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We invite comments on the proposed minimum price of 50 pence per unit which is set out in the draft Scottish Statutory Instrument at Annex A.

We invite comments on the proposed minimum price of 50 pence per unit which is set out in the draft Scottish Statutory Instrument at Annex A .
Introduction The Wine and Spirit Trade Association (WSTA) is the UK organisation for the wine and spirit industry representing over 300 companies from major retailers, brand owners and wholesalers to fine wine and spirit specialists, logistics and bottling companies. We campaign for a vibrant and sustainable wine and spirit industry, across the UK, helping to build a future in which alcohol is produced, sold and enjoyed responsibly. The wine and spirit industry’s contribution to the UK is often underestimated. Over 550,000 jobs are supported in the UK directly and through the wider supply chain. It contributes £50bn in economic activity and pays more than £17.5bn in tax. The industry's contribution to the Scottish economy is significant too. Wine and spirit sales are worth £1.2bn to Scottish shops, supermarkets, pubs and restaurants. In addition to the Scotch whisky industry, there has also been a resurgence in Scottish gin and the majority of the UK production of gin is based in Scotland. Scotland now has 149 distilleries, up from around 90 in 2010, many of which are producing award winning gins and stretch from Shetland to South Edinburgh, there are even Scottish vineyards producing wine. We welcome the opportunity to respond to the consultation on a 50p Minimum Unit Price. Q We invite comments on the proposed minimum price of 50 pence per unit which is set out in the draft Scottish Statutory Instrument at Annex A. Proposed MUP level The level of price determined by the Scottish Government has a significant impact on the industry and the WSTA believes it is important therefore to provide as much clarity as possible on the proposed MUP level. For example, a 50p MUP will impact around half of all products on the shelf and this increases significantly with each increment above 50p . For example, a 60p minimum unit price would impact significantly more products on shelf and distort the alcohol market to a much greater extent. This means there should not be any variation from the Scottish Government’s proposed 50p MUP without further consultation with industry, a review of the evidential basis and detailed Business and Regulatory Impact Assessment based on any new price. Clarity on price It is vitally important that businesses have clarity about the market in which they operate and particularly clarity on price. A lack of certainty around this can have an impact on cashflow, profit and loss, investment or the ability to obtain finance. Therefore, there should be as clear as possible statement that the 50p MUP will remain for the full review period ahead of the sunset clause evaluation. Given the evidential basis for the policy suggested it did not require any uprating for the policy to be effective, there is no reason that uprating or a mechanism to change the price during this period is required. Implementation Retailers are currently preparing for MUP by updating their systems and training programmes. However, until the final Order is laid and the specific details of the policy are known it is not possible to finalise this. For this they require as clear as possible guidance as to how MUP will operate. The WSTA welcomes the Scottish Government’s commitment to producing guidance to support its implementation, but would urge the Scottish Government to ensure this is published in a timely manner, is clear, full and provides clarity over the range of complex technical issues that arise from introducing such a measure. Additionally, to ensure as close as possible regulatory alignment with England and Wales, we would urge the Scottish Government to mirror the relevant provisions on the guidance on the ban of below cost sales produced by the Home Office. Business and Regulatory Impact Assessment It is important that policy makers understand the full impact of the implementation of MUP, not just estimates developed from the impact assessment previously. We would urge the Scottish Government to gather data from retailers, large and small, of the costs associated with implementing MUP and to publish a full estimate of the cost of compliance with the new regulations. Communications It is important that retailers and consumers are aware of the changes and this therefore requires a communication plan from the Scottish Government. Trade Associations are playing their part in ensuring our members are aware of and implementing MUP, however further communications will be required to ensure it is fully understood across all retailers. We support calls for a standard text to be developed by the Scottish Government, which outlines the details of the policy, and can be displayed in store so that consumers are well informed as to why products may have increased in price. Additionally, we would urge licensing enforcement stakeholders to be proactively working with businesses to support them in being compliant and ensuring all businesses are aware of their obligations ahead of May 1st. Considering unintended consequences There is concern that MUP will lead to a number of unintended consequences and the WSTA believes that any monitoring and evaluation of the impact of MUP include the following areas: • Loss of value and non-branded products - Minimum Unit Pricing is a distortion of the market that will increase the price of around half the products on the shelf. The impact of this will increase the average price of alcohol products and reduce the price differential between branded products and value or non-branded products. The likely to result in the loss of a number of these products from the market and significantly reducing consumer choice. This will impact on jobs where those products are produced and may also have a knock-on effect on the wider supply chain in those areas where those businesses are located. • Increase in illicit or black-market trade – There is a real concern that the implementation of a Minimum Unit Price provides a significant incentive to trade alcohol illicitly. Minimum Unit Pricing will create a price differential between the production cost of a product and its retail price well in excess of the retailer margin. For example, a 3 litre bottle of high strength cider that currently retails for £3.99 would retail for no less that £11.25 under the Minimum Unit Pricing regulations at 50p. This therefore creates an incentive to sell products that will be available at wholesale in Scotland, or from other parts of the UK where the regulations do not apply, outside of legitimate retailing channels to profit from this while still under cutting legitimate retailers. This is not an incentive that currently exists to anywhere near this extent. Should the sale of alcohol outside of legitimate channels increase, it may appear through retail data that alcohol consumption or sales are declining, when in fact consumption, and potentially harm, remains the same. • Loss of economic activity – There is evidence to suggest a price differential across a border could lead to consumers shifting their purchases out of Scotland. This is particularly the case in the boarders where there is easy access to England. • Impact on the low income – By its nature Minimum Unit Pricing is regressive and will impact those on low incomes the most. Alcohol consumed by those on higher incomes is more likely to be above a Minimum Unit Price level and therefore the impact will be most felt by those on low income who purchase alcohol at the lower price level. The consequence is making a regular shop for people on low incomes more expensive which will impact on their standards of living. This is particularly the case at a time when inflation is over 3% and it continues to outpace wage inflation. • Retaliatory trade barriers for exports – The WSTA is working to promote the export of British products abroad, including Gin produced in Scotland. There has been significant growth in UK exports with spirits making up about 25% of UK Food. British Gin (£475m), much of which is produced in distilleries in Scotland contributes to nearly £5bn in spirits exports. However, as a barrier to trade, Minimum Unit Pricing could potentially result in retaliatory measures that restrict access for Scottish spirit producers making it hard for them to export. This could particularly be the case following the UK’s exit of the European Union.

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Wine and Spirit Trade Association