Foodstuffs yesterday rejected accusations it was helping drive youth drinking by selling alcohol below cost.

MPs are hearing submissions on the Government's Alcohol Law Reform Bill, which has taken aim at youth drinking.

The Hospitality Association said supermarkets were driving binge drinking with aggressive pricing and should be banned from selling alcohol. The association said the availability of cheap alcohol from supermarkets had increased the availability of alcohol to youths.

Supermarkets were also driving binge drinking by using alcohol as a "loss-leader", where it was sold below cost to attract shoppers.

The association said supermarkets had dramatically increased their market share of alcohol sales, leading to a shift in where New Zealanders drink, and more binge-drinking.

It said retail sales through supermarkets had doubled from about $8 million to almost $16 million in the past decade, while sales at bars and restaurants were either flat or growth was limited.

But appearing before the justice and electoral committee yesterday, Foodstuffs' executive manager, Melissa Hodd, said her company, which controls the Pak'nSave, New World and Four Square chains, did not sell alcohol at a loss.

"We don't loss-lead on alcohol, we ask our members not to loss-lead on alcohol. It is part of our formal alcohol policy."

Foodstuffs' lower North Island retail operations manager, George Sutherland, said supermarkets were able to extract discounts from suppliers, which enabled them to maintain a profit margin of about 10 to 15 per cent on beer and wine despite low retail prices.

Since supermarkets began selling wine in 1990 and beer in 1999, supermarkets' share of those markets had been increasing but overall consumption of those beverages had not.

"There has been a huge channel shift, people are now buying their beer and wine from supermarkets but they're not buying more beer and wine overall on a per capita basis."

Meanwhile, the Distilled Spirits Association said the proposal to limit ready to drink beverages (RTDs) to 5 per cent alcohol and 1.5 standard drinks per serving were too narrow and easily evaded.

It said similar attempts to control consumption of RTDs in other countries had led drinkers to switch to other less rigidly controlled products.

Having conducted several focus groups with RTD drinkers, political blogger and researcher David Farrar told the committee he was "left in absolutely no doubt" that such a limit would drive many RTD drinkers to spirits.

"Well intentioned as it is, I think it will actually be the one aspect of this bill that will do the most harm rather than actually reducing it."

- Additional reporting NZPA