Voluntary Report - public distribution

**Date:** 11/30/2006

**GAIN Report Number:** FI6007

FI6003

**Finland**

**Product Brief**

**Wine**

**2006**

**Approved by:**

![](media/image1.wmf)Roger Wentzel

U.S. Embassy

**Prepared by:**

FAS Stockholm

**Report Highlights:**

The Finnish wine market has experienced significant growth and wine
consumption is predicted to double within the next 10 years. In 2005,
U.S. exports of wine to Finland amounted to \$8 million.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Stockholm \[SW1\]

\[FI\]

# TABLE OF CONTENTS

[I. MARKET OVERVIEW 3](#i.-market-overview)

[II. MARKET SECTOR OPPORTUNITIES AND THREATS
3](#ii.-market-sector-opportunities-and-threats)

[1. Market Size, Structure and Trends
3](#market-size-structure-and-trends)

[Per Capita Wine Consumption in Finland 1990-2002
4](#per-capita-wine-consumption-in-finland-1990-2002)

[Sales of Wine by Country of Origin
5](#sales-of-wine-by-country-of-origin)

[Red Wines by Country -- 2006 5](#red-wines-by-country-2006)

[White Wines by Country - 2006 6](#white-wines-by-country---2006)

[2. Entry Strategy 6](#entry-strategy)

[3. Company Profiles 7](#company-profiles)

[Distribution Channels 7](#distribution-channels)

[Alko Group 7](#alko-group)

[Kesko Food 8](#kesko-food)

[Internet 8](#internet)

[III. COST AND PRICES 9](#iii.-cost-and-prices)

[Tariffs, Regulations and Customs 9](#tariffs-regulations-and-customs)

[IV. MARKET ACCESS 9](#iv.-market-access)

[Labelling/Production 9](#labellingproduction)

[V. KEY CONTACTS AND FURTHER INFORMATION
9](#v.-key-contacts-and-further-information)

# I. MARKET OVERVIEW

In Finland, the consumption of both alcoholic and non-alcoholic
beverages has increased steadily during the last 20 years, of which the
highest relative increase has been seen in the consumption of wine. Of
total alcohol consumption, wine accounts for only 15 percent in Finland.
However, the wine market has experienced significant growth, especially
between 1998-2003, growing at a rate of 6 percent. A trend towards
milder beverages has thus been noted in the Finnish drinking culture, as
a result of favorable monetary factors as well as a growing interest in
wine per se.

Experts are predicting a transformation in the Finnish wine sector over
the next couple of years and local wine consumption is predicted to
double within the next 10 years. In 1990, per capita consumption totaled
8.10 liters per year and in 2002, per capita consumption reached 24.5
liters. In 2005, sales of table wines turned slightly upwards, of which
red wines in this category increased by 5 percent. Sales of white wines
remained the same as the previous year at 18.1 million liters and
sparkling wines enjoyed an increase of 9 percent on 2004. The tax cuts
that were implemented in March 2004, in which the tax rate on sprits was
dropped by 36 percent, and the tax rates for wine and beer decreased by
3 and 13 percent respectively, has naturally influenced the market for
these products.

  ----------------------------------- -----------------------------------
  **Advantages**                      **Challenges**

  Growing interest in wines- new      High tariffs/taxes.
  world wines in particular.          

  Tax reductions on alcohol.          Advertising illegal.

  Favorable dollar exchange rate.     Increased competition from new
                                      world wine countries.

  High standard of living,            Large cross-border trade.
  well-educated workforce, growing    
  incomes.                            
  ----------------------------------- -----------------------------------

# II. MARKET SECTOR OPPORTUNITIES AND THREATS

## 1. Market Size, Structure and Trends 

Since Finland is not a traditional wine producing country, the wine
drinking culture is not a part of established traditions. However,
Finnish drinking habits have been influenced by several factors such as
travel abroad, international magazines, increased concern about health
as well as prices. Generally, Finns are more inclined to drink after the
work week is over and will drink more in one sitting, whereas in Central
Europe, for example, drinking is more spread out over meals. Finns tend
to drink "harder" but are now discovering the "European" wine traditions
and are becoming more interested in combining specific wines with foods.
People purchase wine especially for specific occasions, such as the
Christmas holidays, to match food and wine. Food and wine fairs and wine
tasting festivals are thus becoming more popular each year. Hence, the
Finnish consumer (especially high income consumers) is becoming
increasingly attracted to wine and is opting for quality. The focus on
wines with quality is reflected in a growing interest in the origin,
grape composition and quality designations of the wines. A conversion
from simpler wines to better wines can therefore be noticed in recent
years among consumers, especially in the larger cities. Nevertheless,
price is a key purchase driver in the Finnish wine market. Wine competes
with spirits (especially vodka) and beer, which are the traditional
alcohol drinks in Finland.

