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Scope of Supplemental Report
This report supplements my opinion regarding the impact of permitting the sale of wine and distilled spirits in grocery stores and stores selling gasoline and lubricating oil in Kentucky. It responds specifically to Plaintiff’s Expert Witness Supplemental Report dated October 12, 2011. I incorporate by reference my Expert Witness Report dated September 30, 2011. To the list of exhibits, I add “An Alcohol
Policy Research and Alcoholic Beverage Control Systems: An Annotated Bibliography and Review,”
National Alcohol Beverage Control Association, NABCA, Copyright 2008.
This supplemental report challenges the validity of using economic analyses from Massachusetts and Tennessee to reach conclusions about the impact of changing Kentucky regulations; challenges suggestions that underage drinking would not be impacted should Kentucky’s law be changed based on wine consumption patterns; reviews aspects of history since Prohibition; and, responds to various issues raised about my previous report.
I reiterate my opinion from my original report and add the following statement: The elimination of KRS 243.230(5) and 804 KAR 4:270 would create the potential for both wine and spirits to be sold in grocery and convenience stores associated with gasoline stations. Statistics about youth’s lack of preference for wine cannot be used as a justification for elimination of these regulations as such elimination would allow both wine and spirits to be widely available. Preferences change over time for adults and youth and data indicates that youth, particularly girls, now prefer spirits.
Concerns about Economic Analysis Studies
Plaintiff’s expert has submitted a supplemental report including two economic impact analyses of adding wine to grocery stores in two different states: Massachusetts and Tennessee. In my opinion, there are serious concerns about using these two studies to determine the wisdom of changing alcohol regulations. Both studies are designed to project positive benefits of adding wine sales to grocery stores. In both cases, the vast body of social science alcohol research is ignored or dismissed and standard social science methods used to determine cause and effect are not used.
There is a large body of social science research that helps us understand what works in controlling alcohol problems. Much of it is very recent and generally validates our basic alcohol regulations. But there are considerable gaps in research and we will likely never know everything. The social science discipline espouses strict standards for research that would attribute causality. Generally, such research should be objective with standard measures designed to eliminate bias and the unique circumstances of different locales. This means subjects should be selected at random with an adequate sample size and the experiment should be repeated and reviewed by peers in the field. Organizations such as the World Health Organization (WHO) (1), the Centers for Disease Control and Prevention (CDC)
(2) and the National Alcohol Beverage Control Association (NABCA) (3) use these kinds of standards to assess research that exists. This does not mean that we should never adopt a policy or law without credible research. We would become paralyzed if that happened given that many kinds of human
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phenomenon cannot be researched or the fact that there are limits to human knowledge. Research should be viewed as a helpful input for making effective decisions.
In the “Economic Impact of Allowing Wine Sales in Food Stores in Tennessee,” (4) the authors project an increase in jobs and government revenue based on two scenarios: a 25% market growth and a 55% market growth. Yet, they also conclude there is little evidence that expansion of off-premise sales locations increases alcohol abuse. They conclude that “A review of alcohol abuse literature conducted for NABCA found no reliable connection between off-premise outlet density and increases in alcohol abuse, although there was some positive evidence with respect to on-premise outlets.” I was unable to locate such a conclusion in this publication. Instead, the following is their summary statement on outlet density:
“2.2.3 Outlet Density, Types of Stores and Locations
Research suggests that alcohol outlet density is positively correlated with alcohol-related problems including violence, such as assaults and child abuse. Further, research has established that these relationships vary by license type and may in some cases be non-linear, such that beyond a threshold number in a particular area each additional license resulted in more assaults than an additional license in areas with fewer. However, research is mixed on the relationship between outlet density and behaviors such as drinking and driving. Some research suggests that lower density increases drinking and driving due to the distance that a drinker must travel to get to and from an alcohol outlet, and the necessity of driving rather than walking. These mixed results are also found when considering type of establishment, with restaurant density showing a positive correlation with drinking and driving, and bar density showing a negative correlation.
However, these differences are nested in the context of individual drinking behaviors and patterns as well as characteristics of patrons such as aggression and hostility. Also in question is whether effects related to hostility and aggression are the result of the norms held at a particular establishment, or if patrons with similar norms are able to choose a particular establishment as a result of high outlet density. Overall, a lack of research using well established and tested measures of outlet density and alcohol-related harms is cited as a barrier to understanding the nuances of how outlet density affects alcohol consumption and related harms. It is suggested that states and territories collect systematic data on outlet densities, consumption and alcohol-related harms in an effort to predict how changes in density might affect these outcomes. The few studies of changes in store types allowed to sell particular types of alcoholic beverage suggest that this will increase consumption of that beverage type but may not affect other types.” (3, p.44)
Basically, this publication suggests that, in general, more outlets lead to more alcohol problems although it seems to vary with the type of outlet and the type of problem. They suggest that there may be a critical mass that triggers problems, but indicate the need for additional research in order to really understand how outlet density impacts alcohol problems. Relevant to the issue of adding wine and spirits to grocery stores, they note that the few studies of this change suggest it will increase the consumption of the type of beverage product added. This suggests that policy-makers should be cautious about changes to alcohol availability and realize the potential risks of increasing problems.
