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In globalising Sweden, state still big brother over drinking

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(Globalpost/GlobalPost)

By Alistair Scrutton and Johan Sennero

STOCKHOLM, Feb 25 (Reuters) - Few CEOS would welcome news of a fall in sales. But Magdalena Gerger, head of Sweden's retail alcohol monopoly that is one of the world's biggest single buyers of wine, is one of them.

Gerger's job as head of Systembolaget exemplifies Sweden's attitude that an interventionist state is good for you, and highlights Sweden's conservative attitude to alcohol use despite its stronger reputation abroad for liberal social policies.

"Nothing in my purpose or objectives drives that way (to increasing sales)," Gerger told Reuters at the headquarters in downtown Stockholm, squeezed between a bank and a church. "In fact it's the other way around - a healthier public."

Contrary to popular belief about Sweden, which lies in the so-called vodka belt, the Nordic country has one of the smallest per capita alcohol consumptions in Europe.

Over the last few years Sweden has privatised companies, trimmed its welfare state and cut taxes. But Systembolaget, along with the country's famed, lengthy parental leave, appears a sacred cow oblivious to reform.

If you want to buy wine, beer or spirits in Sweden outside a restaurant, you must contend with Systembolaget, stores that offer no promotions, are closed most of the weekend and have an uncanny ability to make you feel a guilty consumer.

Systembolaget made sales of 24.4 billion Swedish crowns ($3.79 billion) in 2011 and a 168 million operating profit though Gerger tends to be more occupied with ensuring age checks - 20 years old is the limit - are rigorously enforced.

Polls show a majority of Swedes support the system. But it is a model that is increasingly under scrutiny as Swedes buy more on the Internet from Europe.

In 2011, around a fifth of its stores reported a loss, but there is little chance of them closing.

"Our system is one that everyone goes along with," said Gerger, better known for having a penchant for milk after spending years at dairy group Arla Foods. "But there can be pricing, marketing affects. In the Internet world things can come to the customer anyway. That is a huge challenge."

SLOW INNOVATION

The Systembolaget website features a video warning what would happen if it loses the monopoly. It shows a gloomy and untidy kitchen littered with empty bottles of wine, warning that sales would jump 30 percent.

The shops, mostly non-descript supermarkets with bright, unfriendly lights are aimed as much at limiting sales as encouraging consumption and can make one feel more like browsing in a pharmacy than a wine store.

"We actually have a long time target that says don't give me more interest than interest on the 10-year state bond plus a couple of percent," said Gerger. "Give me that, but no more. If you give me more, than you have to put back into the service. It's quite an unusual business model."

Unlike Sweden's innovative companies from Spotify to IKEA, Systembolaget moves at a glacial pace. One of the biggest reforms happened 15 years ago - opening on Saturdays -- though only to around 3 pm.

It is still closed on Sundays. The golden rule of drinkers in Sweden is to plan ahead.

While most of the Nordics and Canada also have state alcohol monopolies, Sweden's is touted as one of the most successful in mixing relative low sales per capita with high customer satisfaction.

The stores are not allowed to highlight one brand over another. Beer is not refrigerated, because that may encourage people to buy the colder brands over another. Stores cannot sell to anyone who appears drunk.

For years, customers were unable to even pick up a bottle off the shelf but rather tell a clerk behind a desk what number they wanted, like a prescription drug.

Polls show that about two thirds of Swedes support it.

"I'm in principle against state regulation, but if you do have it, it must be handled in a very good way. Systembolaget does it well, but it could be better," said 41-year-old Fredrik Armerin.

"But, if you extend the opening hours, let's say between 08.00 and 19.00 including Sundays, that problem is solved"

But there are critics.

"Systembolaget is trusted. And for the average consumer it is OK. But as soon as you have more of a strong wine interest, it is extremely limited, especially for fine wines," said Erica Landin, a Swedish wine writer.

Systembolaget is making reforms and there are plans to expand into home deliveries. But there is little chance of radical changes.

"We are one of the world's biggest wine buyers. If nothing happens to taxes, no one can really compete," said Gerger.

($1 = 6.4386 Swedish crowns) (Editing by)

http://www.globalpost.com/dispatch/news/thomson-reuters/130225/globalising-sweden-state-still-big-brother-over-drinking