3. The Swedish wine market: external factors
Wine consumption and tastes in Sweden
Sweden produces just a tiny amount of wine, while its wine per-capita consumption are quite high (21.21 litres). As a result, Sweden in fact imports all of the wine that is consumed (99%). In this context, Swedish consumers trust the quality and prestige of Italian bottles of wine, especially premium ones, of which the consumption is in constant rise (The Wine Economics Research Centre 2009).
Favourable exporting conditions
Exporting into Sweden is quite easy for Italian wine producers. First, most of alcoholic beverages are allowed to enter Sweden only by the licensed importers (see “Threats”), this gives automatically the possibility and “the must” to choose between different competent partners. Another important marketplace is the so called tax-free market on the Baltic Sea (ferryboats, cruising ships), but our article is only about the land-based market with its special conditions.
The Swedish wine retail system and the impact of regulations
The Swedish alcohol trade consists of two separate parts: the importers/suppliers and the retailer, the retailer being the state-owned Systembolaget AB which has the monopoly as retailer. The idea of a state owned monopolist company to sell alcohol is quite typical in Scandinavian countries and has historical roots. We should understand that this part of Europe has traditionally belonged to so called Vodka Belt including not only the North-Europe, but also parts of Central-Europe. Knowing this it might be easier to understand the idea that a state owned monopoly as the only retailer for alcohol, with strict and controlling rules, might be able to minimize the alcohol-related problems in a country.
“Systembolaget exists for one reason: To minimize alcohol-related problems by selling alcohol in a responsible way, without profit motive.” This sentence can be found on the website of Systembolaget. In its “2011 Responsibility Report”, the alcohol policy-based mandate given to Systembolaget by the government is described as the foundation of the existence of Systembolaget. “We shall help limit the harmful effects of alcohol by selling alcoholic drinks responsibly. Systembolaget shall, furthermore, work continously to increase its operational efficiency and thereby create scope for development and renewal. Responsibility issues shall be integrated into our corporate culture and the way we manage our operations” (2011 Responsibility Report). This quotation significates clearly the unusual character of Systembolaget, and gives a hint about a very special business environment for the companies wanting to participate in the Swedish trade of alcoholic beverages.
Systembolaget is one of the world's largest buyers of wine and spirits, it sells and controls the selling of all alcoholic beverages to end consumers, apart from those with less than 3.5% alcohol (Veseth 2008). In Sweden wine importers have two possibilities. The licensed importers are allowed to sell only to Systembolaget, and to Horeca-branch(nota) – and Systembolaget is allowed to buy only from these around 800 licensed importers, from which around twenty can be seen as major actors.
This means that exporting alcohol to Sweden has to go through these licensed importers/suppliers. Nevertheless, 80% of alcohol is sold in the off-trade market, which means through Systembolaget, while only the 6% of alcohol is sold by the on-trade sector to consumers. However, the retail monopoly is widely escaped through the black market. Moreover, consumers go abroad to buy alcohol and to bring it legally into Sweden as soon as they prove that alcohol was for private use only (Hulot 2010).
Not understanding these features about “the Swedish way” quite sure will create threats, understanding them perfectly will be an opportunity. This is also an essential fact to be understood when using SWOT; threats can be turned to opportunities and vice versa.
The change in global competition is seriously harming the appeal of Italian wines in Sweden. Italy risks to lose its leader position in the Swedish market against the so-called “new world” countries: Australia, Chile, the United States and South Africa (Santini, Cavicchi, Rocchi 2006). They have a strong competitive advantage if compared to Old World countries (Italy, France, Spain), since they are offering wines at a lower price and promote them with appealing and catching images. For instance, in 2008 Italy topped the wine sales list. Just two years later, in 2010, South Africa was ahead of Italy with a market share of 20% (Systembolaget 2012). Among the main consequences that the increasing level of competition arises, we can mention two of them: aggressive pricing and intense battle for table place. The effect of them has been the erosion of the Italian competitive advantage, brand names and quality.
4. About the Swedish market for alcoholic beverages
The words “state-owned monopolist company” might cause a bias-based picture of some dreary shops where customers can buy low-quality products. Visiting one of these shops could just as easy wipe off this kind of thoughts. The around 400 shops are well-organised, customer-friendly and the personnel is not only helpful, but has an unusual good knowledge of the products. This is simply part of the marketing policy of Systembolaget. All stores are going to be self-service outlets till the end of 2012. The product range of beer, wine and spirits is one of the most comprehensive in the world. Even in little villages without a store the customers have the possibility to order all products from the entire product range just visiting one of the over 500 hundred local agents (for instance a food shop). Additionally to the product range to be found in the stores there is the possibility to order products from a special product range (available-for-order-range) consisting of around 9000 products. These can be ordered also directly from the importers, but also at the stores, from the agents or via the website of Systembolaget) – but they are delivered and sold to the customer in the Systembolaget-store that the customer has chosen.
