasing power  As incomes rise people find many things, including cigarettes and alcohol, more affordable

3. Global economic growth

4. Why affordability? Economics 101 Demand (quantity demanded) is a function of:  Price (negative)  Income (positive)  Other factors like advertising, demographics, tastes, preferences, etc Historically we consider how determinants influence demand, ceterus parisbus (all else held constant) Affordability considers price and income simultaneously → this is easier said than done!  Can we explicitly measure affordability?  It is only a relative concept and has no absolute meaning  Consider it at a point in time or how it changes over time  Some might argue that we cannot model affordability in the context of demand

5. Alcohol affordability literature Kan and Lau (2013)  Follow the Kan cigarette method  Scotch, cheap beer, table wine, vermouth, cognac and liqueur  65 cities in 2009  Highly affordable in many cities (88%)  Study lacks any time series analysis and makes absolute conclusions Several country studies on alcohol affordability – particularly in Europe

6. Income Should we use a road or narrow measure of income Broad: per capita GPD  Blecher and van Walbeek (2004 and 2009)  World Bank’s World Development Indicators  Less sensitive to different tax regimes and government’s role in providing goods, services and grants  Available for a large number of countries (particularly LMIC)  Annual observations Narrow: UBS Survey of Earnings  Guindon et al (2002) and Kan (2007)  Net hourly earnings from a number of occupations (12 to 14)  Available for a smaller number of countries (mostly HIC)  Represents purchasing power and easily understandable  Discrete series every three years  “A London teacher’s net hourly wage in 2006 was £8.65” versus “Per capita GDP in the UK in 2006 was £21,084”

7. So, where do we start with alcohol Price data – Economist Intelligence Unit  Data collected in 140 cities in 92 countries from 1990 to present  However, some Islamic countries do not collect alcohol prices (e.g. Brunei, Iran, Kuwait, Libya and Saudi Arabia), meaning 87 countries effectively  High representation of LMICs

8. Products Each product line is measures in two retail environments: mid- priced store and supermarket Beer  Local brand (1L, standardize to 330ml)  Top brand (330ml) Wine (750ml)  Common table – consistent  Fine quality – no idea what they are measuring  Superior quality – no idea what they are measuring Spirits (700ml)  Congac (French VSOP), Gin (Gilbey’s), Liqueur (Cointreau), Scotch Whisky (6 year old), Vermouth (Martini)  Focus on Gin and Whisky Use the lowest price in each category

9. Chalenges Noisy data Challenges for higher priced brands – lack of consistency of product selection over time (safe to assume this is a more significant problem across countries) – mitigate this through use of lowest price City consistency within and across products – more challenging than cigarettes No USD data which we had for cigarettes which helps in economies in transition of high inflation environments

10. Outline Nominal prices in most recent year (2012) Trends in real prices (1990-2012) Affordability in most recent year (2012)  Relative Income Price  Minutes of Labour Trends in affordability (1990-2012)  Minutes of Labour

11. Beer prices in USD in 2012

12. Wine price in USD in 2012

13. Gin price in USD in 2012

14. Whisky price in USD in 2012

15. Summary Nominal prices in most recent year (2012)  Prices of beer lower in LMIC versus HIC  Prices of wine, gin and whisky similar in LMIC and HIC  Significant within group variation South Africa  Beer prices in the “middle of the pack”  Wine cheaper than in many other countries  Gin and whiskey amongst the cheapest in the world

16. Trends in real beer prices 1990-2012

17. Trends in real wine prices 1990-2012

18. Trends in real gin prices 1990-2012

19. Trends in real whisky prices 1990-2012

20. Summary Trends in real prices (1990-2012)  Real price declined in most LMIC and HIC South Africa  Real prices increased for all products  This corroborates other findings elsewhere

21. Affordabilty of beer (RIP) in 2012 Note the dual axes – next slide shows the same graph with a single axis

22. Affordabilty of beer (RIP) in 2012

23. Affordabilty of wine (RIP) in 2012

24. Affordabilty of gin (RIP) in 2012

25. Affordabilty of whisky (RIP) in 2012

26. Affordabilty of beer (MoL) in 2012

27. Affordabilty of wine (MoL) in 2012

28. Affordabilty of gin (MoL) in 2012

29. Affordabilty of whisky (MoL) in 2012

30. Summary Affordability in most recent year (2012)  All products more affordable in HICs than LMICs  Expected result since incomes are so much higher  Scale of affordability much higher with RIP than MoL South Africa  Beer and wine are more affordable in South Africa than most LMICs  Gin and whisky are amongst the most affordable in the developing world  Alcohol is more affordable in South Africa than some HICs

31. Trends in affordability of beer 1990-2012

32. Trends in affordability of wine 1990-2012

33. Trends in affordability of gin 1990-2012

34. Trends in affordability of whisky 1990-2012

35. Summary Trends in affordability (1990-2012)  Beer and wine became more affordable in the majority of HICs and LMICs  Gin and whisky became more affordable in all HICs  Gin and whisky became more affordable in the majority of LMICs South Africa  All products became more affordable  However, they became more affordable at a slower rate than most LMICs

36. Trends in cigarette affordability

37. Cigarettes as a benchmark

38. Conclusions Global  Alcohol products have become more affordable in most countries in the world South Africa  Alcohol in South Africa is cheap by global standards  Alcohol is South Africa is some of the most affordable in the developing world  Alcohol products have become more affordable in South Africa  It is particularly concerning to see how alcohol has become more affordable during the same period of time in which cigarettes became significantly less affordable