All Systems Go

SYSTEMBOLAGET: They’re drinking more and they’re drinking better, and best of all the Swedes are happier than ever with their monopoly system. Is this the future of liquor retailing? asks Penny Boothman

We think nothing of it. We’re disorganised for a dinner party, late for a date, or maybe we just fancy a drink, so we just drop into our local off-licence, corner shop, or even petrol station, and pick up some booze. But, most conveniently of all, we can buy all our drink at the same time and place that we buy all our food, the supermarket. In fact, this is so taken for granted that over 70% of retail wine sales are now made this way.

But it’s not the same for everyone. Spare a thought for those who have to buy their daily dram through a state-owned liquor retail monopoly.

What you may not realise, however, is that, aside from the critical function of preventing alcohol sales to minors, the underlying rationale of the monopoly retailing system is that there should be no private profit gained from the sale of alcohol. Now there’s a thought; remove the possibility of making a profit and you remove the motive for encouraging consumers to buy more. What a very different world this must be.

However, when Sweden joined the EU in 1995, it was forced to agree that the liquor retail monopoly would be allowed to continue for only as long as it was supported by
a majority of the Swedish population.

Curtains for Systembolaget, you might think, but no. “We carry out surveys every month and we are at an all-time high at the moment with almost 60% in favour of the monopoly system,” says purchasing and supply chain manager Ann Burgaz-Schmidt. “So as long as we have this strong support from our customers we
will continue to keep the monopoly, and I can’t see that the monopoly system will be abolished in the near future. Surveys are carried out by people in-store. I don’t know the exact customer base but it’s quite huge.”

The locals are happy then, and one obvious benefit of buying from a monopoly system is that it has the ability to carry an enormous range of products – 2,600 in the core range in fact, with many more available to order. Of the 420 shops around the country, a smaller shop will carry around 700 brands, with the larger stores stocking upwards of 1,500, but any product not in stock can be ordered for collection the next day.

The other notable change brought about by accession to the EU was the disbanding of the Vin & Sprit AB import monopoly, and today Systembolaget buys from 255 active importers, from which the on-trade also furnish their alcoholic needs, meaning that there’s plenty of variety in that sector too.

California steamin’
Alcohol sales have been growing steadily in Sweden across the board for the last decade, and there are some familiar trends appearing in the wine sector. “Generally, New World wines are on the way to even surpass the EU or the Old World wines,” Burgaz-Schmidt confirms. “South Africa, Chile, Argentina and California; ever since the dollar rate grew more weak, the Californian wines have been enjoying quite a positive trend in our market.”

The Swedish system of operating a fixed margin means that the higher the price point of the wine, the better value the purchase, in comparison to percentage-based margin systems used
by retailers in most other markets. Indeed, Burgaz-Schmidt comments that the retail monopoly has to prepare itself for a flood of eager wine fans from the rest of Europe around the time that the classed growth Bordeaux and top Burgundies are released each year. So it is perhaps not surprising that price points are showing a trend to the positive. “Price points are going up, when we talk about bottles. You have to keep in mind that more than 50% of the sales from Systembolaget are box wines, but if you take them away and look at the bottle sales the trend is that people trade up in price. SEK76 (c.£5.39) is the average retail for a bottle of wine today which is quite high. But also wines above SEK100 and SEK80-100 (c.£5.60-£7.00) have a very positive trend. They increase in sales all the time now from a much lower base, but still it looks very promising for quality wines.”

The bag-in-box side of things is an interesting reminder of just how different drinking habits really are in Scandinavia, bearing in mind that BIBs make up just over 10% of the UK market. “Well, I think the Swedish consumer sees bag-in-box as more of a practical thing because we as a people spend quite a lot of our time outside, in the countryside, or in our boats, and we think that the box is a very good practical package that still contains quality wine. I would say many consumers today would go for the bag-in-box during their holidays and in the week, and then during the weekend they would buy the same wine but in a bottle to have on their dinner table. So they just see it as another way of packing the wine, if you see what I mean,” explains Burgaz-Schmidt.

As popular and successful as Systembolaget seems to be, it is not infallible, and there have been a couple of high-profile scandals in recent years concerning the taking of bribes by Systembolaget employees. In a promotion-free environment, greasing the palms of a store manager to place your product at eye-level is an obvious ploy. But unscrupulous employees are not the only problem and, with alcohol taxes notoriously steep, the temptation to load up your Volvo with cheap hooch across the border and smuggle it back must be strong. “I still say that the overall consumption, even of spirits, is growing within Sweden but it’s not the Systembolaget sales that contribute to that trend; it’s other channels like cross-border trade, the private allowances, private imports and so on,” says Burgaz-Schmidt. The domino-effect cross-border trade is a problem for all Scandinavian markets, as indeed it is for the UK, but there is also some light at the end of the Swedish tunnel.

Cocktail boom
“When it comes to spirits we have noticed, along with the rest of the world, the cocktail trends. We drink more dark spirits than white spirits, which historically has always been a very strong category, but the cocktail trend with the dark spirits and liqueurs is a very strong trend in Sweden,” says Burgaz-Schmidt. “The best selling spirit is still vodka but, for example, dark rum, flavoured vodka and malt whiskies are segments that
are coming very strongly.”

Far from limiting alcohol sales, Systembolaget’s goal is to promote a “healthy drinking culture”, focusing on quality rather than quantity. In these days of binge drinking and talk of trading consumers up, perhaps a few British retailers could learn something from the Swedes.  db

Systembolaget
1850 The first Systembolaget is formed by a group of miners
1830 Home distilling is prohibited
1969 Minimum drinking age lowered from 21 to 20 years
1991 First self-service store opens in Filipstad
1997 Verdict from European court: Systembolaget will retain alcohol retailing monopoly
2001 Systembolaget opens all stores on Saturdays