Can the use of wine fuel worldwide economic gains?

Wines & Vines, Oct, 1995 by Kirby Moulton

I. Introduction

The benefits of a balanced education and communications program about moderate wine consumption can be substantial. If such a program succeeded in shifting consumer behavior toward healthy diets, including the moderate consumption of wine, an economic gain of $36 billion might be achieved world-wide. The principal source of gain is the increased productivity realized by the world's economy as life spans become longer; this benefit is estimated at $20.8 billion. Health care costs might be reduced by $0.9 billion in response to a healthier population. Higher sales levels would add $7 billion to global retail sales and this would cause an added $7 billion in economic benefits to industries serving the grape and wine sector. Total income would be increased by $4.6 billion and 108,000 more jobs could be created.

The costs for mounting such a campaign, based on experience in other commodity fields, would be about $200 million, or about 3% of retail sales value. This cost could mount substantially if behavior shifts more slowly than projected.

The number of potential consumers that could change their behavior toward a more healthy diet, including wine, is estimated to be 402 million, located in the United States, Canada, Western Europe, and a few other selected countries. Not all of these people will change, hence it is assumed that the education and communications program will cause 10% of the total to shift their diets and consume an average of 39 liters per year (one bottle per week). This change would increase global wine consumption by 15.7 million hectoliters (174 million cases), or 7% of recent levels. These assumed changes are used with economic relationships identified in various studies to estimate total economic impact.

The benefits and costs are based on a series of constraints and assumptions that call for careful interpretation. However, they are sufficiently credible to support the general magnitudes of the values and their relationship to one another. Besides presenting estimated values, the foregoing analysis defines the various components that should be considered in any thoughtful analysis of benefits and costs. The following sections examine projected and speculative impacts of moderate wine consumption on health care costs, productivity, regulatory costs, industry revenues, and regional economic health. The final section examines the potential costs of a balanced communications program and compares these costs with potential benefits.

II. The foregone costs of health care for cardio-vascular diseases

Moderate wine consumption in the United States is associated with almost $1 billion in reduced health care expenditures and can lead to a further reduction of $2.2 billion if one-half of the non-wine drinkers adopted such a pattern (Lewin-VHI, 1994). These reductions are calculated after accounting for the other factors affecting the use of health care services such as health status, age, gender, education, and tobacco use. The key element in projecting health care costs is that the consumption of one glass of wine per day, relative to no consumption, will shift 1.81% of the population into a better health classification (that is, from fair or poor to good or better). Health care costs are significantly lower for those reporting good or better health than those reporting fair or poor health. They are also lower for wine drinkers (Table 1).

The magnitude of health cost changes estimated by Lewin-VHI is supported by a less comprehensive analysis based on survey results reported by Doll et al. (1994). Their report, published by the British Medical Journal and based on a survey in the United Kingdom, estimated that mortality was one-sixth lower for moderate drinkers than for abstainers or heavy drinkers and that moderate drinkers were about 40% less likely to suffer heart attack. The annual rate of heart attacks in the United States is about 8.7 per 1,000 of the adult population. Based on the U.K. findings, and the proportion of heavy drinkers and abstainers in the U.S. adult population, the heart attack rate of heavy users and abstainers would be 12.8 per 1,000 and the rate for moderate drinkers would be 7.4 per 1,000. If 24 million out of the 47 million abstainers and heavy drinkers could be persuaded to adopt dietary and drinking behavior similar to that of moderate drinkers, heart attacks might be reduced by almost 120,000 and the attendant health care expenditures by $2.8 billion in the United States. This projection does not make the adjustment for age and other differences in the drinking populations, and, consequently, savings are probably lower than $2.8 billion, and closer to the Lewin-VHI estimate.

In the absence of survey data comparable to that reported by Lewin-VHI, I have estimated potential health care savings in countries outside of the United States to be $2.5 billion. This is an heuristic estimate based on a series of assumptions (Table 2).

TABLE 1

For cost purposes I have used conservative assumptions about increased life expectancy, the number of persons converted, and the average economic productivity of those persons. While life expectancy might increase over time by two years, I have used an increase of one month to compensate for the different demographic and other factors affecting health. Although wine drinkers tend to have higher incomes than do the rest of the population, I have used an annual income of $21,000 as a measure of economic productivity. Finally, I have calculated costs based on the conversion of 10% of the abstainers and heavy drinkers to a more healthful diet. Based on these assumptions, the productivity gain from increased life span in the United States would be $8.2 billion. If we project these values to a world level, using similar population ratios and the same per capita income, then gains would be $20.8 billion (Table 4).