The Irish top the charts on alcoholic drinks expenditure
With spending of €1,584 in 2002, Euromonitor finds that the Irish spend more per head on alcoholic drinks than anyone else in the world. Given their reputation for swilling alcohol, a natural supposition is that the Irish drink a disproportionate amount of alcohol compared to the rest of the world.
But this is not quite the case. It is a convergence of factors that contribute to this comparatively high spend, factors which include taxation and the importance of the pub culture.
This is not to say of course that the Irish are not fond of their drink, indeed they are second only to Czech Republic in terms of per capita consumption at ready-to-drink level. This is primarily down to the high volumes of beer consumed in both countries. In Ireland, some 151 litres of beer per person were consumed in 2002 while in the Czech Republic, per capita consumption totalled 163 litres.
However a somewhat different picture emerges when looking at consumption in pure alcohol terms: Ireland’s per capita is just slightly higher than Germany’s at 11.8 and 11.5 litres of pure alcohol per head respectively. While Germany is behind Ireland in per capita consumption of beer, it is a higher consumer of both wine and spirits, both of which have a much higher alcohol content.
This pattern is also true of some other Western European countries including Austria and Spain which lag only slightly behind on between 11 and 10.5 per capita litres of pure alcohol respectively. So although Ireland stands at the upper end of the scale of in terms of alcohol drinking, it does not stand out in isolation by any means. How then do the Irish manage to spend so much more on alcohol?
There’s no place like the pub
In Ireland most drinking is done in the pub. An overwhelming 80% of all alcoholic drink sales is made on-trade. This phenomenon gives Ireland another world number one spot since in no other country does the on-trade weigh so heavily. The Western European average of on-trade sales stands at just over 40%, while the world average is even less. Sales of alcoholic drinks through the on-trade in Germany account for under 35%. So although it means forking out more money for a pint, drinking in a sociable environment takes precedence for the Irish consumer. In fact it could even be said that a sociable environment is more important than drinking itself since traditionally if a visit wasn’t made to the pub, it wasn’t substituted by having a drink at home. It is only recently that drinking in the home on a regular basis is becoming more mainstream.
A taxing subject
Coupled with this fact of paying higher than average prices because of the strength of the on-trade, another key contributing factor to the high per capita spending is the role that tax plays. In Ireland, the average price for a half litre of lager in a bar is €3.85 while in Germany the equivalent is €2.00. A comparison of excise explains much of the price differential. Excise of €9.88 is paid per every 100 litres of beer of 5% abv in Germany whereas in Ireland excise for the same amount is ten times higher at €99.35.
For spirits, the Irish pay three times the amount of excise compared to the Germans. For a standard bottle of wine in Ireland, €2.05 of the retail sales price equates to excise while in Germany there is zero duty on domestically produced wine, which accounts for almost half of wine consumed there.
With harmonisation a cornerstone of the European Union, the European Commission undertook a study on the impact of taxation on consumption patterns and competition in alcoholic drinks at the beginning of 2001. As part of the study, it was considered what would happen in the case of setting all excise duties at the indexed minimum rate across Europe. The main conclusion was that there would be a reduction of beer consumption in Germany, Spain and Luxembourg, while Denmark, Finland, UK, Ireland and Sweden would all experience significant increases in consumption.
Nothing can be said to be certain, except high spend and taxes
Price harmonisation on alcohol, however, appears far from the Irish government’s intentions with further hikes in tax imposed in 2003 which are estimated to yield €90 million for the Exchequer. Already faced with a heavy drinking culture, not to mention the substantial contribution that taxes make – estimated at 6% of the total national tax yield – the chance of taxes being lowered in the near future is slim. It is likely that the Irish will retain their mantel of being the highest spenders per head on alcoholic drinks for some time to come.
Note: litres of pure alcohol calculated assuming the following standard measure of alcohol by volume: beer, cider, perry & FABs 5%, spirits 40%, wine 12.5%