The threat of higher taxation
Finnish brewers can never get it right. If they raise prices, consumers complain. If they drop prices, the government objects.
Does an annual consumption of more than 85 litres per capita turn all the Fins into “heavy users”? Apparently their government thinks so. That’s why the Finnish health and social services minister, Paula Risikko, threatened brewers with a rapid beer tax hike if prices of medium-strength beers stay below what the government deems a suitable price level.
At the beginning of the year, the government introduced a regulation which was to do away with the phenomenon of relative price advantage in bulk buying. Before the new law became effect, if you bought beer in a pack it was relatively cheaper than if you bought a single bottle or can.
Contrary to politicians’ expectations, however, it was not the price of bulk beer that went up in January but the price of single bottles that came down. Irked by their non-success, the Finnish government is now threatening the country’s brewers with a rise in taxation.
Naturally, Finnish brewers are not too happy with a tax hike looming. Already in September 2007 Timo Jaatinen, Managing Director of the Federation of the Brewing and Soft Drinks Industry, had issued a warning that the proposed tax increase would make Finland’s beer tax the highest in Europe. In the past, Finnish consumers used to avoid the highly priced domestic beers by resorting to private imports from Estonia, which is only a short ferry ride away.
However, for some reason or other, Finnish consumers seem to have gone off beer a bit. For the period January to September 2007, the brewers’ association reported a decline in domestic beer sales and private beer imports.
Nevertheless, brewers expect 2008 to be a challenging year, especially after having heard Ms Risikko’s threat. Ms Risikko told Finnish media in January 2008 that the suitable price level of medium-strength beer (less than 4.7 percent ABV) was the one set by Alko, the state’s alcohol retail monopoly. Prices of medium strength beer start at EUR 1.10 for a 33cl bottle at Alko, while at a supermarket you can get a bottle for as little as EUR 0.90.
