RTDs=WMDs?

The new Australian government has gone to war on RTDs – how long till the battlefield reaches here?

Kevin Rudd’s new Labour government recently announced an excise hike on RTDs of 70 per cent ‘to curb teenage binge-drinking’, equating to about a 25-30 per cent increase. The raise is expected to boost the government’s coffers by AU$500 million (assuming sales don’t go down), and puts pressure on most of the country’s liquor suppliers, especially the big RTDs suppliers such as Independent, Diageo and Fosters. Weeks before the sudden increase Foster’s and Lion Nathan had taken the initiative and stopped producing alcohol-laced energy drinks and extra-strong pre-mixed spirits, presumably to placate the government.

Obviously the hardest hit company was Independent Liquor; 60 per cent of their sales are made in Australia and some of their drinks are among the most popular. Independent’s chief executive, Doug McKay stated that it was unfair to tax the drinks at a rate comparable to full strength spirits, as it they had just 5 per cent alcohol – the same as beer.

Lion Nathan’s corporate affairs director, Liz Read, understands that the subject does whip up emotions, and that in this regard RTDs pose a unique problem for the industry.

“There certainly is a level of legitimate community concern surround RTDs, they do have a very different taste profile when compared to other categories, which means they do have an element of appeal to younger drinkers. Having said that, if the issue is the culture of drinking in New Zealand and Australia, and the prevalence of binge drinking, then that’s not so much what people are drinking, it’s how they’re drinking – to borrow from ALAC,” says Read.

Doug McKay, in an interview with Associated Press, stated simply that tax hikes on specific drinks don’t solve binge drinking.

"Binge drinking is a social and community issue and where it does occur, it is across all forms of alcohol. In fact, the number one preferred binge drinking product is beer, number two is wine, and number three is RTDs closely followed by full strength spirits."

Certainly all players in this sector are focusing intently on these overseas trends. Mark Campbell GM corporate affairs and human resources at DB, a newer RTD player, obviously isn’t terribly worried.

“The RTD market is very competitive and has become even more proliferated over the last 12 months. We are relatively new and small player in the RTD market and our focus is on 5% ABV drinks, which is the same alcoholic content as beer. While beer is our business and always will be, our RTD portfolio means we’re not totally reliant on one category. No DB products contain more than 2 standard drinks per unit, for this reason there would be no reason to change our current products,” he said.

Lion Nathan having more of a stake across the ditch is a bit more diplomatic, and works closely with government there and here to ease concerns based on evidence.

“Certainly in new Zealand we have watched the events in Australia with some interest, so on both sides of the Tasman lion Nathan has maintained a good relationship with government over the years, in terms of discussing evidence based measures that will actually make a real difference to reducing alcohol related harm,” says Read.

While more extremist elements have advocated the banning of such drinks, or even limitations in their marketing, availability and pricing structures over here, the temptation to simply move to another drink or substance is strong.

“Young people are enormously price sensitive, and that goes into everything that they do. Put that together with their sensation seeking tendencies, the likelihood that they will find something else as an alternative to higher priced RTDs is extremely high,” says Read, “That could mean buying a bottle of full strength spirits, mixing their own and that could well be a recipe for disaster. When they’re buying ready-to-drink single serve items they at least have the benefit of some information, a controlled alcohol level, and knowledge of the aspects of it’s composition.”

Some industry commentators have pointed the finger at Australia’s big beer brewers, especially those with limited RTD portfolios for perpetuating the RTD-underage drinking-binge drinking myth in order to boost the stagnating popularity of beer among the demographic. Some companies have already thumbed their noses at Rudd, proposing a new generation wine coolers. Popular in 80s, and somewhat ironically a drink that caused the same kind of backlash we’re seeing amongst community groups now. In Australia, wine is not classified as such unless it is at least 70 per cent wine and more than 8 per cent alcohol – mixed with lemonade and other flavourings it is extremely easy to reproduce RTD style concoctions to utilise this loophole.