As Liquor
Prices Rise, Consumption Stalls
A distiller's recent decision to raise prices has boosted profits
but slowed sales, unintentionally providing statistical support
to preventionists who argue that making alcohol more expensive is
effective in preventing overconsumption and related problems.
The Wall Street Journal reported July 16 that Diageo PLC, maker
of brands like Smirnoff vodka, Bailey's Irish Cream, and Captain
Morgan rum, in the last year broke with industry precedent to sharply
raise prices on at least 19 of its 25 brands. Through mid June,
retail prices of Diageo products were up 2.1 percent, according
to an ACNeilsen report. Company profits rose 5 percent during the
same period.
But as prices and profits rose, sales of Diageo products began
to slow. The company, which controls 21 percent of the U.S. liquor
market, was widely credited with leading a 3.5 percent rise in industry
sales last year. But in the first half of 2004, the company's sales
volume in distribution outlets rose just 0.1 percent, far below
the 1.7 percent growth in the rest of the industry.
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