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Scandinavian monopolies will last ‘five years’

The Scandinavian government monopolies should collapse ‘like dominoes’ within five years, a London press conference heard today.

In Norway, Sweden and Finland almost all alcoholic drinks are sold in government-controlled shops, a system supported by most sectors of society including the public, suppliers and government itself.

But the pressures of a modern, globalised retail environment mean the monopolies are under intense pressure – from the European Union, from neighbours, and from importers – and will inevitably be dismantled.

‘In five years they will be gone. There will be a domino effect,’ Frederic Julia of Bordeaux-based market researchers Vertumne said, at a briefing for the London International Wine and Spirits Fair.

Tax-savvy Scandinavians are constantly hopping across each other’s borders for cellar stocks. The tax on wine in Norway is over €5/litre. In neighbouring Sweden it is just over €2 – and in Estonia, which joins the EU in May, a litre of wine is taxed at €0.67.

For this reason, Julia said the weakest of the monopolies was Alko in Finland. Estonia is only two hours away by ferry, and as an EU member its tax regime will be lower still.

‘Profitability of the monopoly might not resist such a sharp decrease [in sales],’ Vertumne predicts – and once Alko goes, Vinmonopolet in Norway and Systembolaget in Sweden will follow, governments finding it impossible to justify the expense of maintaining the system in the face of falling sales.

Private companies in the Scandinavian states are watching developments closely. Food companies in Finland, for example, are setting up wine and spirits divisions in readiness for a more open import market.

Julia cited what he called the ‘Pan-Nordic Vision’ as further evidence of imminent meltdown of the monopoly system. Importers are forming subsidiaries and distribution agencies in neighbouring countries in order to capitalise on a new freer market.

Controlling distribution in countries as vast and remote as Sweden, Finland and Norway is vital – in Norway for example, only three companies control over 90% of the distribution of alcohol.

Overall, Scandinavia shows extremely healthy growth in terms of wine and spirits sales. The market expanded by over 60% between 1996 and 2003, from 300.8m litres to 489m litres, and continues to grow at some 4% per year. The population is highly drink-literate, being used to a choice of some 6000 lines in the monopoly shops, whose remit is to serve the entire population in even the remotest areas.

All this will change when – and if – the monopolies are dismantled. Private companies will not be able to carry anything like that range, and moreover are unlikely to see profit in opening bottle shops in the far corners of the Scandinavian north.

‘At present it is more a political issue than a business issue,’ Julia said. ‘But it’s obvious things are not going to stay this way for long.’

Written by Adam Lechmere

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