Report from the Commission to the European Parliament and the Council on the German Alcohol Monopoly
Date: 2010-06-24
Institutions: European Commission
Subjects: Germany, State aid, State monopoly, beverage industry, control of restrictive practices, ethanol, suspension of aid

EN 

EN 

   EN 

 
 
EUROPEAN COMMISSION 

Brussels, 24.6.2010 
COM(2010)337 final 

REPORT FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

on the German Alcohol Monopoly 

EN 

   EN 

 
 
 
  
REPORT FROM THE COMMISSION 
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 

on the German Alcohol Monopoly 

1. 

INTRODUCTION 

Article 184(3) of Council Regulation (EC) No 1234/2007 establishing a common organisation 
of  agricultural  markets  and  on  specific  provisions  for  certain  agricultural  products  (Single 
CMO  Regulation)  requires  the  Commission  to  submit  before  31 December 2009  to  the 
European Parliament and the Council a report on the application of the derogation provided in 
respect of the German Alcohol Monopoly. The report shall include “an evaluation of the aids 
granted in the framework of that Monopoly, together with any appropriate proposals”. 

For this report the Commission has taken into account the information submitted annually by 
the German authorities on the functioning of the system, as well as the information coming 
from other sources. 

Ethyl alcohol 

There are mainly two kinds of ethyl alcohol or ethanol: 

- agricultural alcohol – product of fermentation and distillation of agricultural products such 
as  cereals,  sugar  beet,  potatoes  and  fruits.  It  is  used  for  human  consumption  (drinks  and 
vinegar), in the biofuel sector (in that case it is called bioethanol or fuel ethanol) and in other 
industrial applications. 

- synthetic alcohol - made from petrochemical feedstock (i.e. oil derivatives) is used only in 
the  industrial  market  (e.g.  pharmaceuticals,  cosmetics,  inks,  paints,  detergents,  screen 
washers, surface coating etc). 

With  an  alcohol  content  ranging  from  80%  vol.  to  99.9%  vol.  ethyl  alcohol,  in  particular 
above 96% vol., has no specific organoleptic characteristics. It has no taste, no colour and that 
is why it is also commonly referred to as neutral alcohol. 

In  recent  years  the  production  and  use  of  alcohol  in  the  biofuel  sector  have  experienced 
unprecedented  growth  around  the  world  (mainly  in  United  States).  In  2003  the  European 
Union adopted the Directive on the promotion of the use of biofuels and other renewable fuels 
for transport1 and in April 2009 adopted the Directive on the promotion of the use of energy 
from  renewable  sources2.  Council  Regulation  (EC)  No  670/2003  layed  down  specific 
measures  concerning  the  market  in  ethyl  alcohol  of  agricultural  origin3  in  the  form  of  a 

1 

2 

3 

Directive  2003/30/EC  of  the  European  Parliament  and  of  the  Council,  Official  Journal  L  123  of 
17.5.2003. 
Directive  2009/28/EC  of  the  European  Parliament  and  of  the  Council,  Official  Journal  L  140  of 
4.6.2009. 
Council Regulation (EC) No 670/2003, Official Journal L 96 of 15.4.2003, p. 6. 

EN 

2 

   EN 

 
                                                 
"lightweight" common market organisation. It introduced a possibility of a trade monitoring 
system by means of licences for agricultural alcohol and brought the alcohol sector under the 
competence of the Management Committee for Wine. Moreover, on the basis of data provided 
by  the  Member  States  the  Commission  publishes  an  annual  Community  balance  for  the 
market. The Regulation authorised a derogation for the German Alcohol Monopoly from the 
State  aid  rules.  This  Regulation  has  been  later  integrated  into  Council  Regulation  (EC) 
No 1234/2007 (Single CMO Regulation). 

Market of the agricultural ethyl alcohol in the EU 

In  the  EU-27,  about  40.5 million hectolitres  of  agricultural  ethyl  alcohol  were  produced 
in 2008.  Most  of  the  production  originated  from  cereals  (22.3 million hl)  and  sugar  beet  / 
molasses (15.9 million hl), wine (2.4 million hl), potatoes (250.000 hl), fruits (200.000 hl) and 
other materials (1.3 million hl). 

In 2008, the main producers of agricultural alcohol in the EU were: France (15.4 million hl), 
Germany (5.9 million hl), Spain (5.4 million hl) and Poland (1.9 million hl). 

