- Scandinavia's five monopolies are combining forces to cut carbon emissions by 50% by 2030
- These countries have a high rate of recycling and acceptance of alternative packaging
- However, the five markets vary in pricing and behaviour
- Environmentally-friendly packaging is not always compatible with traditional wine
- The monopolies are still deciding how producers will achieve their objectives
Sweden’s Systembolaget, Finland’s Alko, Norway’s Vinmonopolet, Iceland’s Vínbúðin and the Faroe Islands’ Rúsdrekkasøla Landsins have collectively announced a plan to become beverage business leaders in sustainable development. The specific target is for 2030 CO2 emissions to be half their 2019 levels. This will involve actions at every stage of the production, packaging and distribution processes and will involve consumers as well as industry professionals.
As the Swedish monopoly says, the programme “means reduced emissions from not only beverage packaging but also from cultivation, production, and transportation of beverages as well as from customer trips to and from our stores.“
The Norwegian monopoly Vinmonopolet frankly acknowledges that that it is not clear how the ambitious target, will be reached and Rolf E. Eriksen Vinmonopolet’s Director of Sustainability Climate & Environment similarly admits that “How we are going to reach our goal of 50% reduction is not yet defined in details. There are many aspects in this; what we are able to measure, how we measure it, what we are able to affect.” Even so, the group has outlined a number of specifics::
- Minimizing suppliers’ use of heavy weight glass bottles
- Maximizing the use of low carbon footprint packaging
- Maximizing the use of recycled material
- Maximizing the recyclability of all their packaging
- Eliminating unnecessary packaging
- Supporting new innovative low carbon packaging solutions
- Implementing best practices for energy efficient and low carbon transportation
- Encouraging the implementation of best practices including, but not limited to, soil health, agrochemicals, biodiversity, circularity, water use, energy use and greenhouse gas emissions
The majority of products listed by the monopolies will have to be sustainable certified.
What will this Actually Mean?
In order for the plan to succeed it is acknowledged that it will have to focus on the highest volume wines, beers and spirits products.
Lightweight glass, already a focus for the monopolies will have to become more widely used, which may prove challenging for some spirits brands that rely on proprietary bottles. Use of Bag in Box – BiB - will be encouraged, as will PET bottles, Tetra Paks and other alternative packages. Cans will similarly be a greater focus for beer and possibly wine.
While farming and production, local regulations and technological innovation, not to mention customer trips and wine tourism are all outside the control of the monopolies, their approach follows the holistic lines of the increasingly respected B-Corp model which places the responsibility on suppliers to monitor every stage of their own activities as well as those of the companies with which they work. It is to expected that drinks businesses of any size wanting to sell to these important markets will consider gaining B-Corp accreditation alongside the sustainability badges that will be required for their products.
Differences in Approaches?
The monopolies see the plan as a framework for their own specific markets. They will meet, to report, discuss, share experiences regularly. For the moment, unsurprisingly, given its size, the Swedish Systembolaget appears to be leading the group with most detailed material and clearest targets. The other monopolies are not yet ready to reveal specific targets or the means by which they will be achieved.
Sweden and Finland
Just looking at the differences in the markets reveals that there will be differences in the details of implementation. Sweden, for example, has lower tax on wine and the monopoly a lower profit margin than Finland and Norway. Consumption patterns and packaging vary too, as does purchasing behaviour.
In Sweden, local legislation means that most beer is purchased from the monopoly stores, while in Finland, where it is still the most popular beverage, it is available in retail stores. Sweden’s wine culture is stronger than in Finland where spirits still have a larger presence in the market, and Sweden’s wine drinkers get more value for money when they go shopping.
A wine with an ex-cellar cost of €3 would retail in Stockholm for €10 while a buyer in Helsinki spending that much would get a wine sold by the producer for only €1.50.
In Norway the alcohol taxation is high as are salaries, so that wine retailing at €10 in Helsinki will cost €14 in Oslo. However, this is compensated for by the Vinmonopolet taking a lower margin than the Finnish Alko, so a wine on a Norwegian shelf at €10 will have had a similar ex-cellar €3 cost to one retailing for the same price in Stockholm. Norwegians are less likely to be buying wines at this price, however. Due their high incomes, Norwegians routinely buy more expensive wines than the Finns or Swedes.