### Per Capita Wine Consumption in Finland 1990-2002

**Year** Liters per year

  ----------------------------------- -----------------------------------
  1990                                8.10

  1992                                9.90

  1995                                14.30

  1999                                21.40

  2002                                24.49
  ----------------------------------- -----------------------------------

EU products still dominate on the Finnish wine market, but are losing
market share to new world producing countries such as Argentina,
Australia, Chile and South Africa. Good market opportunities exist for
quality wines as tastes and knowledge become more sophisticated. Other
European countries such as France, Italy and Spain enjoy a competitive
advantage in the market for wine. American wines have nonetheless become
increasingly popular and Finland could therefore be a potential target
for U.S. suppliers. U.S. exports of wine and wine products have grown in
Finland, amounting to some \$8 million in 2005. U.S. wine industry
representatives have participated in the ViiniExpo Trade Show (a trade
show focused on wines) in Helsinki. The next ViiniExpo is scheduled for
March 15-17, 2007.

The most popular red wines originate from Chile, Spain, France,
Australia and Italy, comprising about 75 percent of wholesale volumes
(23.3 million liters). As previously mentioned, wines coming from the
new world have increased in popularity. Chile's increased market share
reflects its ability to supply value for money in the budget wine
category. Total wholesales of wine in Finland have now reached some 45
million liters of which Chile enjoys 22 percent of the market share at
7.8 million liters. The second supplier to the market is France at 7
million liters in 2005, followed by Spain at 6.9 million liters.

Bag-in-box sales have increased greatly in the last few years and there
are currently 85 different products in this category. At present, the
United States exports 6 bag-in-box wines: 3 red and 3 white. There could
be great potential for U.S. wine exporters here due to the popularity of
these wines. With regard to organic wines, there has been a steady but
limited demand in this category the last 5 years. At present, there are
14 organic wines in the general selection and 20 in the sale-to-order
collection.

The conversion to the Euro, a single currency unit for all EU countries,
which replaced local currency in 2001, has helped smooth the flow of
commerce. Cross border shopping to neighboring countries with lower
taxes on alcohol, such as Estonia, has boomed since the Baltic States
joined the European Union in 2004.

# 

###  

### 

### Sales of Wine by Country of Origin

+--------------------------+-------------+-------------+--------------+
|                          | **2003**    | **2004**    | **2005**     |
+--------------------------+-------------+-------------+--------------+
|                          | million     | million     | million      |
|                          | litres      | litres      | litres       |
+--------------------------+-------------+-------------+--------------+
| Chile                    | 6.5         | 7.3         | 7.8          |
+--------------------------+-------------+-------------+--------------+
| France                   | 7.7         | 7.4         | 7.0          |
+--------------------------+-------------+-------------+--------------+
| Spain                    | 8.1         | 7.2         | 6.9          |
+--------------------------+-------------+-------------+--------------+
| South                    | 4.9         | 5.4         | 5.5          |
|                          |             |             |              |
| Africa                   |             |             |              |
+--------------------------+-------------+-------------+--------------+
| Italy                    | 4.8         | 4.2         | 4.2          |
+--------------------------+-------------+-------------+--------------+
| Australia                | 1.4         | 2.0         | 2.8          |
+--------------------------+-------------+-------------+--------------+
| Finland                  | 3.5         | 2.7         | 2.6          |
+--------------------------+-------------+-------------+--------------+
| Germany                  | 2.1         | 2.1         | 2.4          |
+--------------------------+-------------+-------------+--------------+
| USA                      | 1.5         | 2.0         | 2.1          |
+--------------------------+-------------+-------------+--------------+
| Argentina                | 0.8         | 1.3         | 2.0          |
+--------------------------+-------------+-------------+--------------+
| Hungary                  | 2.5         | 2.1         | 1.8          |
+--------------------------+-------------+-------------+--------------+
| Other                    | 2.8         | 2.6         | 2.6          |
+--------------------------+-------------+-------------+--------------+