Eurostats'  data  on  the  trading  of  goods  show  that  during  2008  the  EU-27  imported  in  total 
about 13 million hl of ethyl alcohol from third countries (more than double the 5.6 million hl 
imported in 2006). The main country of origin remained Brazil, which supplied 7.3 million hl 
and accounted for 56 % of imports. 

In 2008, the internal consumption of ethyl alcohol amounted to 52.6 million hl, or 9% more 
than  in  2007.  This  increase  was  mainly  due  to  the  expansion  of  use  in  the  fuel  sector: 
28.7 million hl in 2008, or 38 % more than in 2007. 

2. 

FUNCTIONING OF THE GERMAN ALCOHOL MONOPOLY 

2.1. 

Evolution of the monopoly 

The  Alcohol  Monopoly  was  officially  established  in  1918  as  a  financial  monopoly  and  a 
national  organisation  for  ethyl  alcohol.  The  legal  basis  for  the  Monopoly  is  the  Alcohol 
Monopoly Act of 8 April 1922, last amended by the Law of 15 July 20064. 

The  particular  feature  of  the  German  Alcohol  Monopoly  is  its  two-stage  production:  firstly, 
the  distilleries  produce  raw  alcohol  using  potatoes,  grains  or  fruits.  Secondly,  most 
agricultural  alcohol  produced  under  the  Alcohol  Monopoly  is  delivered  to  the  Federal 
Monopoly Administration for Alcohol (BfB5) which is responsible for the organisation of this 
market  in  Germany.  The  BfB  regulates  alcohol  production  by  granting  nominal  distilling 
rights  to  individual  distillers  (see  Section 2.4)  and  setting  purchase  prices  that  in  principle 
cover  the  producer’s  costs  (see  Section 2.5).  The  annual  distilling  rights  are  established  (as 
percentages of the total rights) at different levels from year to year depending on the demand 
for agricultural alcohol. The BfB is legally bound to purchase agricultural alcohol produced 
within the nominal distilling rights at the prices that have been set. A reduced price, set at a 
prohibitively low level, applies to any surplus production. The Monopoly thus offers alcohol 
producers relative certainty as regards prices and revenue. 

4 
5 

Bundesgesetblatt I, p. 1594. 
Bundesmonopolverwaltung für Branntwein. 

EN 

3 

   EN 

 
                                                 
2.2. 

Share of the Monopoly on the German market 

In  the  calendar  year  2007  the  total  production  of  ethyl  alcohol  of  agricultural  origin  in 
Germany amounted to about 5 million hl. The volume produced by the distilleries under the 
Monopoly  was  about  590.000 hl,  or  about  12%  of  the  agricultural  alcohol  produced  (see 
graph below). Alcohol produced within the Monopoly originated mainly from cereals (59%) 
and  potatoes  (almost  34%),  with  only  7%  from  fruits;  while  alcohol  produced  outside  the 
Monopoly  originated  largely  from  cereals  (57%),  but  also  from  molasses  and  sugar  beet 
(37%). 

Graph 1: Production of agricultural alcohol in Germany in 2007 (hl A) 

6.000.000

5.000.000

4.000.000

3.000.000

2.000.000

1.000.000

0

other materials

molasses and sugar beet

wine

fruit

cereals

potatoes

under the
monopoly

outside the
monopoly

2.3. 

Classification of distilleries under the Monopoly 

Since  the  last  reform  of  the  German  Alcohol  Monopoly  in  1999  the  Monopoly  covers  only 
agricultural  distilleries,  fruit  collective  distilleries  (bonded  distilleries),  agricultural  and 
commercial small scale distilleries and distillery users. The basic classification differentiates 
according to the production/tax measuring system between the bonded distilleries and flat-rate 
distilleries: 

- 

- 

- 

Bonded  distilleries  (Verschlussbrennereien) are  those  in  which  all  vapours 
containing alcohol are condensed in production and refining systems that are closed 
with  official  customs  seals  and  all  the  alcohol  flows  through  pipes  into  collection 
tanks  or  barrels  (both  of  which  are  similarly  sealed)  or  through  official  measuring 
instruments. Bonded distilleries can be divided into: 

Agricultural distilleries (Landwirtschaftliche Brennereien) are always linked to an 
agricultural  undertaking.  In  principle,  they  may  process  only  potatoes  and  grain 
(wheat,  triticale,  maize  and  rye).  There  are  about  677  small  and  medium-sized 
distilleries of this type in Germany.  

