Where the Swedish Alcohol Industry is Headed Post Covid-19
11th January 2021
John Roche, Bord Bia Fellow Sweden, Bord Bia – The Irish Food Board
Unlike most European countries, the retail alcohol industry in Sweden is heavily restricted through a government-owned monopoly called Systembolaget. This organisation is the only entity with a retail license to sell products with an alcohol content of over 3.5%. Moreover, Systembolaget does not advertise any of their products nor sells to anyone under the age of 20 (Olsen, 2019).
Overview of Alcohol Consumption
In terms of volume, the most popular alcoholic drink in Sweden is beer; followed by wine, spirits and cider. Nevertheless, wine generates significantly more revenue than the rest of drinks. The total revenue for wine in 2019 was 5,220 million Euros, while beer generated 2,654 million Euros and spirits generated 1,358 million Euros in that same year (Statista, 2020).
While historical data showed an upward trend in alcohol sales and consumption in the country, Covid-19 has significantly affected the revenue growth rate in 2020 and the rest of the forecast period. The YoY revenue growth rate of alcohol in 2020 was of -5.2%, leading to a total revenue of 9,245 million Euros (Statista, 2020).
Sweden has a strong culture of drinking at home, whether this is before going out or instead of going out to a bar or restaurant. For this reason, 76% of all alcohol consumed in 2019 was at home (39% of total revenue) while 24% was out of home (61% of total revenue) (Statista, 2020).
The organic trend is the fastest growing in the market and is influencing most product categories within the alcohol industry. The market leader for beer, Spendrups Bryggeriet, has heavily invested in the production of organic beer and brewed over 10 million litres in 2018 (Euromonitor, 2020). Spendrups is in fact the largest producer of organic beer in the world and feature organic products under their two most popular brands, Norrlands Guld and Mariestads (Spendrups, 2020).
The growing health and wellness trend is also having an influence in the demand for organic spirits. Although to a much less extent than organic beer and wine, organic spirits experienced growth in 2019 as consumers look for healthier and better-quality products, even in the alcohol department (Euromonitor, 2020).
It is also worth noting that, according to Euromonitor (2020), sales of organic wine may slow down in the coming years. Chalmers University of Technology recently published a study detailing that organic farms may be more harmful to the environment than traditional ones, which could potentially discourage Swedish consumers from purchasing organic in the future (Euromonitor, 2020).
Premiumisation is also a trend that is influencing the development of the alcoholic drinks’ category in Sweden. In terms of spirits, consumers are looking to drink higher quality products and are being less price sensitive in doing so. This is especially true for rum, gin and whiskey, where consumers are looking for more specialised and exclusive alternatives (Euromonitor, 2020).
Effects of Covid-19 & Recovery Projections
While there have been no legislative restrictions in terms of on-trade establishment closures, the elevated number of Covid-19 cases in Sweden has partly discouraged the population to eat and drink outside of home. As mentioned previously, total revenue decreased by 5.2% in 2020, but is expected to recover and surpass the levels of 2019 by 2022 (Statista, 2020).
On-trade consumption volume has fallen by as much as 31% for categories such as wine (Euromonitor, 2020). In addition, bulk buying for home consumption has not been a strong tendency for Swedish consumers as there was no strict lockdown implemented by the government. For this reason, retail sales are not expected to compensate for the sharp decrease in on-trade consumption. For instance, retail sales of wine are expected to have increased by 2% in 2020, which remains extremely far from the sharp decrease in on-trade sales (Euromonitor, 2020).
In terms of recovery, sales of alcohol are expected to pick up in 2021 and gradually reach pre-Covid levels over the 5-year forecast period. The long shelf life of most alcoholic products will minimise the economic impact of demand fluctuations in this category, allowing on-trade operators to preserve stock and sell it once footfall picks up again (Euromonitor, 2020). As described in the previous section, premiumisation and organic products are expected to shape the future of the category, with the high-end nature of these products expected to increase the average unit price of alcoholic beverages in the market.
Euromonitor (2020) – Wine in Sweden
Euromonitor (2020) – Beer in Sweden
Euromonitor (2020) – Spirits in Sweden
Euromonitor (2020) – Alcoholic Drinks in Sweden
Institute of Alcohol Studies (2019) – Explaining the Strong Support for the Swedish Alcohol Retail Monopoly
Statista (2020) – Alcoholic Drinks Sweden