Grapes, hops and alcopops

Based on the Consumers Price Index (CPI) expenditure weights, nearly $5 out of every $100 spent by households is on alcoholic beverages. That equates to about $45 spent on alcoholic beverages each week by an average household. Households have been presented with an increasing number of choices over the past two decades. They have been able to purchase from a wider range of beers, wines, spirits and liqueurs, choose from local or imported beverages, shop at supermarkets for wine (from 1989) and beer (from 1999), and consume alcoholic beverages at a substantially higher number of licensed premises. With the purchasing age lowered they've been able to do all of this at younger ages (from 1999).

Figure 1 shows that the total amount of alcohol available for consumption has increased during the past 10 years, following declines in the previous 10 years.

Figure 1

Graph, Litres of Alcohol Available for Consumption.

It is interesting to see how this translates to the amount of alcohol available for consumption per person above the purchasing age (noting that the minimum age for purchasing alcoholic beverages changed from 20 to 18 years in 1999). Before this, the amount of alcohol available per person aged 20 years or over had generally been declining since 1986. It fell by 24 percent, from 12.8 litres per person in 1986 to 9.8 litres per person in 1999. Since the purchasing age was lowered, the amount available per person aged 18 years or over has risen slightly from 9.4 litres in 1999 to 9.8 litres in 2007.

Prices for alcoholic beverages have increased, by a total of 29 percent from the June 1999 quarter to the March 2008 quarter. Compared with the overall CPI, prices for alcoholic beverages have increased more rapidly, as the CPI increased by 25 percent over the same period. It is interesting to note the different rates at which price levels have changed for alcoholic beverages consumed on and off licensed premises. Figure 2 shows that prices at off-licence premises have increased at a substantially slower rate (up 19 percent) than prices at on-licence premises (up 39 percent).

Another interesting aspect shown in figure 2 is the noticeable increases in alcoholic beverage prices in September quarters. An explanation for this is that an inflation adjustment to the excise duty levied on alcoholic beverages has been made on 1 June each year. As prices are collected monthly, there is an effect in June quarters as well, but the majority of the movement is shown in the September quarters.

Figure 2

Graph, Consumers Price Index Alcoholic Beverages: On and Off Licensed Premises.

As mentioned earlier, prices for alcoholic beverages have increased overall by 29 percent since the June 1999 quarter. Looking back a decade further, prices increased by 72 percent from the December 1988 quarter. The costs of beer, wine, and spirits and liqueurs have increased by varying amounts. Figure 3 shows that beer has had the highest overall increase, at 82 percent. Spirits and liqueurs had the next highest increase, at 72 percent. Wine prices have increased less substantially, rising 40 percent, which is lower than the overall CPI increase of 61 percent during the period.

Figure 3

Graph, Consumers Price Index Alcoholic Beverages: Beer Wine and Spirits and Liqueurs.

Supermarkets began selling wine in 1989. In figure 3 it is interesting to note the decrease in the level of wine prices between the September 1990 quarter and the March 1992 quarter. Wine prices fell for five successive quarters, by a total of 5.9 percent.

The overall level of alcoholic beverages available for consumption can be broken down further into beer, wine and spirits. This gives an insight into what has driven the total movements for alcoholic beverages. Figure 4 shows that the level of beer available for consumption declined from the mid-1980s to 1997, largely reflecting the overall trend for alcoholic beverages. The fall for beer was offset to some extent by a moderate increase in wine availability.

Since 1997, the volume of alcoholic beverages available for consumption recovered the losses incurred during the previous decade, but over the latter period beer has not been the main driver. In fact, beer levels have remained relatively constant. The minimum purchasing age was lowered in 1999, and supermarkets began selling beer in late 1999. Based on sales, beer (and wine) have grown to become two of the biggest categories at supermarkets.

Figure 4

Graph, Alcoholic Beverages Available for Consumption.

Wine levels grew strongly over the past decade and reached over 92 million litres available for consumption in 2007, 36 percent higher than in 1997. Like beer, wine has been a big seller at supermarkets.

Looking at figure 4, it is apparent that the level of spirits has increased sharply since 1995. Levels were reasonably steady before this at around 11 million litres. However, since then they have grown to over 66 million litres in 2007. The increase is due to the increasing popularity of alcopops or RTDs (ready-to-drink pre-mix spirits), which are lower in strength than the traditional full-strength spirits. Levels for stronger spirits have stayed relatively constant at around 10 million litres per year, whereas figure 5 shows that lower-strength spirits have been steadily increasing since the mid-1990s.

Figure 5

Figure 5 shows how New Zealanders' tastes for alcoholic beverages have changed. Beer has always been the most highly available alcoholic beverage. In 1986, beer made up 85 percent of all alcoholic beverages available, whereas wine and spirits made up 12 percent and 3 percent, respectively. In 1996, just before alcoholic beverages reached the lowest level of availability in the past 20 years, a shift was apparent. Beer, while still the most widely available, had decreased to 81 percent, wine had increased to 16 percent and spirits remained at 3 percent.

In 2007, beer remained the favourite alcoholic drink, but only made up 66 percent of the available volume. Wine now accounts for 20 percent and the big mover has been spirits, which, at 14 percent, accounts for one litre in every seven available. The increase for spirits is solely due to growth in alcopops.

Back to Price Index News: July 2008