In this way the customers get in touch also with the importers. The contact between importers and for instance active wine-affinados is often lively and interactive, because there are lots of fairs for food and wine-interested customers, and the biggest importers have customer-clubs, magazines, different kind of events such as wine-tastings etc., and they also organize travels mostly for wine-lovers (wine-tourism). There are also lots of Swedish wine-clubs to be found on the internet, and these also import wine directly to the customers and organize the same kind of services as the licensed importers, but we have chosen not to research this phenomenon.
When thinking about choosing Sweden as target market for wine export, it is crucial to have a very good knowledge of the special environment that this target market means; the important actors are not only the importers, but just as well Systembolaget and the end consumers.
The inter-acting relationship between the customer and Systembolaget builds part of the framework and the base for the product range that Systembolaget decides to launch. The results of the continual monitoring of the operating environment in order to meet trends & driving forces also create part of this framework and the guidelines. The importers/suppliers have to be very well aware of this framework and how it works in order to be able to offer products that fit into it – but at the same time they should understand how the framework emerges and which is the role of the end consumers in this system. The keywords are inter-acting and being up-dated, which means that a high degree of engagement is necessary on this target market.
In order to make it clear what we mean with this, we want to describe some of the features and the policy of Systembolaget a little bit nearer. In the official documents of the company (Launch plan 2013) consideration, knowledge and inspiration are described as the three core value words of Systembolaget for renewing and developing the product range. These words symbolize a wide field of ideas and ideology that also are essential for the mandate, business concept and vision of Systembolaget. Consideration, for instance, is connected with such values as caring and showing respect, not only for the customers, but the world in which we are living. Thus also environmental aspects and sustainability in wide meaning are important for Systembolaget. Inspiration and knowledge are also values that guarantee a high quality level and customer satisfaction, but just as well keep aware the consciousness of the possible problems with alcohol consume – and in which ways it affects the environment, for instance. It is important to understand that the mentioned core values build the base for all acting for Systembolaget, which can be considered to be a special kind of social enterprise.
Systembolaget distinguishes between driving forces and trends; driving forces are changes taking place in the society in several areas like demography, technical development, climate. These forces also have an influence on trends, which in turn affect the behaviour of consuments. Demographic changes, the change of climate, new technologies and urbanisation together with globalisation are all having a part in emerging trends like new channels & networks, individualisation, awareness of ethics and environment but also the health, and consumers seeking of “the experience” and “the real thing”.
Awareness of these driving forces and new trends is a fundamental cornerstone for the product range of Systembolaget, as it would be for any company or organisation wanting to be succesful. As already mentioned, the importance of the three core values should not be forgotten, which in this case means that the combination of these together with driving forces and new trends create the following guidelines for the product range:
products with low alcohol content, small packages (the health aspect)
products in all price classes (the economical climate)
eco-friendly packagings like light-weight glass, BiB and PET(nota)
organic products and ethically certified products (the green and fair trade-trend)
exclusive items, sparkling wines (for the luxury & individualist – trend)
new types of products (for the experience-trend).
Some other important cornerstones for the product range work are the abilities to offer:
a product range that is broad and deep and perceived as modern and innovative
a product range that enhances the food & drink – experience
At the same time, meeting the requirements for profitability and efficient management in the chain of logistics and in-store is crucial.
Without going deeper into the comprehensive and vast business policy of Systembolaget and the different aspects of it, we only want to underpin the fact that Systembolaget considers the importers/suppliers as “partners”. Using this word instead of terms like “external/internal customers”, also reveals the importance of interacting and cooperating, being part of an entity operating in a business field where also the consumers are having an active role just as well as many other actors. For instance suppliers of suppliers, normally seen only as a part of supply chain, can in this kind of construction get and take a more active role. For doing this succesfully, it is fundamental to have enough knowledge of this special system.
With a quotation from Gert Carl we want to show how this should be understood : “[...] I will not say that I support the monopoly...but once you are in, you have guaranteed volumes.” (Ilkjaer 2007).
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