The Changing Face of the Irish On-trade

There are many changes happening in the Irish on-trade (on-premise). These will make a big impact on the drinks industry over the next few years. The changes within licensing laws shall impact publicans, beverage manufacturers, suppliers, distributors and advertisers to name a few. Let's look a bit closer at one of the key areas of change which is legislation.

Public Health Alcohol Bill

There were some interesting debates about the Public Health Alcohol Bill, 2015 (PHAB) as it progressed through the Irish houses of government. It was brought through the final stages in October 2018. The minister for health called it the “most important piece of public health legislation that will be enacted” in that year. Indeed, it had been many years working its way through the houses.

Even at that final stage of the Seanad éireann debate, there were some strong opinions on both sides that were expressed both in favour of and against elements of the bill.

The bill discussions at this point focused on amendments to labelling size and pricing, with some light hearted interactions from the speakers in Seanad éireann, in typical Irish style politics. The discussions also recognised the demanding work that people had put into getting the bill across the line.

So the laws have been updated but what does that really mean for the industry??

Brand Impact

From a global perspective, there has been research completed in this field to examine the potential impact for brands. For example, when a market moves to change laws, as is happening in Ireland. The Brand Finance Marketing Restrictions 2021 report was one such a piece of research. They completed a report examining nine brand owners from across alcohol, snacks and confectionery industries: Diageo, Pernod Ricard, PepsiCo, Heineken, AB InBev, The Coca-Cola Company, Treasury Wine Estates, Nestlé and Mondelēz International.?

The report analysed the impact of restrictions. This included limitations on advertising, targeted taxation, plain packaging and marketing restrictions such as mandatory health warnings on the alcohol, sugary drinks and confectionery categories. They estimated that the nine companies mentioned could each lose nearly a quarter of their enterprise value on average and more than 50% of brand contribution.?

Whilst the updates in the Irish PHAB don’t include this full spectrum of restrictions, there are elements of them included. Brands should consider these changes when exploring new ways to engage with consumers.

Minimum Unit pricing

On 4th of January 2022, section 11 of the Public Health (Alcohol) Act 2018 came into operation. This part of the act relates to the minimum pricing of alcohol products. The minimum price per gram of alcohol from the act is €0.10. Whilst the impact of this is more visible to the off-trade in terms of pricing, will the repercussions impact consumer trends in the on-trade? Will consumers be more likely to go out to a pub or cocktail bar to socialise instead of staying at home to have a drink?? Given the restrictions of COVID-19 in the on-trade and as yet unpublished full year on year data to consider, it is a waiting game.?

Aside from practical implications for consumers, let's take a look at a market that has already implemented changes to alcohol pricing. In 2018, Ireland’s neighbour, Scotland, was the first country in the world to introduce minimum unit pricing (MUP). Alcohol in Scotland is now a minimum of 50p per unit. Having implemented the change and completed 3 years of research, it was found that there was a 3.6% reduction in sales per-adult of alcohol from the off-trade. However, research from Public Health Scotland, found no evidence that that MUP caused any changes in per-adult sales of alcohol through the on-trade. This suggests that MUP did not cause a shift towards alcohol consumption in pubs and on premise. It will be interesting to see if that trend is reflected in the Irish market

Licencing Laws

On 16 September 2021, Minister of State, Hildegarde Naughton announced that there would be a reform of the Irish licensing laws.

The intention of this was to streamline and re-categorise the types of licences available to establishments. It also aimed to encourage a more open and coherent process while still ensuring that the sale of alcohol can continue to be controlled appropriately. These updated laws were striving to meet the needs of new areas of activity in the hospitality sector. It was recognised that new categories of licences may also be required and this was considered in the drafting of the Bill. Other issues included trading hours and ways to modernise and streamline the licensing application process.

One of the most prominent outcomes of this reform has been the change in application for on-trade liceneces

There are currently 6,800 pub licences in Ireland and 85 nightclubs in Ireland. Under the regulations in the existing Intoxicating Liquor Act, 1960, there was a need to extinguish an existing licence in order to issue a new one. Effectively it was, one in, one out, for alcohol licences on-trade. This is a process that goes through the court system. The removal of this element of extinguishing of licences has perhaps attracted the most attention. Effectively in the on-trade the current limit to licences would cease. The objections process would remain intact.

Secondly, the trading hours time would be amended, allowing pubs to stay open until 12.30am every night. NIghtclubs would have a new closing time of 6am, with last orders at 5am. There would also be a provision for late bar licence to 2.30am

The minister will consult further following the publication of the General Scheme of the Sale of Alcohol Bill 2022. It is the Minister’s intention to bring a final Bill before the Oireachtas and enact the legislation in 2023.

Impact on Hospitality and Consumers

For publicans and hospitality operators, given the longer trading hours, there will be a requirement for an increased number of staff. This could pose a challenge given the shortage of hospitality staff that we have seen in the industry, due to the COVID-19 pandemic. There is the potential insurance increase associated with staying open later every night. This will also have an impact on publicans and nightclub owners in terms of costs.

For consumers, the legal changes outlined above will result in updated information on labels around the potential health effects of alcohol. This will allow consumers to make more informed choices at point of purchase. MUP won't affect consumers in the on-trade as drinks sold in clubs and pubs are already priced above the minimum threshold. The longer opening hours will mean more opportunity to socialise later into the night. However, the challenge of then getting home is another story!

It is a dynamic time for the Irish on-trade industry, with many changes coming about in a short period of time. How consumers respond, in terms of frequency of visit and spending changes per head remains to be seen.

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