Conor Pope: Why does a zero-alcohol, low-tax pint cost the same as a normal beer?

The price of alcohol-free beers and service charges in pubs have come to our attention in recent days – and we figured we should bring them to yours.

Alcohol-free beers are not new, but the landscape in which they find themselves has changed radically since the 1980s when all that was on the table was Kaliber.

For decades, this Guinness-brewed product had the game to itself, and at the turn of this century it had more than two-thirds of the entire alcohol-free beer market in the UK.

It is still out there somewhere, but after many years of failing to ignite, non-alcoholic beers have since exploded in popularity all over the world.

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[ Sober reflections on alcohol-free beer ]

More than 10 per cent of the beer market in Spain, for example, is made up of alcohol-free beers. The EU-wide value of the products is now well in excess of €4 billion each year.

Even Ireland has started to embrace the booze-free party.

Over the four years from 2017 there was a three-fold increase in the volume of sales of non-alcoholic beers in this country, and alcohol-free wines and spirits are also more popular now than ever.

About five years ago, non-alcoholic beers accounted for about 0.5 per cent of the market, but now it is close to 2 per cent.

The tax benefits of non-alcoholic beers are clear to see – or maybe that should say the tax penalties of regular beers are clear to see.

A report issued by the Drinks Industry Group of Ireland (DIGI) last year found that Irish pubgoers pay more tax on an alcoholic pint than in 25 EU member states and the UK. When it comes to wine, Ireland has the highest wine excise, which is hardly much of a surprise given that 15 EU countries do not impose any tax on wine. In France, the excise tax on a glass of wine is just €0.01, while it is €0.80 in Ireland. In beer terms, Ireland is in second place behind Finland, with the level of excise in Ireland just under €0.55 or more than 10 times the rate in Germany.

That takes us to the concerns of at least one reader.

Peter mailed us with a query we have previously wondered about ourselves.

‘Alcoholic beverages are subject to alcohol products tax ... Typically, the excise duty on a pint of 4.3 per cent ABV beer is 54 cent’

In the middle of May, Peter met some friends in The Barge pub in Dublin. As part of one round he had a regular pint of Guinness, and paid €6.30. As part of a second round, sensible Peter had a pint of Guinness 0.0 – one of the brewing giant’s more recent products, which is obviously alcohol-free.

While drinking the latter may have been better for his head the following morning, it was all the same when it came to his wallet.

“There is no difference in the price of a pint of Guinness and a pint of alcohol-free Guinness 0.0,” he writes. “This seems like a rip-off, since the tax on an alcohol-free pint should be a lot less than a normal beer.”

He sent us the receipt and, sure enough, the price of the Guinness 0.0 and the regular Guinness was exactly the same in The Barge.

Peter asked the server what the story was, and she in turn asked a barman-manager. “She returned with the answer that there is no difference in price because the process used to remove the alcohol is expensive. I doubt this explanation, as I am sure the price of a keg of Guinness 0.0 is cheaper than a keg of regular Guinness. Maybe something you could investigate?”

At the very least, Guinness 0.0 selling in Irish pubs should be 55 cent cheaper than regular Guinness. In fact it should be much cheaper than that, given that non-alcoholic drinks also attract a lower rate of VAT.

The topic of high-priced alcohol-free beers was raised in the Dáil last year.

Green Party TD Patrick Costello asked then minister for finance Paschal Donohoe why “alcohol-free beverages cost the same as their alcoholic counterparts, given that no excise duty applies; and if he will take appropriate steps to ensure that there is a price differential to encourage more persons to switch to alcohol-free drinks”.

The answer was somewhat informative, if not overly encouraging.

[ An alcohol-free bar? In Ireland? Risky business indeed ]

“Alcoholic beverages are subject to alcohol products tax. For example, excise duty on beer is charged based on the percentage, by volume, of alcohol in the beverage. Typically, the excise duty on a pint of 4.3 per cent ABV beer is 54 cent,” the minister said. “Non-alcoholic beer is not liable for any excise duty. Alcoholic beverages are subject to the standard rate of VAT, currently 23 per cent. Ireland currently operates two lower rates of VAT, 13.5 per cent and 9 per cent. At present, Ireland applies the 9 per cent VAT rate to certain non-alcoholic beverages such as tea, coffee and fruit juices where they are supplied in the course of catering.”

