A bridge too near

What happens when alcohol is much cheaper down the road? The PMA Team went to Malmo in Sweden to find out and argues that there are lessons for the pub trade in the UK

The paternalistic Swedes have taxed the hell out of booze to make it relatively unaffordable in the belief that its citizens need protecting from themselves.

Last century, in particular, the Swedes developed a real taste for home-produced booze that led to high levels of alcoholism and domestic violence. As part of the push against the evils of alcohol, its government decided to take ownership of its off-licences, creating Systembolaget to clamp down on easy access to cheap liquor.

For decades, Systembolaget liquor stores were few and far between, closed at 6pm on weekdays and were designed to be as welcoming as accident and emergency wards in hospitals. In Malmo, though, Systembolaget stores are a lot more user-friendly. Brightly-lit and with a good choice of wine, beer and spirits, Systembolaget stores look like they've come from the liquor shop self-assembly section at Ikea. And, unlike the old days when customers would find themselves in long, snaking queues, getting served is not difficult. But that's because they are so expensive ­ and much cheaper booze is not far away.

The Systembolaget store is the last place most Malmo citizens would buy their booze, with Denmark now readily accessible, via a bridge to Copenhagen.

Everybody you meet in Malmo knows how to get hold of cheap booze. "I can't remember the last time I went to a Systembolaget," one taxi driver told me. "Beer costs half as much in Denmark as in Sweden. I don't go across the bridge myself to get it. But it's very easy to find somebody that can supply you and everybody knows somebody."

The killer change for Systembolaget this year has been the European Union forcing Sweden to allow its citizens to bring home from abroad as much booze as they want for personal consumption. Sales have been in spectacular freefall. Swedes have been importing more drink privately from abroad than is sold through the domestic network. Nationally, Systembolaget sales were down by 14.2% year-on-year in May.

One Systembolaget manager in Malmo reported that his sales were much more dramatically affected by the proximity of Denmark: "Our sales are 35% down on this time last year. Lots of Swedes cross to Elsinore on the ferry to buy large amounts of alcohol," he said. "It has become impossible for us to compete."

Not surprisingly, the bars in Malmo, which are relatively few in number, are pretty quiet, too. On a Thursday evening, when you might expect a few revellers to be enjoying a pre-weekend drink, there's just a few hundred drinkers to be found in Malmo's largest cluster of bars.

Anna Lindstrom, 21, says: "Mostly, we drink at home with friends because it's much cheaper to make a phone call and go and pick up your beer from someone who has imported it. Everybody knows a contact for cheap beer."

The increase in unmonitored home-drinking this year in Sweden has not gone unnoticed by the Government. One reason might well be that Systembolaget's chief executive Anitra Steen is married to Swedish Prime Minister Goeran Persson. Steen has been very vocal about the need to reduce alcohol taxes in Sweden to make shopping for booze abroad less attractive.

Originally, the Swedish government had hoped to persuade other EU members to raise their taxes on alcohol. After receiving short shrift from the European Commission, the Government commissioned Kent Haerstedt to study the issue. His conclusions, which where published in September, were as radical as they were logical. "To break the pattern of the strong increase in travel-imports of spirits, and to strengthen the Swedish alcohol policy's legitimacy, we suggest that the tax on hard liquor be lowered by 40% starting on 1 January, 2005."

He admitted that the country's hard liquor consumption would jump by 8% and total alcohol consumption would be up by 2%. But at least the government would be able to keep tabs on drinking habits when alcohol was bought in Sweden.

This month, Sweden's Finance Minister Paer Nader said a decision on cutting alcohol tax would be made next spring. It's odds-on, though, for swingeing cuts. Sweden's experience has applicability for the pub industry in the UK.

For many, higher prices, in the form of minimum price schemes, have become one solution to the problem of binge drinking. The reality is that, as in Sweden, customers will simply turn to the off-trade to source cheaper booze.

The phenomenon of pre-loading, drinking at home prior to a night out in the UK, is likely to rise if the pub trade allows its prices to rise while the off-trade continues to discount deeply. In Sweden, where prices are high in the on-trade and off-trade, heavy drinking does not disappear. It just ends up happening indoors. In Malmo, the locals have an alternative ­ there's always a good night out to be had over the bridge in Copenhagen.