ESTIMATING PRICE ELASTICITIES OF ALCOHOL DEMAND IN CHINA (2010-2024)
Author(s)
Xuechen Xiong, PhD1, Zhaohua Huo, PhD2, Yang Yang, MSc3, Zhenping Zhao, PhD3, Jianchao Quan, MD4, Maigeng Zhou, PhD3;
1Hung Hom, Hong Kong, 2The Chinese University of Hong Kong, Hong Kong, China, 3China CDC, Beijing, China, 4University of Hong Kong, Pokfulam, China
1Hung Hom, Hong Kong, 2The Chinese University of Hong Kong, Hong Kong, China, 3China CDC, Beijing, China, 4University of Hong Kong, Pokfulam, China
OBJECTIVES: We aim to evaluate the price sensitivity of alcohol consumption in China, providing empirical insights to inform effective pricing strategies and public policy interventions.
METHODS: We estimate the population-level price elasticities the for five alcoholic beverage categories: beer, wine, spirits, cider, and ready-to-drink (RTD) products. We fitted the AIDS (Almost Ideal Demand System) econometric model to derive the elasticity matrix. Data were sourced from Euromonitor International, covering the period 2010 to 2024. We estimated both own-price and cross-price elasticities, separately for on-trade and off-trade channels to capture differences in consumer behaviour across contexts.
RESULTS: Beer, wine, and spirits collectively account for over 99% of the alcohol market share. Beer has an own-price elasticity of -0.382, indicating that a 1% increase in beer prices leads to a 0.382% decrease in demand. Wine shows a similar inelastic response with an elasticity of -0.352, while spirits are moderately elastic at -0.794. Cross-price elasticities suggest that RTDs are substitutes for beer and wine, with elasticities of 5.798 and 1.963 respectively, meaning that demand for RTDs increases notably when beer or wine prices rise. In contrast, wine and spirits exhibit complementary relationships, evidenced by a cross-elasticity of -0.770. In the off-trade market, most alcohol categories are generally less responsive to price changes compared to the on-trade segment; however, spirits are an exception, showing greater price sensitivity off-trade, with an own-price elasticity of -0.928 versus -0.664 in the on-trade market.
CONCLUSIONS: Targeted price-based interventions (e.g., taxation) on spirits may be an effective strategy to reduce overall alcohol consumption. In contrast, price-based interventions may have limited impact on beer and wine consumption due to their inelastic demand. Policymakers should consider cross-category effects when designing alcohol pricing policies. Moreover, the differences between on-trade and off-trade elasticities highlight the need for channel-specific approaches to alcohol regulation.
METHODS: We estimate the population-level price elasticities the for five alcoholic beverage categories: beer, wine, spirits, cider, and ready-to-drink (RTD) products. We fitted the AIDS (Almost Ideal Demand System) econometric model to derive the elasticity matrix. Data were sourced from Euromonitor International, covering the period 2010 to 2024. We estimated both own-price and cross-price elasticities, separately for on-trade and off-trade channels to capture differences in consumer behaviour across contexts.
RESULTS: Beer, wine, and spirits collectively account for over 99% of the alcohol market share. Beer has an own-price elasticity of -0.382, indicating that a 1% increase in beer prices leads to a 0.382% decrease in demand. Wine shows a similar inelastic response with an elasticity of -0.352, while spirits are moderately elastic at -0.794. Cross-price elasticities suggest that RTDs are substitutes for beer and wine, with elasticities of 5.798 and 1.963 respectively, meaning that demand for RTDs increases notably when beer or wine prices rise. In contrast, wine and spirits exhibit complementary relationships, evidenced by a cross-elasticity of -0.770. In the off-trade market, most alcohol categories are generally less responsive to price changes compared to the on-trade segment; however, spirits are an exception, showing greater price sensitivity off-trade, with an own-price elasticity of -0.928 versus -0.664 in the on-trade market.
CONCLUSIONS: Targeted price-based interventions (e.g., taxation) on spirits may be an effective strategy to reduce overall alcohol consumption. In contrast, price-based interventions may have limited impact on beer and wine consumption due to their inelastic demand. Policymakers should consider cross-category effects when designing alcohol pricing policies. Moreover, the differences between on-trade and off-trade elasticities highlight the need for channel-specific approaches to alcohol regulation.
Conference/Value in Health Info
2026-05, ISPOR 2026, Philadelphia, PA, USA
Value in Health, Volume 29, Issue S6
Code
EE103
Topic
Economic Evaluation
Disease
No Additional Disease & Conditions/Specialized Treatment Areas