Fruit  cooperative  distilleries  (Obstgemeinschaftsbrennereien)  may  process  only 
fruit, berries, wine, wine lees, grape must, root crops or residues of these. These are 

EN 

4 

   EN 

 
 
- 

- 

bonded  distilleries  run  by  an  association,  a  partnership  or  a  cooperative  in  which 
alcohol is produced exclusively from the members’ own fruit products. Each member 
has a production quota under the Monopoly of 300 litres of alcohol. 

In  small-scale  flat-rate  distilleries  (Abfindungsbrennereien),  on  the  other  hand, 
there are no seals or other forms of closure and alcohol production is calculated on 
the basis of the volume and type of raw materials (mainly fruits), together with the 
yield  rates  set  for  the  respective  types.  To  benefit  from  treatment  as  a  small-scale 
distillery  under  the  Monopoly  legislation,  a  distillery  must  stay  within  ‘eligible 
production’ limits (50 or 300 litres of alcohol a year). Small-scale flat-rate distilleries 
can  either  deliver  the  alcohol  produced  to  the  Monopoly  or  commercialise 
themselves  the  alcohol  as distillates  or  spirits. In  the  latter  case  they  benefit  from  a 
reduced rate of excise duty of €10,22/litre instead of the  standard rate of €13,03/litre. 
This is done in accordance with the EU law6. 

Apart  from  bonded  and  small-scale  distilleries  there  is  the  separate  category  of 
distillery  users  (Stoffbesitzer).  These  are  individuals  who  do  not  have  their  own 
distilling equipment and use the equipment of a small-scale distillery to process only 
their own fruit products into no more than 50 litres of alcohol in any production year. 
For historical reasons, this form of distilling is allowed only in very specific areas of 
Southern  Germany.  Alcohol  produced  by  such  users  of  small-scale  distilleries  is 
subject  to  a  reduced  rate  of  excise  duty  if the  distillates  are marketed  by  the 
producers themselves. As small-scale flat-rate distilleries they can deliver the alcohol 
to the Monopoly. 

In the 2007/08 production year, small-scale distilleries, distillery users and fruit cooperative 
distilleries produced around 75.000 hl of alcohol, of which around 50.000 hl was delivered to 
the BfB. 

2.4. 

Distilling rights 

A distilling right is the right, linked to a particular distillery, to receive the purchase price, as 
set by the BfB, for a certain volume of alcohol (nominal distilling right). It is thus a benefit 
allowing the distillery to produce alcohol for a fixed price. In addition, however, it forms the 
basis for regulating alcohol production. The Alcohol Monopoly Act allows the BfB to reduce 
distilling rights for each distillery in the light of volumes in stocks, foreseeable demand and 
available  financial  resources,  and  to  set  different  annual  distilling  rights  (as  a  percentage  of 
the nominal distilling rights) from one production year to another. 

Under  the  Monopoly  legislation,  small-scale  flat  rate distilleries,  distillery  users,  fruit 
cooperative  distilleries and  small  bonded  distilleries  do  not  have  production  quotas  in  the 
legal  sense  (Brennrechte),  but  a  right  to  produce  a  certain annual  alcohol  quantity;  unlike 
distilling  rights,  these  limits  do  not  change  from  year  to  year.  These  distilleries  have  the 
option of delivering raw alcohol to the BfB, but are not obliged to do so. 

6 

Council  Directive  92/83/EC  on  the  harmonization  of  the  structures  of  excise  duties  on  alcohol  and 
alcoholic beverages, OJ L 31 of 7.2.1992, p. 48. 

EN 

5 

   EN 

 
                                                 
2.5. 

Purchase price 

The functioning of the Monopoly is based on the principle that the producers of raw alcohol 
receive  for  their  product  an  above-market  level  purchase  price,  which  is  the  subsidy  that 
allows  them  to  continue  operating.  The  alcohol  collected  and  rectified  by  the  Monopoly  is 
then sold to different commercial buyers. 

The  BfB  sets  the  basic  purchase  price  for  alcohol  each  year  on  the  basis  of  the  average 
production  costs  of  well-run  potato  distilleries  with  an  annual  output  of  up  to  600 hl  of 
alcohol. 

For all larger distilleries, the basic price is reduced by a percentage of production costs which 
varies according to their output (the larger the distillery, the higher the reduction). 