Since the publication of the NABCA Bibliography in 2008, there has been considerable additional research on the issue of outlet density. Based on the recent body of research the
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Centers for Disease Control and Prevention’s Community Task Force now “ recommends policies that limit outlet density based on sufficient evidence of a positive association between outlet density and excessive alcohol consumption and related harms.”(2)
Given that the Tennessee report projects an increase in sales of 25-55%, it is inconceivable that such a large increase will have no impact on alcohol problems whatsoever.
The second report, “Effects of the MA Wine at Food Stores Initiative,” (5) also gives little attention to social problems with alcohol, and devotes most of its pages to how the proposal would work and how it would increase consumer choice, convenience and reduce consumer costs. They declare that concerns about underage drinking are unwarranted. One of the reasons is their contention that “package stores” are no better at preventing sales to minors than supermarkets. Yet the data they cite could lead to the exact opposite conclusion. They state that package stores account for about 2/3 of the violations for underage purchases. But, they also state that package stores own the majority of retail liquor licenses and account for 85% of wine sales. As a result, one would logically expect package stores to have the majority of off-premise violations. Moreover, the data cited from Massachusetts does not conform to widely accept statistical standards and simply cannot be used to conclude anything about Kentucky. To be a fair test of different types of stores, at a minimum, you would have to have random selection of targets, a larger sample size, and repetition of the test in different locales.
Other reasons cited for unwarranted concern about minors is the data showing that most minors get alcohol from sources other than stores and that wine is not the “drink of choice” of minors. I do not dispute these data, but offer a few cautions. Regular and frequent enforcement of age restrictions is a relatively recent phenomenon and is assisted by federal grants for that purpose. Prior to
1996, such enforcement was rare and it is likely that more minors bought their own alcohol. However, by expanding the types, hours, days and locations of alcohol sales and by making it a lot cheaper, you facilitate the process of supplying youth with alcohol and add to the burden of law enforcement.
Second, preferences in alcohol types do change over time with adults as well as minors. Youth used to prefer beer, but that is changing. While boys still appear to prefer beer, girls prefer spirits, especially vodka. In a comprehensive report on teen culture funded by the Century Council (a spirits industryfunded non-profit) they determined that, “Teens tend to drink whatever alcohol is available. Their preference is liquor, particularly vodka, because it can be mixed with juice and has its effect more quickly.” (7, p. iii) While I do not dispute the evidence that wine is not the beverage of choice for minors, the wine category is broad encompassing wine coolers and bringing an array of new products which may in the future attract youth particularly if they are cheap and sweet tasting.
The issue of greatest concern at this point in time is the addition of spirits to grocery and convenience stores since youth will likely increase their consumption of this high potency product if it becomes much more available. Some spirits industry representatives have argued that all forms of alcohol are equal because the same amount of alcohol is contained in a standard drink. But this is merely a technical argument. It does not describe the practice of underage drinking. It is unlikely that
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the underage drinker carefully pours the specified ounces of spirits in standard drink sizes in order to monitor their consumption.
Both economic analyses express concern about the “anti-competitive” nature of alcohol regulations and suggest that proposed changes would bring consumer benefits of lower prices and greater selection. It should be noted that alcohol regulatory systems strive to balance prices. Prices too high encourage bootlegging and prices too low increase consumption and the greater alcohol problems associated with higher consumption. It is inaccurate to characterize alcohol regulatory systems as anticompetitive in purpose; rather the price balancing policies are based on strong research indicating that price is a powerful mechanism to control consumption and problems. The price balancing mechanisms have provided an environment where small operators—be they wineries, craft brewers, small distributors, wine shops—can operate profitably without being eliminated from the market by large corporate operators.
A final concern about both studies is the lack of attention to other problems alcohol causes in our society. In a section of the NABCA Bibliography entitled, “What makes alcohol different from other commercial products?”, they discuss the following problems which are related to alcohol consumption: poisoning, cancer and heart disease, injury, violence, risky sex and STD’s, driving-related accidents,
fetal alcohol spectrum disorder, chronic heavy use and addiction. (3) We should never forget the devastation that alcohol creates as we strive to achieve the right balance of moderation in consumption.
Through policies that foster moderation, we can minimize problems, provide for employment, and foster the enjoyment of our citizens. It is that balance that must be sought in face of the serious problems alcohol can engender.
