Finns say beer tax cut was not sufficient; price should have fallen by 39%
Press release 30 March 2004
TNS Gallup survey of private production and imports of alcoholic beverages:
Finns say beer tax cut was not sufficient; price should have fallen by 39%
The effect of the March alcohol tax cut on the price of beer was not sufficient, according to a fresh study conducted by TNS Gallup. Finnish consumers said that the price of beer would have had to fall by 39-40% to discourage private imports. This would have required at least a 70% cut in beer tax, instead of the 32% cut which was actually made. Cheap beer outside the country will continue to lure Finns and private imports are expected to grow by more than 40% this year. Beer tax will have to be cut again by a similar amount.
The survey supports the Federation of the Brewing and Soft Drinks Industry's original demand that beer tax be cut by 70%. The effect of the 32% cut in beer tax at the beginning of March was to lower the price of beer by only about 15%. Most Finns who import beer (64%) consider the price reduction insufficient to discourage private imports now that restrictions have been loosened on imports from the EU and with the Baltic countries set to join the European Union at the beginning of May. According to respondents a 39% drop in the price of beer would have been sufficient to discourage private imports. It is significant that consumers' conceptions of differences in price levels have clearly improved in the past year. Last year they called for a 29% drop in price.
Loosening of import restrictions did not accelerate private imports; fall in private production
At the beginning of 2003 restrictions on beer imports were loosened somewhat but this did not have a significant effect on Finns' private imports. The survey indicated that the amount of alcoholic beverages imported by travellers fell slightly. Respondents said that they imported about 27.1 million litres of beer, 6.6 million litres of wines, 2.4 million litres of fortified wines and intermediate products and 5.4 million litres of spirits. These figures do not include organized grey imports and illegal sales. Respondents also tend to underestimate their alcohol consumption. Actual figures are therefore higher. The survey also indicated that private production of alcoholic beverages has fallen. Finns produced 1.0 million litres of beer and 4.2 million litres of wine at home.
Private imports of beer will rise by at least 40% this year
The survey asked Finns whether they intended to import alcohol in 2004 and how much they expected to import. Respondents were aware that alcoholic beverages can now be imported for private use without restrictions from the other EU countries and that Estonia will join the EU at the beginning of May. If respondents' estimates are accurate, private imports of beer will rise by over 40% to 38.2 million litres. This is a cautious estimate.
Private imports will hurt domestic brewers. Foreign beer's share of imported beer has increased steadily in recent years. This poses a serious threat to the Finnish brewing industry, since competition with foreign beer at current prices will be impossible once Estonia is a member of the EU. The survey undeniably shows that beer tax will have to be cut again by a similar amount.
Additional information:
Director Risto Saarinen, Federation of the Brewing and Soft Drinks Industry, tel. +358 9 1488 71 (switchboard)
Research Director Juhani Pehkonen, TNS Gallup Oy, tel. +358 9 6135 0503, GSM +358 40 557 2393
The Federation of the Brewing and Soft Drinks Industry promotes the interests of producers of beer, cider, long drinks, soft drinks and mineral waters in Finland. Its members are Oy Hartwall Ab, Olvi Oyj, Pirkanmaan Uusi Panimo - PUP Oy and Oy Sinebrychoff Ab. The Federation of the Brewing and Soft Drinks Industry operates in connection with the Finnish Food and Drink Industries' Federation and is among the three largest industries in the food and drink branch in terms of the value of production.
