The Effects of Recession on Finnish Alcohol Consumption : Concentration on brewery industry in comparison to the recession in Finland 1990 - 1993

Abstract

The purpose of this study was to find and answer to a question: How will the economic slowdown affect the Finnish brewery industry and can the results of the recession in the beginning of the 90’s apply today? Finland faced a deep recession in the beginning of the 90’s and as a result the consumption of medium beers and wines increased, even though the total consumption of 100% alcohol by volume decreased.

Both qualitative and quantitative research methodology was utilised in this study. The qualitative research data consisted of two in-depth interviews; Katri Tuulensuu from the The Federation of the Brewing and Soft Drinks Industry and Irmeli Mustonen from the The Finnish Food and Drink Industries’ Federation (ETL). Quantitative research was conducted by studying alcohol sale and consumption statistics both from the 90’s and today.

It was discovered that even though the consumer behaviour in terms of income spending has not significantly changed, there are several other factors that have a strong influence on the industry. Therefore it seems that the alcohol industry and more specifically breweries in Finland will not gain any profit during the current economic slowdown. The importance of taxation has dramatically increased after Estonia joined the EU and the borders opened for unlimited personal imports. Due to the low alcohol prices in Estonia, the price of the products becomes more important in Finland. Finland’s alcohol taxation is among the highest with-in the EU. The total consumption of alcohol is unlikely to vary too much, but consumers might start to purchase alcohol outside Finland’s borders.

Even though the government’s main purpose is to reduce the total consumption of alcohol, the tax revenue is also important. The result of increasing alcohol taxes can actually decrease the sales and therefore cause decreased tax revenues for the state, and eventually also decrease the production in the Finnish brewery industry. Interestingly however it seems that small breweries in Finland are very confident about the future. Few small breweries are making heavy investments despite the economical situation.