Monopoly legislation provides for special purchase prices for alcohol from fruit cooperative 
distilleries, small-scale distilleries and distillery users; these are set on the basis of the basic 
alcohol price but include various supplements. 

Table 1: Quantities of alcohol bought by BfB in the 2007/08 marketing year7: 

Purchases  of  raw  alcohol 
from: 

hl alcohol 

Purchase price in 
€ / hl alcohol* 

BfB expenditure 
in € * 

Potatoes 

Grain 

Fruit pulp 

Sub-total 

Additional volumes of raw 
alcohol purchased by the BfB 

204 974 

340 279 

51 514 

596 767 

22 811 

126,66 

141,58 

354,31 

154,82 

58,09 

25 962 000 

48 178 000 

18 252 000 

92 392 000 

1 325 000 

Total  

619 578 

151,26 

93 717 000 

* including collection costs; total expenses of the BfB amount to about €120 million 

The price is calculated in such a way to favour most the farmers supplying the raw material. 

The  distillation  process  is  characterised  by  the  fact  that  the  initial  10%  and  final  10%  of 
alcohol produced (called "head and tail") are of low quality with an increased rate of fusel oils 
and higher alcohols, which are usable only after further treatment or re-distillation. It should 
be noted that despite lower quality those 20% of production are bought by the Monopoly at 
the  same  attractive  prices  as  the  better-quality  volumes.  In  this  way  besides  farmers  the 
distilleries are main beneficiaries of the Monopoly. 

7 

Marketing year runs from 1 October to 30 September. 

EN 

6 

   EN 

 
                                                 
2.6. 

Processing and sales by the Monopoly 

2.6.1.  Processing 

Once  collected,  the  raw  alcohol  is  processed  in  the  BfB’s  three  refineries  in  Munich, 
Wittenberg and Nuremberg, which have the total rectification capacity of 600.000 hl. 

The administration of the Monopoly employs in total about 90 people. 

The raw alcohol with an alcohol content of about 85% delivered by the producers is processed 
into 96% and 99% pure alcohol. The volume resulting from the processing of alcohol in the 
2007/08 marketing year reached 546.000 hl. 

2.6.2.  Alcohol sales 

The  BfB  sells  its  alcohol  exclusively  to  companies  based  in  Germany.  The  sales  take  place 
through  seven  business  outlets  owned  by  the  BfB.  The  pure  alcohol  is  sold  mainly  to  the 
spirits,  food,  pharmaceutical  and  cosmetics  (‘priority’)  sectors.  Also,  the  tertiary  alcohol  is 
denatured for use in anti-freeze, window-cleaning fluid and methylated spirit. 

In 2008 the Monopoly sold about 555.000 hl of alcohol of which: 

- 53% went to the industrial sector such as cosmetics (30% of the total) and pharmaceutical 
sectors (8%) 

- 47% went to the foodstuffs sector such as beverages (as much as 33% of the total quantities 
sold) and food (13%). 

Table 2: BfB sales volumes in the priority sector from 2004 to 2008 in hectolitres: 

Foodstuffs sector: 
- Use for alcoholic beverages  
- Food 

Industrial sector: 

- Pharmaceuticals  
- Cosmetics 
- Other industrial alcohol 
Fuel 
Other uses 
Total 

2004

333 278
265 675
67 603

298 865
44 658
157 134
97 073

0
0
632 143

2005

2006

2007 

2008 

339 264
274 034 
65 230

292 376
38 464 
164 890
89 022

0
0
631 640

292 555
213 998
78 557

295 002
37 393 
154 917
102 692

0
0
587 557

232 200 
151 004  
81 196 

294 356 
42 467  
175 461 
76 428 

0 
0 
526 556 

259 014 
185 387  
73 627 

295 602 
43 191  
168 161 
84 250 

0 
0 
554 616 

The prices at which the BfB sells its products are contested by several stakeholders as being 
below the market level. The BfB sold alcohol at the following average prices in 2007/2008: 

- alcohol for spirits and food – 70 €/hl, 

- pharmaceuticals and cosmetics – 73 €/hl, 

- other industrial uses – 59 €/hl. 

EN 

7 

   EN 

 
  
With regard to sales to the pharmaceutical and cosmetics markets it should be noted that the 
Alcohol  Monopoly  Act  stipulates  that  the  synthetic  alcohol  cannot  be  sold  to  the  cosmetics 
industry  unless  a  minimum  200.000 hl  per  year  of  agricultural  alcohol  had  been  previously 
sold for that use, therefore it effectively prohibits the access of synthetic alcohol producers to 
that market. 