### Red Wines by Country -- 2006

+----------------------+-------------+-------------+-----------------+
| **January-**         | **Sales**   | **+- %      | **Share of      |
|                      |             | pr.y.**     | total sales,    |
| **April**            | **in 1000   |             | %**             |
|                      | litres**    |             |                 |
+----------------------+-------------+-------------+-----------------+
| Chile                | 1,770       | 1,6         | 23,8            |
+----------------------+-------------+-------------+-----------------+
| Spain                | 1,306       | -11,5       | 17,6            |
+----------------------+-------------+-------------+-----------------+
| France               | 967         | -9,5        | 13,0            |
+----------------------+-------------+-------------+-----------------+
| Italy                | 749         | 31,2        | 10,1            |
+----------------------+-------------+-------------+-----------------+
| Australia            | 758         | 39,3        | 10,2            |
+----------------------+-------------+-------------+-----------------+
| South                | 456         | -8,9        | 6,1             |
|                      |             |             |                 |
| Africa               |             |             |                 |
+----------------------+-------------+-------------+-----------------+
| Argentina            | 727         | 56,4        | 9,8             |
+----------------------+-------------+-------------+-----------------+
| USA                  | 182         | 2,6         | 2,5             |
+----------------------+-------------+-------------+-----------------+
| Several              | 122         | 1,5         | 1,6             |
|                      |             |             |                 |
| countries            |             |             |                 |
+----------------------+-------------+-------------+-----------------+
| Portugal             | 106         | 23,6        | 1,4             |
+----------------------+-------------+-------------+-----------------+
| All                  | 7,435       | 5,1         | ![](med         |
|                      |             |             | ia/image2.png){ |
| countries            |             |             | width="8.333333 |
|                      |             |             | 333333333e-3in" |
|                      |             |             | he              |
|                      |             |             | ight="8.3333333 |
|                      |             |             | 33333333e-3in"} |
+----------------------+-------------+-------------+-----------------+

### White Wines by Country - 2006 

+--------------------+-------------+-------------+--------------------+
| **January-**       | **Sales in  | **+- %      | **Share of total   |
|                    | 1000        | pr.y.**     | sales, %**         |
| **April**          | litres**    |             |                    |
+--------------------+-------------+-------------+--------------------+
| South              | 982         | -9,1        | 18,7               |
|                    |             |             |                    |
| Africa             |             |             |                    |
+--------------------+-------------+-------------+--------------------+
| France             | 666         | 2,9         | 12,7               |
+--------------------+-------------+-------------+--------------------+
| Germany            | 605         | 13,2        | 11,6               |
+--------------------+-------------+-------------+--------------------+
| Chile              | 577         | -4,6        | 11,0               |
+--------------------+-------------+-------------+--------------------+
| USA                | 496         | 21,9        | 9,5                |
+--------------------+-------------+-------------+--------------------+
| Italy              | 489         | 3,3         | 9,3                |
+--------------------+-------------+-------------+--------------------+
| Hungary            | 369         | -11,2       | 7,0                |
+--------------------+-------------+-------------+--------------------+
| Spain              | 356         | 0,6         | 6,8                |
+--------------------+-------------+-------------+--------------------+
| Australia          | 293         | 34,3        | 5,6                |
+--------------------+-------------+-------------+--------------------+
| All                | 5,238       | 2,6         | ![](media/image2   |
|                    |             |             | .png){width="8.333 |
| countries          |             |             | 333333333333e-3in" |
|                    |             |             | height="8.3333     |
|                    |             |             | 33333333333e-3in"} |
+--------------------+-------------+-------------+--------------------+

## 2. Entry Strategy

The goal of Finnish alcohol policy is to reduce consumption of alcoholic
beverages for reasons of national health. In accordance, beverages with
alcoholic content are taxed heavily, by international comparisons. The
government operates a retailing monopoly, Alko Oy.  Alko functions under
the Finnish Ministry of Social Affairs and Health. Alcohol sales in
Finland are dominated by Alko's 330-outlets.

Following the accession to the EU in 1995, Alko's monopoly has been
relinquished on importing, wholesaling, production and exporting of
spirits. With the termination of the import monopoly, more and more
restaurants and caterers have started to import directly.

Alko Oy, handles all over-the-counter sales of wine and spirits
containing over 4.7 percent alcohol. Only people over the age of 18 can
buy wine at Alko (and over age 20 to buy spirits). Alko supplies more
than 88 percent of total domestic wine sales through its some 300 stores
in Finland. The other 12 percent is sold through restaurants.
Approximately 200 companies are officially licensed to import and store
wines and spirits. These companies can be divided into three main
categories:

-   The duty free market (international airports, airlines and ferry
    lines). There are companies that specialize in supplying cruise
    ships traveling on the Scandinavian seas. These companies were
    authorized to import, store and distribute wine after the
    dismantling of the import monopoly. One of the world's largest
    sellers of duty free spirits are ferry lines operating between
    Sweden and its neighboring countries.

