Elsevier

Journal of Substance Abuse

Volume 10, Issue 4, December 1998, Pages 355-373
Journal of Substance Abuse

Implications of Privatizing/Deregulating Alcohol Retail Sales: Projections of Alcohol Consumption in Ontario

https://doi.org/10.1016/S0899-3289(99)00011-5Get rights and content

Abstract

Purpose: To project the consequences of privatizing or deregulating current alcohol retail monopolies in Ontario, Canada. Methods: The projection is based on a multiplicative model and applied to estimate per capita alcohol consumption for four hypothetical scenarios, including both partial and complete privatization for the Province of Ontario, Canada. Those scenarios are mainly focused on the two dimensions of changes affected by privatization: alcohol physical availability and economic availability (i.e., retail prices). Various assumptions involving availability and prices are largely based on the Canadian and international research literature on deregulation/privatization. Results and Implications: The study showed that per capita alcohol consumption in the short/medium term is expected to increase in all four hypothetical scenarios examined, with the magnitude ranging from 11% to 27%. The sensitivity analysis also revealed a similar increase in alcohol consumption, even though the magnitude of the increase would be less for some scenarios. Therefore, any deliberations on modifying alcohol control policies are well advised to proceed with caution, since an increase in alcohol consumption is likely to be associated with elevated levels of drinking-related problems.

Introduction

Since the 1970s, privatization/deregulation of liquor control — or demonopolization — has been discussed in many jurisdictions, and implemented in several Edwards et al., 1994, Holder et al., 1995, Österberg, 1992. In Ontario, the 1995 provincial election campaign included reference to the options of privatizing provincial liquor stores and allowing variety grocery stores to sell alcohol. The “natural experiment” literature demonstrates that privatization or demonopolization of the alcohol distribution system associated with an increase in the number and types of retail outlets, in hours of sales, in advertising, in sales promotions, and changes of alcohol retail prices. In many instances, this increased access to alcohol may lead to an increase in alcohol consumption and alcohol- related harm (Her, Giesbrecht, Room, & Rehm, 1999). The intent of this paper is to project the per capital alcohol consumption rate in Ontario if a partial or complete privatization of the retail sale of alcohol had been implemented in 1995.

The projection focuses on evaluating two dimensions of alcohol availability that are commonly affected by privatization: physical availability and alcohol retail prices. All scenarios and parameter assumptions are based on evidence acquired through international and Canadian research in the past several decades. Recent drinking patterns among Ontarians are also incorporated into this projection.

Section snippets

Description of the Model

In this paper, a multiplicative model developed by Skog, 1979, Skog, 1991 and Holder et al.(1995) is used to estimate per capita alcohol consumption, where the changes in availability and price are assumed to be two factors affecting alcohol consumption. For the purpose of model testing, we assume that other macro-environmental factors (such as other alcohol-related regulations, or life style changes) will be either stable or not be directly affected by dismantling or restructuring the

Availability Scenarios

A0: Status quo. No change in availability.

A1: Wine and beer sales are extended to all corner stores, convenience stores, small and large grocery stores and supermarkets.

There are no studies from North America on the effect of deregulation on beer consumption. However, three studies were conducted in Nordic countries. In 1969, in Finland, medium-strength beer was introduced to 17,431 grocery stores compared with prior sales in only 132 state-owned monopoly stores. The consumption of

Results

Per adult alcohol consumption (see Table 2) is projected by applying model Formula A and substituting those parameter assumptions with low price elasticity (see Her et al., 1996). Note that the left-hand corner of the table (no price change, no availability change) is the actual per adult alcohol consumption value for 1994–1995 in Ontario and the area below the first row (A0) contains the short/medium-projections for different privatization scenarios.

As can be seen in the model in Table 2, in

Sensitivity Analyses and Long-Term Scenarios

The estimates of the change in consumption levels for different availability scenarios are a relatively conservative reflection of the findings in the empirical literature. But there is considerable variation in those findings, and room for debate about the applicability of the literature to Ontario. Previous research shows that the effects of increased availability are strongest for wine, but several of the studies are for jurisdictions where wine was a smaller segment of the alcohol market

Discussion and Implications

Results from our main analysis, using the best available estimates of parameters in the short or medium-term, showed that in all four of the privatization scenarios examined, the per adult alcohol consumption could be expected to increase, the magnitude ranging from 11% to 27%. Hence, this study suggests that liberalizing access to alcohol is likely to result in an increased consumption of alcohol, even if some of the availability effects might be counterbalanced by increased price. It is

Acknowledgements

Preparation of this paper was supported in part by the funding from the Ministry of Health, Government of Ontario, Canada. The authors would like to thank a number of persons for their comments on an earlier document in developing this paper: Susan Bondy, Philip Cook, Perry Kendall, Harold Mulford, Gerald Fitzgerald, Jussi Simpura, Kalervo Leppanen, Eric Single, Tim Stockwell and Douglas West. The authors would also like to thank Rowland Dunning, Rob Hinrichsen, Christiane Dini and Alexander

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