It should be noted that neither of these economic analyses was sufficiently persuasive to convince the legislatures in Massachusetts or Tennessee to permit the sale of wine in grocery stores.
History of Alcohol Regulation since Prohibition
It is my opinion that deregulation of alcohol by removing most of our marketplace regulations would be an extreme measure. What we have learned from Prohibition is that an extreme measure, rigidly applicable to all states is not very workable. Americans are pragmatic in nature and we are at our best when working in practical ways by experimenting, learning, adjusting to changes in the environment as time passes by. That is what was allowed by the 21st Amendment when the states’ were granted the ability to regulate alcohol. In my opinion, it has worked remarkably well.
From time to time, things do get out of balance. But, then efforts emerge to re-right the balance. In the 1970’s alcohol laws were liberalized—most notably the age restriction. Several states lowered the drinking age to 18 or 19. But, car crashes and fatalities due to alcohol increased which propelled the formation of Mothers Against Drunk Driving. Eventually, all states returned to the 21 age limit. Laws against drunk driving became stricter. Enforcement increased and death and injury rates due to alcohol declined. Recently, cheap alcohol energy drinks have emerged as a problem. But, once again community groups marshaled to publicize their impact and, as a result, many have been removed from the marketplace or reformulated.
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I do not dispute the idea that sale of malt beverages of high alcohol content in grocery stores is a problem. But, the solution is certainly not to add additional types of products with high alcohol content such as wine and spirits. Spirits products are typically sold in a concentration of 40% (80 proof).
It is the product that can achieve the most rapid intoxication because of this high concentration.
Businesses often try to find ways to circumvent regulations. New products come on the market that later turn out to be harmful. These are issues with which regulators and policy-makers will always have to deal.
Plaintiff’s Expert comments on Defendant’s Report
Regarding the “domino effect”, in my opinion it is a very real concern. It is how deregulation occurred in the United Kingdom beginning with allowing sale of all forms of alcohol in grocery stores followed by lessening of closing hours to the point of allowing 24 hour sales. In the wake of these changes, four large grocery chains gained 75% of the grocery market and began to aggressively sell alcohol at low price points. They even cut into the off-premise market share as people began to drink the cheaper alcohol at home before going out to clubs and pubs. (6) If grocery stores can sell alcohol, they will likely lobby to sell these products at all hours they are open for business, they will want to be able to use clerks as young as 18 and engage in discounting and advertising designed to increase sales.
Use of self check out systems are used by large chain grocers as a means to reduce labor costs. But, these systems can be fooled by clever teens. Recently, California banned these systems for the sale of alcohol.
I wish to correct a mischaracterization of my opinion on the performance of liquor stores. I did not say that “statistics demonstrate sales to minors are as frequent at liquor stores as they are at convenience stores.” I said, “Compliance check programs sometimes show that liquor stores and convenience stores sell to an underage decoy at the same rates.” I noted that what impacts these statistics is not type of store, but frequent compliance checks and effective management policies. I reached my conclusions about management practices by observing and working with the CEO of an
Oregon convenience store chain that brought his stores from the worst to the best performers. The CEO of this chain worked diligently on this issue over a period of two years to find the right combination of training, technology, a secret shopper program and rewards for passing compliance tests. It was an impressive demonstration of what can be achieved through good management. I also do not dispute the contention that most underage drinkers do not purchase their own alcohol at this point in time. To a degree, this is a success story of states’ efforts to enhance enforcement and prevent such sales. When I started as a regulator in 1996, these laws were not well enforced and sales rates to youth were alarmingly high. In almost all states, stores are now regularly checked and held to high standards.
However, this success should not be used as a reason to liberalize alcohol laws which expand the opportunities for youth to buy alcohol and to increase the burden on law enforcement.
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NOTES
(1) “What are the most effective and cost-effective interventions in alcohol control?” World
Health Organization, February 2004.
(2) Thecommunityguide.org, Preventing Excessive Alcohol Consumption.
(3) “An Alcohol Policy Research and Alcoholic Beverage Control Systems: An Annotated
Bibliography and Review,” National Alcohol Beverage Control Association, NABCA,
Copyright 2008.
(4) “Economic Impact of Allowing Wine Sales in Food Stores in Tennessee,” Stonebridge
Research, January 2011.
(5) “Effects of the MA Wine at Food Stores Initiative,” Northbridge Group.
(6) “The Danger of Alcohol Deregulation, the United Kingdom Experience,” Pamela S.
Erickson, September 2009.
(7) “Final Report, Understanding Teen Drinking Cultures in America,” David S. Anderson et al,
George Mason University, 2010.
Pamela S. Erickson
President/CEO Public Action Management, PLC
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