-   Central purchasing companies buying on behalf of large groups of
    restaurants. The main purchasing companies are actively
    restructuring their organization in order to be able to import,
    distribute and sell wine and spirits to their clients in
    anticipation of a possible dismantle of the retail monopoly.

-   The monopoly chain Alko. However, due to Alko's strong market
    position and knowledge of wine, it is recommended that U.S.
    exporters familiarize themselves with the company's homepage and
    purchasing plan. All information and the forms necessary regarding
    wine imports to Finland can be found on the company's homepage. It
    is, of course, also possible to contact licensed
    importers/wholesalers directly. For more information on the major
    importers/wholesalers, please contact the National Product Control
    Agency for Welfare and Health. See IV. Key contacts and further
    information.

According to Finnish law, beverages with more than 22 percent alcohol
content cannot be advertised publicly. Prices of such drinks do not even
appear on Alko's website. Active marketing towards consumers will
continue to be highly restricted.

## 3. Company Profiles

### Distribution Channels

The distribution of wine in Finland has undergone radical change since
Finland became a member of the European Union. The import, wholesale and
production monopolies, previously held by the Alko Group, have now been
abolished and the market has opened up to competition. Imports are now
handled by special wine and spirits agents and wholesalers (such as
Kesko, for example). Alko is still the largest single importer of wines.

The Finnish Food Marketing Association has challenged the authority of
Finland's state alcohol monopoly Alko. It has taken its case to the
European Union, saying that the monopoly is illegal. The Association
demands that the European Commission investigates the legality of Alko's
hold over the wine and spirits market. The Association also suspects
that Alko has unfairly used its position as the only liquor retailer. In
addition, the organization challenges the logic of the monopoly, saying
that consolidating alcohol in the hands of state retailers has not
prevented the rise of alcohol-related social ills. This issue is under
official discussion at the moment.

### Alko Group

Alko is regulated to operate fairly and transparently. It does not
produce or market any products of its own. It purchases products from
domestic and foreign producers (and distributors) and the purchasing,
listing, de-listing and pricing criteria are designed to be impartial
and non-discriminatory.

There are currently more than 150 licensed importers that supply Alko.
Alko imports certain wines directly from producers, in cases where it is
considered that the producer is capable of servicing the Finnish market
directly in terms of product launches and media contacts. These
arrangements provide enhanced opportunities for marketing to
restaurants. However, when it comes to retail trade -- which accounts
for the vast majority of table wine sales -- the wine must be listed and
sold through Alko's retail monopoly. It is strongly recommended that
U.S. suppliers familiarize themselves with Alko\'s listing procedures
before making direct contact with Alko. Alko does not currently receive
many offers from U.S. exporters and the state owned retail chain would
welcome more offers from U.S. wine exporters.

As mentioned, Alko is a trading chain specialising in alcoholic
beverages and the company has a vast selection of wines originating from
28 different countries. The knowledge of wines is great among Alko's
employees and with the growing interest in wines among the Finnish
population, the selection of quality wines is on the rise. The price
range in Alko's selection of wines varies greatly, with the cheapest
wines at a price of 4-5 euros. In 2002, monopoly wine sales reached 39.4
million liters, which is an increase of 11.7 percent compared to the
previous year. In addition, restaurant wine sales totaled a sales volume
of approximately 3.2 million liters. 70 percent of red wines sold in
2005 were in the price category of under 7 euros. The lowest priced
white wines, under 5 euros, accounted for 22 percent of all white wine
sales. The Finnish population generally favors wines that cost less than
10 euros. About 95 percent of sales come from wines that cost between
6-10 euros. The following table shows the predominance of wine sold in
the budget category.

  ----------------- ----------------- ----------------- ------------------
                    **Sales breakdown                   
                    in 2005 by price                    
                    category**                          

  ** Cost**         **Red wines**     **White wines**   **Sparkling
                                                        wines**

  Under €6          32.9%             65%               34%

  €6--6.99          29.2%             19.5%             10.8%

  €7--9.99          26.3%             13%               41%

  €10+              4.3%              2%                14.3%
  ----------------- ----------------- ----------------- ------------------

Each month Alko calls for 'service products' to supplement its general
selection range. Service products are wines with low-volume sales that
Alko stocks to ensure that its range of wines is diverse and
representative. Service products are selected through a process of
competitive bidding for a maximum of three years at a time and those
that sell well stand a chance of becoming part of Alko\'s general
selection.

