“The World Health Organization (WHO) has shocked the duty-free industry by proposing a global ban on duty-free liquor sales, a business which was worth $6.3bn last year.”
The proposal to slow down alcohol consumption was actually published in December of last year, but will finally get onto the WHO’s Executive Board agenda between January 18-23, 2010. The Board is made up of health ministers from 34 leading countries, and if it approves the proposal, it will be presented to the WHO’s full annual General Assembly in May 2010.
Keith Spinks, secretary general of the European Travel Retail Council (ETRC) believes that the proposal will pass the Executive Board and into the General Assembly that is made up of 193 governments, and warns, “If this goes though, it will be a disaster for the industry.”
Should the World Health Organization ratify this proposal, there is an upside. According to Spinks, this proposal on liquor would not be “binding.”
“It is going to be up to each member country to decide whether to implement the proposal or not.” But, he adds, “My fear is that some countries will and some won’t, leaving us in a big mess.”
In 2005, the WHO tried to ban duty-free tobacco sales through its Framework Convention on Tobacco Control (FCTC). The FCTC was ratified by 165 countries worldwide, but has yet to be implemented by any country.
A quick review of the members of the World Health Organization may give a clue as to why.
Alcohol, Tobacco, and Tourism
All countries which are Members of the United Nations may become members of World Health Organization by accepting its Constitution. So, which countries are members?
Australia, the Bahamas, Costa Rica, Dominican Republic, Egypt, Finland, Germany, Hungary, Italy, Mexico, Switzerland, UK, and the USA, to name just a few. Most all of these countries have one or more international airports with duty free stores selling among other things, spirits, cigars, and cigarettes.
Not only do most of these member countries tout tourism as a major industry, but many also have their signature spirits (and cigars, in some cases) that define them. Examples are rum from Barbados, limoncello from Italy, and of course, tequila from Mexico.
Where duty free merchants pay inventory/business or other taxes, customers usually pay none. For these countries, tourism, and the profit made at duty free shops from alcohol and tobacco sales, is directly related to each other.
How much damage could the enforcement of this proposal do?
WHO vs. Patrón
As stated above, duty-free liquor sales from last year amounted to $6.3 billion in 2008. That accounted for 17.2% of the total global liquor business according to the Drinks International article.
In the April 2008 issue of Impact Magazine, it states that Patrón tequila was also penetrating the travel retail sector overseas, long a key channel for high-end spirits but one in which tequila was underappreciated. Patrón was aggressively growing its brand by sampling at very visible public relations events in key cities such as London, Athens, Hong Kong, Singapore and Sydney, all whose countries are members of the World Health Organization.
The Patrón Spirits Company, producers of Patrón tequila, claim on their website to be in over 100 countries and islands worldwide. Given that there are only 193 members of the WHO, the chances are good that Patrón is available in the duty free stores of most of these member countries.
Assuming that the same 163 countries that ratified the duty free tobacco ban in 2005 also decided to ratify—and enforce–the duty free alcohol ban, the results could be devastating not just for Patrón, but also for Sauza, Brown-Forman (El Jimador brand), and Jose Cuervo, as well as all spirits suppliers, duty free retailers, and airports.
While it seems likely that the World Health Organization’s Executive Board will ratify the alcohol ban proposal, it seems unlikely that any countries will actually enforce it.
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