Estonian devaluation threat alarms Alko

Alko, Finland’s state-owned chain of liquor stores, sold more than 112 million litres of alcoholic beverages from its 343 outlets last year. In accordance with the prevailing tendency, more and more of the sold products were mild beverages, especially wines.
      When measured in litres, the aggregate sales volume was slightly lower than the year before. Nonetheless, the EUR 1.13 billion net sales were six per cent up from 2007, and the business can be considered comfortably profitable.
      The overall business profit was around EUR 57 millions, 55 million of which is returned as dividend to the state.
     
In the near future things may get considerably more complicated, however.
      The tax on alcohol was raised by ten per cent at the turn of the year, and politicians are straightaway talking about another equally sharp increase.
      Alko CEO Jaakko Uotila consents to collect the imposed taxes but hopes for patience with the timing.
      The suggested April deadline would be far too early already from the product-pricing perspective.
      In Uotila’s view the best time for the tax increase would be in November. This would allow for canvassing experiences from at least one busy summer season of people's habits of importing alcoholic beverages from the cheaper Estonia after the turn-of-the-year tax increase.
      Personal imports from Estonia rose appreciably in 2008 after taxes on alcohol were raised in January of that year, following earlier sharp cuts (in 2004) that had sparked a resurgence in alcohol-related problems. Those earlier cuts were in part inspired by concerns that when Estonia joined the EU in May 2004 it would lead to an explosion in personal imports, given the steep price differential that existed.
     
For Alko and Finland’s alcohol policy, the crucial question is the private importation from the south side of the Gulf of Finland.
      It forms the bulk of the consumption of alcohol that does not show up in the Alko statistics. Last year this undocumented consumption of pure alcohol was estimated as 1.9 litres per each adult member of the population, against the 8.5 litres per capita sold by Alko.
     
The most important alcoholic beverage contributing to the consumption of alcohol purchased from elsewhere than Alko is beer, which in Estonia costs around half of the Finnish retail price.
      This difference may increase by tens of percentage points if the current economic misery in the Baltic States leads to a heavy devaluation of the Estonian currency, the kroon (EEK).
      “That is a huge unknown factor. If the devaluation materialises, the imports from Estonia will increase dramatically”, Uotila says. “Helsinki will run out of vans”, one expert laughs sardonically.
     
Alko also expects the general economic situation to put a damper on the sales figures to a certain extent. Still, business at least during the first two months of the year has been more or less the same as last year.


Previously in HS International Edition:
  Sales of alcohol down by 3% in year to June (12.9.2008)
  Supermarket price war causes beer sales to slump at Alko (1.3.2006)
  Retail organization calls on EU to dismantle Alko monopoly (3.2.2005)

See also:
  Rise in alcohol tax leads to surge in personal imports from Estonia (22.8.2008)

Links:
  Alko (Wikipedia)
  Alko website