No alcohol is sold for the use in biofuels. 

2.7. 

State aid granted by the German government through the Monopoly 

State  aid  granted  through  the  Monopoly  corresponds  to  the  difference  between  the  costs  of 
buying  raw  alcohol  at  high  prices  and  income  generated  by  the  sales  of  that  alcohol  at  the 
market price after rectification, taking into account the collection, processing and operational 
costs borne by the BfB. 

Council Regulation (EC) No 1234/2007 fixed the maximum amount of State aid to be granted 
by  the  German  government  through  the  Monopoly  at  €110 million.  This  limit  has  been 
respected and subsidies decreased from €110 m illion in 2003 to almost €80 million in 2008. 
The quantities sold by the Monopoly decreased accordingly in that period from 640.000 hl in 
2003 to 555.000 hl in 2008. 

The  reduction  of  the  budget  was  linked  to  the  reform  of  the  Monopoly  undertaken  in 1999. 
This reform resulted in the commercial bonded distilleries leaving the Monopoly in return for 
compensation payments of up to €257,50 per hl of nominal dis tilling rights, depending on the 
type of distillery and the date of withdrawal. Those payments are State aid granted over five 
marketing  years  to  help  distilleries  to  survive  in  the  open  market.  Between  2001  and  2008 
about  70  distilleries  decided  to  leave  the  Monopoly  against  such  compensation.  The 1999 
reform also introduced cuts in purchase prices for the agricultural distilleries remaining within 
the Alcohol Monopoly. 

Further reductions in the annual aid resulted from general reductions in all of the financial aid 
to the Monopoly provided by the Federal Government which was accompanied by a reduction 
of the authorised annual production for agricultural distilleries of up to 50% of their nominal 
distilling rights. 

3. 

ASSESSMENT OF THE AID  

3.1. 

Impact on farmers and distilleries 

There are some 677 small and medium-sized agricultural distilleries. About 7.000 family farms 
producing  potatoes  and/or  grain  for  alcohol  production  are  associated  with  those  distilleries 
which  account  for  some  4.000 full-time  jobs.  Those  farms  use  only  part  of  their  agricultural 
land  to  cultivate  products  for  alcohol  production,  meaning  that  for  farmers  the  Monopoly  is 
only an additional source of income. There are also around 28.000 small-scale distilleries (of 
which  around  20.000  a  year  are  in  operation),  8 fruit  cooperative  distilleries  and  about 
425.000 distillery users (of which on average 100.000 in operation every year). 

With  regard  to  the  agricultural  distilleries  (674),  which  in  2007  supplied  to  the  Monopoly 
538.921 hl  of  alcohol  produced  from  potatoes  and/or  grain,  their  average  production  volume 
per  distillery  equalled  800  hl  alcohol  and  they  received  on  average  a  total  purchase  price  of 
about  €107.000  per  year.  Rega rding  co-operative  distilleries,  taking  into  account  an  average 

EN 

8 

   EN 

 
potato co-operative distillery consisting of 15 member farms and producing an annual volume 
of 2.500 hl of alcohol, each farmer received an annual total purchase price of around €15.000. 
The total purchase price includes the production costs arising to the distiller (the costs of raw 
materials, energy, maintenance, etc.)8. 

Small-scale flat-rate distilleries which are allowed to produce maximum 300 litres of alcohol 
a year receive a maximum total annual purchase price of about €1.000 9. This aid represents a 
small  part  of  individual  income,  but  may  be  decisive  to  continue  their  activity.  It should  be 
noted  that  those  production  limits  can  be  cumulated  (up  to  3000 litres  during  10 years), 
creating  an  economy  of  scale.  The  Monopoly  actually  helps  to  maintain  the  high  prices  for 
alcohol produced from fruits. 

Regional importance of agricultural distilleries 

In  some  parts  of  Germany  the  Alcohol  Monopoly  plays  an  important  role  for  the  local 
economy,  in  particular  in  areas  with  a  higher  number  of  distilleries.  In  2009  87%  of  all  the 
agricultural  distilleries  under  the  Monopoly  are  located  in  five  Länder:  Bavaria  (157), 
Rhineland-Palatinate  (115),  North  Rhine-Westphalia  (118),  Lower  Saxony  and  Bremen  (93) 
and Baden-Württemberg (79). 

