Alko, the Finnish government-owned alcoholic beverage retail company, has implemented its biannual price adjustments this fall, with prices seeing a modest increase of 0.4 percent on average. Some products will experience price hikes, while others will see reductions. Additionally, the proposed government tax increase is expected to impact Alko product prices starting from the beginning of 2024. Alko aims to maintain transparency in its pricing structure.
Twice a year, Alko's retail prices undergo changes, typically occurring at the end of March and September. This autumn, the new prices took effect on September 26th, resulting in an average price adjustment of 0.4 percent. On average, beer prices increased by 0.4 percent, spirits by 0.7 percent, sparkling wines by 0.9 percent, red wines by 0.2 percent, and white wines by 0.3 percent. While prices increased for about 1,700 products, nearly 400 products saw price reductions.
"The price increases at Alko have been very moderate. The average price increase for this fall is 30 cents per product. In the spring price adjustment, product prices increased by an average of 1.5 percent," stated Anu Koskinen, Alko's Director of Assortment and Procurement.
Last year, the average price increase for Alko products was 2.3 percent, while the general inflation rate stood at 7.1 percent.
Alcohol incurs costs to society, leading to high taxation in several countries, including Finland, Norway, Sweden, Iceland, and the United Kingdom. Alcohol taxes are employed to influence alcohol consumption, as research indicates that price, alongside availability, is one of the most significant factors affecting consumption.
For spirits and beers, alcohol tax is determined based on the alcohol percentage, meaning higher alcohol content leads to higher taxes. In contrast, wine products have a fixed alcohol tax, irrespective of their alcohol percentage.
Alko maintains an average sales margin of 17 percent on products subject to alcohol tax.
"We regularly engage in discussions about product prices and pricing. That's why we've launched our 'Price Anatomy' campaign, where we openly disclose the various components of our pricing. It often surprises many people that taxes constitute a significant portion of beverage prices. The tax portion remains the same, regardless of the seller," emphasized Koskinen.
"For instance, on a €10 bottle of wine, 51 percent, or roughly €5, is attributed to taxes. Alko retains approximately €1.70 in sales margin. For a €30 bottle of spirits (0.7 liters, 40% alcohol content), 66 percent, or nearly €20, goes to taxes, and Alko keeps €3.30 as sales margin."
Alko maintains uniform prices throughout Finland, whether in-store or online.
"In price discussions, there is often a reference to significantly cheaper prices when ordering alcoholic beverages from abroad. However, consumers often realize when ordering spirits or wines as imports and paying the relevant taxes and fees that their purchases become more expensive than buying them domestically."
The Finnish government is planning to increase the tax on alcoholic beverages at the turn of the year. Any potential tax changes will be fully reflected in consumer prices for alcoholic beverages. The impact of the proposed alcohol tax increase on prices for different product categories is illustrated in the accompanying image.