Supermarket price war causes beer sales to slump at Alko

Red wine sales exceed sales of spirits

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The supermarkt chains' gloves-off fight over customers was reflected last year in exceptionally poor sales of beer at Alko, Finland's state-owned chain of liquor stores.
      Alko's sales of medium-strength beer slumped by a whopping 43 percent. This has been attributed to the fact that grocery stores and supermarkets have replaced coffee with a 12-pack of beer (known in the trade as a "Dachshund") as the loss-leader of choice in their pricing strategies.
      As a result, even the sales of strong beers declined by ten percent at Alko.
      Still, Alko's end-year result for 2005 was excellent. The operating profit was EUR 51 million, of which the government’s cut is just under EUR 40 million.
      At present, Alko is responsible for half of the sales of alcoholic beverages in Finland.
     
Last year, the Finns bought around 20 million litres of hard liquor, which was one percent less than the year before, when a liquor tax reduction and the subsequent price reduction encouraged people to buy spirits in unprecedented quantities.
      Red wine sold very well last year. Sales rose about five percent from 2004, and the total sales of red wine have, for the first time, exceeded the sales of spirits. The selling of white wine has remained at the same level, around 18 million litres, for the past two years.
      Of the hypothetical pure alcohol sold by Alko, 56 percent is still bought in the form of hard liquor, or spirits. In the spring of 2004, the taxing of spirits was reduced by 40 percent, whereas the wine tax was lowered only by 10 percent.
      Red wines now cover almost a quarter of Alko’s net sales income, against the 16 percent covered by spirits.
     
There were no massive changes in alcohol consumption in 2005. Alko's own statistically-recorded sales rose by around 1% to 8.3 litres per capita of pure alcohol, but the non-documented consumption - estimated personal imports, sales on board ferries, and home brewing - was up by 9 per cent.
      The overall consumption of alcohol rose by three percent. When all things are factored in, Finns consumed an estimated 10.6 litres of pure alcohol per person in 2005.
      According to Alko's own estimates, the Finns brought in about 35 million litres of alcoholic beverages from abroad, half of it from Estonia.
     
The alcohol tax plays a huge role in the sales development of alcoholic beverages. Finland's current alcohol tax averages at 28.25 percent. Before the big cuts of 2004, it was over 50 percent. After this summer’s tax increase, Estonia’s liquor tax will also be around 10.74 percent, narrowing the gap for consumers.
      Sweden and Norway’s corresponding figures are no less than 55.5 and 66.5 percent respectively.
      Alko has 327 outlets in Finland, through which it markets 1,927 different brands of alcoholic beverages. A total of 390 new products entered the assortment in 2005.


Previously in HS International Edition:
  Retail organization calls on EU to dismantle Alko monopoly (3.2.2005)

Helsingin Sanomat