24 September 2021

Economist: Lower alcohol prices in southern Sweden but raise them north

Sweden | An interesting idea – not that it will ever be seriously considered. The economist Jerker Holm suggested that Sweden’s monopolist off-licence retailer, Systembolaget, should adopt a flexible pricing policy: lower the prices of beer, wine and spirits in southern Sweden, but hike them in the northern part of the country.

It was in a debate article on the website sydsvenskan.com in August 2021, that Mr Holm, a professor of economics at Lund University, proposed differentiated alcohol prices, depending on where in the country the purchases take place. This would prevent the “outflow of tax money”.

Social responsibility over profits

Systembolaget is a government-owned chain of alcohol stores. Its 450 outlets and 500 agent stores, up and down the 1600 km long country, carry nearly 17 000 items. It is the only retail store allowed to sell alcoholic beverages that contain more than 3.5 percent ABV.

Founded in 1955, it is meant to sell alcohol in a responsible way, in order to minimise alcohol-related problems, not maximise its profits. Open Monday to Saturday, shoppers must be 20 years of age, although the legal drinking age is 18 (for restaurants).

Mr Holm’s reasoning goes that prices should be set lower in the southern part of the country, where residents are close to cheaper alcohol, especially in Germany and Denmark. This would benefit Systembolaget’s revenues, and not least the environment, as it would lead to less cross border trade and fewer car journeys.

Systembolaget benefited from travel restrictions

During the pandemic, when borders went up, Systembolaget’s sales went up too. Nowhere was the increase as strong as in southern Sweden, which Mr Holm regards as a clear indication of the amount of foreign alcohol that is normally consumed.

In Skåne, Sweden’s southernmost province, sales of spirits and beer increased by 54 percent and 48 percent, respectively, during the second quarter of 2020, compared with the corresponding period in 2019.

This can be compared with Västernorrland, a province 500 km north of Stockholm, which is significantly further away from Denmark. Here, the corresponding figures for spirits and beer sales were 15 percent and 14 percent, respectively.

Per the website, Sweden’s Minister of Public Health, Lena Hallengren, has declined to comment on the proposal.

Countering public health concerns

Indeed, 2020 proved a good year for Systembolaget. Its sales volume amounted to 569 million litres (2019: 512 million litres), which means an increase of 11 percent. Revenues came to SEK 36.7 billion (USD 4.3 billion), up 14 percent over 2019, while operating profit rose to SEK 542 million (USD 63 million).

Systembolaget’s operating profit 2009-2020 (million SEK) (Source: Statista)

Systembolaget was quick to stress that its increased sales were mainly due to other channels being severely impacted because of covid-19. The pandemic has led to reduced travel, limited personal imports and fewer restaurant visits, officials said.

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