Liqueur sales in Finnish fruit wine estates – the beginning of the end? Thomas Karlsson & Esa Österberg Nordic alcohol and drug researchers’ assembly Reykjavík, Iceland August 23rd – August 25rd /05/2015

Contents Background The 1994 Alcohol Act and 1995 Alcohol Decree Gradual liberalisation of off-premise retail sales of fruit wines Proposal to sell liqueurs from fruit wine estates Conclusions 12/05/2015 Liqueur sales in Finnish fruit wine estates / Thomas Karlsson & Esa Österberg2/12

Background After the abolition of the Prohibition Act in 1932 Finland got a comprehensive alcohol monopoly system, including monopolies on production, export, import, wholesale and retail sale of alcoholic beverages. The State Alcohol Monopoly, Alko was empowered to license alcohol production to private enterprises. Private companies was granted licenses for manufacturing berry- and fruit wines as well as liqueurs from domestic fruits and berries. In the summer of 1932 there were 13 active private manufacturers for wine and liqueur. 12/05/2015 Liqueur sales in Finnish fruit wine estates / Thomas Karlsson & Esa Österberg3/12

Recorded consumption of still wine in litres of 100 per cent alcohol per capita, and their percentage of the total recorded alcohol consumption, /05/2015 Liqueur sales in Finnish fruit wine estates / Thomas Karlsson & Esa Österberg4/12

Sales of different types of wines in litres of finished product, /05/2015 Liqueur sales in Finnish fruit wine estates / Thomas Karlsson & Esa Österberg5/12 million litres ( l)

The 1994 Alcohol Act (1143/1994) In the mid-1990s, Finland joined the European Union (EU) and was forced to dissolute its comprehensive alcohol monopoly system. Production, export, import, wholesale and on-premise retail sales monopolies were abandoned. The new Alcohol Act reformed the off-premise retail sale monopoly of alcoholic beverages by introducing sale of cider and long drinks produced by fermentation into grocery stores, kiosks and gasoline stations. The Alcohol Act made it possible for fruit wine farms, situated in the rural areas to produce and sell off the premise their own wines containing up to 13 per cent alcohol by volume. More detailed rules and regulations for sales of fruit wines were given by the Ministry of Social Affairs and Health in a 1995 Alcohol Decree. 12/05/2015 Liqueur sales in Finnish fruit wine estates / Thomas Karlsson & Esa Österberg6/12

The 1995 Alcohol Decree “Retail trade of alcoholic beverages containing a maximum of 13 per cent ethyl alcohol by volume, which are prepared through fermentation, may be carried on, besides by the State Alcohol Monopoly, on conditions determined by the Ministry of Social Affairs and Health and with the permission of the licensing authority, by the person who has been licensed to produce the said product.” In practice this means that the licensing authority (VALVIRA) has been able to give fruit wine estates the right to sell off the premise their own wines with a maximum strength of 13 per cent alcohol by volume in vicinity of the production place situated outside the population This practice concerned also licensed producers of sahti, a traditional Finnish malt beverage with an approximate alcohol content of six per cent alcohol by volume. 12/05/2015 Liqueur sales in Finnish fruit wine estates / Thomas Karlsson & Esa Österberg7/12

Gradual liberalisation of off-premise sales of fruit wines and sahti After the new Alcohol Act and Decree came into force in 1995, there have been several liberalizations regards to sales of fruit wine and sahti off the premise. There were two amendments passed by Parliament in May and June 1998 and inforced in July the same year. These amendments allowed sales of fruit wines and sahti also on Sundays between 9.00 and 18.00, as long as the fruit farm was situated outside a populations centre. In April 1999, a further liberalisation to this decree made it possible for fruit wine and sahti farms to sell their products even within population centres as long as the place of commerce is situated ”in the immediate or close vicinity of the place of manufacturing”. 12/05/2015 Liqueur sales in Finnish fruit wine estates / Thomas Karlsson & Esa Österberg8/12

Fruit wine and sahti estates in Finland, /05/2015 Liqueur sales in Finnish fruit wine estates / Thomas Karlsson & Esa Österberg9/12

Proposal to sell liqueurs from fruit wine estates (1/2) 12/05/2015 Liqueur sales in Finnish fruit wine estates / Thomas Karlsson & Esa Österberg10/12 Since 2008, an amendment of the Alcohol Act, which would allow off-premise liqueur sales (up to 22 per cent alcohol by volume) in Finnish fruit wine estates, has been under preparation by the Ministry of Social Affairs and Health. The annual production of liqueurs on these farms is low, only about litres. Because of the small amounts, the amendment of the Alcohol Act would not entail any great increase in total alcohol or liqueur consumption or related harm. The right proposed for wine estates to retail farm liqueurs is therefore not a public health threat primarily because of increase in consumption but rather because of the possible multiplier effects the amendment might have on the alcohol system.

Proposal to sell liqueurs from fruit wine estates (2/2) 12/05/2015 Liqueur sales in Finnish fruit wine estates / Thomas Karlsson & Esa Österberg11/12 If the proposal is carried out in its present form, alcohol producers and importers without off-premise retailing rights would probably demand that the competitive distortions regards to farm wine and liqueurs should be corrected by further extending the retailing rights of alcoholic beverages. Permitting the sale of farm liqueur would challenge the justification for the Finnish alcohol monopoly system and perhaps even lead to its abolishment if the Commission decides to take the matter to the EC Court for a ruling. An alternative outcome would be to abolish off-premise retail sales of fruit and berry wines from the wine estates. The abolishment of the monopoly system would multiply the number of alcohol beverage sales outlets. This would again, based on research findings, increase the consumption of alcohol, which in its turn would lead to an increase in alcohol related harm.

Conclusions 12/05/2015 Liqueur sales in Finnish fruit wine estates / Thomas Karlsson & Esa Österberg12/12 Retailing farm wines off the premise do not meet the requirements of the Single Market. The Commission has, however, not yet initiated any infringement procedures against Finland because of the very small amounts of fruit wines sold in this way and because of the possible advantages fruit wine farming could have for rural development in Finland. Another reason has been that fruit wines are very different from grape wines in the sense that they are not disturbing competition on the regular wine market. Farm liqueurs, on the other hand, do not deviate from other liqueurs produced in Europe that are made from fruits and berries. Therefore, the European liqueur producers would pressure the Commission to act against Finland, and it is very likely that the Commission would take action against Finland and the farm liqueur act. In fact, according to the Commissions’ point of view off-premise sales of fruit liqueurs would be in breach of the EC law and it is clear that it would oppose the adaptation of the farm liqueur amendments to the Finnish Alcohol Act.