That 9 per cent rate is still in place, but will climb to 13.5 per cent at the end of the summer.

Donohoe added that “any suggestion for extending the application of a reduced VAT rate further to non-alcoholic beverages would need to be considered carefully, having regard to a range of factors including the impact on exchequer revenues, and the practical concerns that it would be difficult to administer and would be likely to provide considerable scope for manipulation of the VAT system and opportunities for tax avoidance”.

That is neither here nor there, at least from Pricewatch’s perspective.

Donohoe concluded his answer by saying something that was more relevant to our concerns. He pointed out that the “retail price of non-alcoholic beers is determined by retailers and publicans, and this should reflect the fact that no excise applies to such products as well as other factors. Other than the portion that is taxation, the department has no role in setting the price of these beverages.”

So, we did a bit more digging.

Given that it is mandatory for licensed premises to display the cost of alcohol, how legal are ‘service charges’ on alcohol only?

We priced the two Guinness products in a couple of supermarkets last week and the good news was that much of the price differential as a result of lower taxes was accounted for in the shops we visited. A four-pack of Guinness 0.0 was selling in Supervalu for €7, with the regular Guinness priced at €8.50. It was the same story in Tesco.

If we allow for a 50 cent reduction in the price of Guinness 0.0 because of the absence of excise duty and a further euro reduction as a result of the reduced VAT rate, then the price of the Guinness 0.0 in both Tesco and Supervalu seems about right to us.

Having said that, price discrepancies do exist, as the receipt Peter sent us from The Barge proves.

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So we contacted The Barge pub to find out why it was selling both drinks for €6.30 when, by our reckoning, the alcohol-free product should have cost around a fiver. At the time of writing we had heard nothing back.

Then we contacted Diageo to see what it had to say about the price of its Guinness 0.0. It’s response was – to be honest – not entirely helpful.

“Diageo has no role in setting retail prices for consumers on any of our wide range of products, that is entirely at the discretion of the individual retailer.”

Staying with the price of drink, we also heard from a reader called Sarah. “A group of us recently went for dinner and fancying an after-dinner drink, relocated to a nearby hotel – this was a venue completely separate to the restaurant we dined in,” she says.

“After a few drinks – primarily pints, a glass of wine and a G&T, we received and paid for the bill. Some of the drinks were table-service, some were served at the bar. It was only the next day we noticed a 10 per cent service charge on the bill – which we then queried with the hotel. They replied that a 10 per cent service charge was in place across all of their different venues – including the bar.”

She says the hotel said that “if you feel the service you received didn’t deserve this please let me know I will happy (sic) refund you the amount.”

But for Sarah, the service is not the issue, “that was fine, but applying a service charge – only to drinks – is effectively raising the price of drinks by 10 per cent. We were never made aware of the service charge – to the best of our knowledge it isn’t displayed anywhere. We didn’t receive a menu, we didn’t need one as our order was very simple. In any case, looking at their website shows that the service charge isn’t mentioned on the menu. I guess our query is, given that it is mandatory for licensed premises to display the cost of alcohol, how legal are these ‘service charges’ on alcohol only?”

Sarah did not identify the hotel so we contacted the Competition and Consumer Protection Commission to find out if what had happened was legal and if not, what should have happened.

They replied that “businesses cannot mislead consumers” when it comes to prices or do something that “would be likely to cause the consumer to be deceived or misled “. It is also an offence to omit “material information on the price of a product or the manner in which that price is calculated.”

A spokeswoman suggested our reader could “lodge a written complaint with the pub and if she supplied details of the incident to the CCPC it would be passed on to its Consumer Protection Enforcement Division for information purposes”.

She also said that when it comes to alcohol prices, the price of the drink must be clearly advertised but said that law “does not extend the requirement to incorporate additional changes such as service charges.”