Iceland & Faroe Islands
In Iceland & Faroe Islands, alcohol consumption from the monopolies constitutes mainly of beer. Wines make a small contribution.
Good at Recycling
Across all of these regions, there is a high consumer awareness of environmental issues and recycling rates are over 90%, rising to 98.2% for the nature loving Norwegians. Finland’s recycling rate has been encouraged by a deposit-refund system (10 cent to 40 cent depending on the size). The return ratios are with cans at 97%, PET-bottles 90% and glass bottles 98%.
Historically, until the late 1990s, the Nordic monopolies had their own refund systems on wine bottles that were then cleaned and refilled. The cheap, low-quality wine they contained, and the packaging model, went out of fashion, but there are now suggestions that it might be revived. According to Maritta Iso-Aho, Alko’s Communications Director in Alko “All means are on the table and we have discussed the possibility to re-introduce the concept.” But the the discussions are evidently still only in the very early stages.
Current Alternative Packaging
Scandinavia, as sales statistics and 2020 Swedish research by UK-based analysts, Wine Intelligence reveal, has a more open attitude towards alternative packaging than other parts of the world. BiB use is already famously high – at around 50%, but an even larger 74% of wine drinkers told the researchers that they would consider buying wine in this format, with 64% saying the same about PET bottles and 44% and 36% doing so for Tetra Pak and cans respectively. Even if fewer Scandinavians go as far as these responses suggest when they do their shopping, the unusually high penetration of PET and Tetra Pak in some of these countries suggests that there is potential for further growth.
The monopolies’ own sales data and the broad consumer insights available to any distributor with a total view of a market should not be underestimated either.
Bag in Box
BiB use has been steadily growing its market share in the Scandinavian monopolies. In Sweden and Norway, the first markets to focus on this format, it has over 50% market share, by volume, and its use is increasing in Finland and Iceland. However, it is recognised that, at some point, saturation will have been reached, especially given the inability or unwillingness of smaller or more premium producers to adopt it. However, growth in smaller, more premium – 1.5l – BiBs of the kind that are proving popular in France for AOC wines may be possible, especially as 56% of the Wine Intelligence panel indicated they would consider them.
Of course some DAC/DO/DOC/DOCG regions have regulations that determine packaging styles and bottling location. In Austria, for example, Qualitätswein can be PET bottled but wines labelled as DAC (Typically for the region) can’t. Alsace AOCs have to be packaged in the region and in traditional flute bottles. So bulk shipping for packing into PET or BiB is not an option. However, some wine regions like DO Penedes in Spain, have started trials and studies for lighter bottles as well as reusing bottles. Others such as Chianti DOC & DOCG are studying new solutions and lighter bottles are likely to become ubiquitous.
PET and Pouches
In countries like the US and UK, this form of packaging which had a brief moment of popularity over a decade ago thanks to its undoubted environmental benefits, now encounters market resistance because of the widely-publicised impact of plastics on the ocean. This is currently far less of an issue for Scandinavia, where recycling rates are over 90%. Its market share in this region is still small, with Finland topping the list with 6.3% followed by Norway with 5.2%, but these figures are still high by international standards.
It will be interesting to see whether concerns over microfibres released when fabrics made from recycled PET are washed become a talking point in these regions.
Pouches raise similar concerns and have yet to gain traction in Scandinavia or elsewhere, but the monopolies’ new objectives may increase their appeal.
Another form of packaging little seen elsewhere that has a following in Scandinavia is the Tetra Pak where it has a 4% market share overall and over 9% in Finland. This globally high figure is despite the fact that a €9.99 Tetra Pak wine carries 6€ in tax and Alko's 1.54 margin, meaning that, when the importer’s commission, packaging and transport are taken into account, the ex-cellar value of the wine is around €1 per litre.
Until now, cans have been most used for beer and RTDs, but their penetration varies across the region. In any case, given the retail sale of beer in Norway and Finland, the use of glass or cans for it falls outside the remit of those countries’ monopolies and does not feature in their statistics. However, in Finland, most beer is sold in cans. As elsewhere, canned wine is a novelty.
Packaging wine in BiB, Tetra or PET inevitably raises the question of longevity. Most wine is not stored by its purchasers, so the often-quoted issue of wine not maturing in these kinds of package is not a particular concern. However, with packaging options with lifespans of under two years, the question of shelf-life does have to be considered.