Alko specifies the service products in demand, for example:

Product: Red wine

Country of origin: USA, for example

Wine Type: Zinfandel with screw cap (may be an advantage)

Bottle size: 0.75-litre bottle

Estimated sales: 800 bottles per year

Retail price: €8-10

Interested suppliers are advised to check Alko\'s website where
specifications for service products are published.

### Kesko Food

The central purchasing company Kesko Food is the market leader in
Finland in the sales of alcoholic beverages targeted at restaurants. Its
product selections include over one thousand alcoholic products, of
which more than half are wines. About 20 of the wines are own label
products. In the next few years, Kesko Food intends to launch more own
wines and strong alcoholic beverages on the retail market as the company
would like to offer Alko new products whenever their request is for
beverages in which Kesko co-operates with producers.

Meira Nova is also a leading market player when it comes to supplying
restaurants with food and wine. Central purchasing companies such as
Kesko and Meira Nova would experience great benefits from the possible
dismantling of the monopoly. For additional information on the major
actors on the market please contact the National Product Control Agency
for Welfare and Health. See IV. Key contacts and further information.

### Internet

Internet based sales of alcohol are becoming more popular in Europe, and
Finland. On August 1, 2006,
[www.viinisaitti.com](http://www.viinisaitti.com/) was launched in
Finland. It is not clear, however, if sales of alcohol on the internet
are legal. The Finnish Customs has decided that it is illegal and has
seized some 84,000 litres of beer, wine and spirits from previous
internet alcohol sales and there is a risk that the consumer will not
receive orders placed. If it is decided that alcohol sales on the
internet are legal (i.e. that free trade within the European Union also
should include alcohol) there may be great potential for U.S. exporters
to enter the market via web based sales of wine/alcohol.

# III. COST AND PRICES

## Tariffs, Regulations and Customs

Finland is a member of the European Union (EU), and thus, the import
regime of the EU applies. In Finland, alcoholic beverages are subject
to:

-   Alcoholic beverage tax. Taxes are based on alcohol content of the
    product and vary between 4,5 cents per/liter to 212 cents per liter
    for wine

-   A surcharge when in retail sale containers - unless these are
    refillable or recyclable

-   General value added tax (VAT)

As can be seen from the example below, prices in Finland are higher
compared to international standards due to the tax system.

Example:

Bottle size 0,75 liter

Alcohol content of 8% vol.

  ------------------------------------------------------ -------------- --------------------------
  ![](media/image2.png){width="8.333333333333333e-3in"   **Euros**      **share of retail price**
  height="8.333333333333333e-3in"}                                      

  Purchase price + Alko\'s margin                        3,25           54%

  Alcoholic beverage taxes and package handling charges  1,65           28%

  VAT                                                    1,08           18%

  Retail price                                           5,98           100%
  ------------------------------------------------------ -------------- --------------------------

# IV. MARKET ACCESS

## Labelling/Production

As a member of the European Union (EU), Finland applies EU wine labeling
rules laid down in Annex VII to Council Regulation 1493/1999. An
overview of the mandatory information required on wine labels are given
in USEU GAIN Report E36067
<http://www.fas.usda.gov/gainfiles/200604/146187574.pdf>

# 

# V. KEY CONTACTS AND FURTHER INFORMATION

[Alko
Group](http://www.austrade.gov.au/australia/layout/0,,0_-1_-2_-3_PWB1662006-4_-5_-6_-7_EXTERNAL,00.html) --
[www.alko.fi](http://www.alko.fi/)

Kesko Ltd. -- [www.kesko.fi](http://www.kesko.fi/)

Meira Nova Oy --
[www.nettitilaus.meiranova.fi](http://www.nettitilaus.meiranova.fi/)

Government, business and trade resources for Finland

[Finnish
Government](http://www.austrade.gov.au/australia/layout/0,,0_-1_-2_-3_PWB110783886-4_-5_-6_-7_EXTERNAL,00.html) --
[www.valtioneuvosto.fi](http://www.valtioneuvosto.fi/)

[Finnish
Customs](http://www.austrade.gov.au/australia/layout/0,,0_-1_-2_-3_PWB1665136-4_-5_-6_-7_EXTERNAL,00.html) --
[www.tulli.fi](http://www.tulli.fi/)

[Invest in
Finland](http://www.austrade.gov.au/australia/layout/0,,0_-1_-2_-3_PWB110365309-4_-5_-6_-7_EXTERNAL,00.html) --
[www.investinfinland.fi](http://www.investinfinland.fi/) 

National Product Control Agency for Welfare and Health -
[www.sttv.fi](http://www.sttv.fi/)