As Alko’s Maritta Iso-Aho of Alko says “Products packed in PET packaging should be those that are consumed relatively quickly after purchasing the product. The PET packaging type is not suitable for maturing the drink. The manufacturer can optionally add a best-before date to the product if they feel that the product's shelf life could become a problem for the drink and the monopoly.”
For the monopolies switching to environmentally friendly packaging formats may be driven by simply creating tenders featuring them. This is not as straightforward as it seems.
“Of course it is absolutely vital we do all our best in this matter. There is no question about that. And the industry as whole must act. But increasing the tenders of PET and Tetra Pak will increase challenges within the trade. Tetra Pak and PET do have a cheap wine price image. So, my concern is that it will show in the monopolies’ tendering. Also, due the minimum bottling lot of 25,000 packages there are many producers that will not offer them as this would represent a big listing in the monopolies. Big listings include risks and most the producers want to minimise risks. Where I see opportunities is in the heavy bottles. The industry should stop using them and focus on lighter bottles rather than PET bottles as I do see the glass bottle staying as the main package of wine.
Then there is the pricing issue. Who can produce it and who wants to drink it? We have tried the 0.75l PET-bottle and it does not work as it looks too small on the shelves. The 1l. bottle works but it becomes a bit too expensive, going over price points [with which consumers are happy."
Johansson also doubts that Horeca will adopt these formats. “PET and Tetra are too difficult in practical use. So, the only issue would be the light bottles.”
Jussi Laakso / Restaurateur at Wanha Satama has similar views:
”The PET-bottle is way too difficult as it does not hold its shape while it empties. It becomes difficult to hold on to and pour from it. So, I do not see it in HoReCa. Neither the Tetra Pak. Perhaps the restaurants could order bigger BIB’s and re-introduce the old en carafé service of wines? But perhaps the big hotel chains etc, might use PET-bottle in minibars.”
Fear of offending monopoly buyers affects many in the industry. The worry of getting penalized in tendering thus losing listings often comes up in discussions. Naturally, the monopolies deny ther exidstence of any such friction. Alko’s Communications Manager Varpu Göös claims “We have an active, open and continuous dialogue with our suppliers. Together with the Nordic monopolies and our suppliers, we strive to find the best solutions for more environmentally friendly packaging.”
Fear of Speaking Out
Even so, it is telling that the sales manager of a well-known Bordeaux negociant insisted on remaining anonymous when he said
“The Scandinavian market is challenging as the monopolies demand a lot but commit to little. Tenders are released with little knowledge of what is financially possible. New packaging forms costs and include a business risk. The monopolies have to commit to volumes and share the risk. Otherwise, it is quite difficult for us to offer wines to PET etc. tenders. Light weight bottles are a big yes for us tough. As whole the one big issue is that only a few really big suppliers could operate with these alternative packages and when it comes to canned wine there are only one or two companies canning wines for the whole Nouvelle-Aquitaine region, so many really big questions remain.”
Another made the point that pricing will be an issue. The same wine sold in three different monopolies can cost €7,50 in Sweden, €13 in Finland and €18,70 in Norway. Three different price groups and possibly three different sets of consumers. How will the producer react to a strong request to bottle it for all the five markets in PET? How will it affect total sales? Would it comply with their local wine laws?
Even where producers proactively embrace environmentally-friendly packaging, will the monopolies pay what this requires? An Italian producer, for example, recently discovered that the Finnish monopoly’s price ceiling was too low for it to put good wine in its premium aluminium bottles.
Another point that is made by producers is that tendering is a slow process and it will not be easy for monopolies to delete listings due them being in a glass bottle.
The alcoholic drinks industry is far from alone in having to come up with ways to avert climate catastrophe and consumers will have to change their behaviour in a wide range of ways. Persuading traditionalist wine producers and their customers to embrace new forms of packaging will not be easy, but it is not so long ago that no one would have imagined that well over half the red wine in Sweden would now come out of a BiB tap, that one glass in 10 in Finland would be poured from a Tetra Pak or one in 16 from a PET bottle.
As Varpu Göös Communications Manager of Alko admits “The goal is challenging, but we believe that it is possible to achieve it in cooperation with various stakeholders.” Time will tell if she is correct, but few would deny that if any part of the world can make these kinds of changes, it is most likely to be Scandinavia.