Table 3: Distribution of agricultural distilleries and their production quotas per German Land 
(2009) 

Land 

Number of distilleries 

Baden-Württemberg 
Bavaria 
Brandenburg 
Bremen 
Hessen 
Mecklenburg-Vorpommern 
Lower Saxony 
North Rhine-Westphalia 
Rhineland-Palatinate 
Saarland 
Saxony (Sachsen) 
Sachsen-Anhalt 
Schleswig-Holstein 

79 
157 
15 
1 
24 
3 
92 
118 
115 
31 
1 
6 
3 

Nominal production quota in hl 
alcohol 
60.888 
295.743 
56.945 
545 
12.775 
8.490 
211.950 
136.879 
46.704 
26.106 
720 
26.699 
3.560 

3.2. 

Impact on the alcohol market in Germany and in the EU 

The Monopoly provides important volumes of alcohol (0.5-0.6 mln hl) on the German market 
(estimated  at  about  3.1 mln hl  excluding  biofuels)  in  particular  to  beverages  and  industrial 
sectors. 

Table 4: Share of the alcohol sold by the Monopoly on the German market in 2008 in 1000 hl: 

8 

9 

The difference in aid received by different types of distilleries is due to among others different purchase 
prices fixed depending on volumes produced. 
€ 1000 = 3 hl x € 354,31/hl (see Table 1). 

EN 

9 

   EN 

 
 
                                                 
Food use 
Beverages 
Foodstuff 
Industrial sector 
Fuel 

Sales from the Monopoly
259
185
74
296
0

German market
1938
346
1591
1142
4740

% 
13% 
53% 
5% 
26% 
0% 

Furthermore, the volume of alcohol subsidised by the Monopoly may have an impact on the 
European market (estimated at 23.9 mln hl - excluding biofuels). Stakeholders claim that the 
quantities subsidised by Germany may influence the prices of alcohol on the EU market. 

3.3. 

Impact on the environment 

According to the German government the Monopoly is said to help to maintain the traditional 
orchards,  which  supply  the  raw  material  to  small-scale and fruit  distillers. They represent an 
ecological  value  in  terms  of  flora  and  fauna  and  secure  the  unique  variety  of  rare  animal 
species.  Orchards  also  prevent  soil  erosion,  help  to  store  water  and  thus  to  balance  the 
atmospheric humidity. 

In case of small-scale distilleries the aid received through the Monopoly is limited; however, it 
is considered necessary for farmers to continue cultivating fruit trees which are an important 
element of the landscape. However, in other regions of neighbouring EU Member States which 
are not covered by the Monopoly, the landscape is comparable to the German regions. 

3.4. 

Situation in other Member States 

It  is  worth  pointing  out  that  production  of  alcohol  by  small  agricultural  distilleries  is  also 
undertaken in other Member States for example in Austria or Poland, where producers do not 
receive any subsidies for alcohol or distillate. In several countries there exists however a tax 
relief for small agricultural distilleries. 

Moreover  in  France  there  also  was  an  alcohol  monopoly  created  in  1916  and  abolished  in 
1991. All the agricultural alcohol used to be bought by the government at guaranteed prices. 
The system caused the alcohol production to grow constantly as the state was obliged to buy 
all  the  produced  volumes.  Currently  there  remain  only  a  few  small  agricultural  distilleries 
mainly located in Alsace. 

4. 

CONCLUSION 

The functioning of the German Alcohol Monopoly is based on a temporary derogation from 
the  State  aid  rules.  The  aid  granted  by  the  Monopoly  is  an  operational  aid,  otherwise  not 
allowed by the State aid rules. However, the distorting effect of this State aid is limited since 
the volumes of alcohol benefiting from it are quite small and may currently be estimated to 
less than 10% of the total production of agricultural ethyl alcohol in Germany. 

The  German  Alcohol  Monopoly  has  several  positive  effects.  It  plays  an  important  role  in 
some  regions  where  small  and  middle  size  farms  still  rely  on  the  aid  received  for  alcohol 
distillation. It does in particular allow the small fruit distilleries, whose production is local and 
very limited, to maintain the traditional orchards and to stabilise producers' incomes. 

EN 

10 

   EN 

 
 
Clearly, since the Council granted a derogation for the German Alcohol Monopoly only for a 
"limited  period  of  time"10,  the  distilleries  operating  within  it  will  have  to  undergo 
restructuring in order to prepare for an elimination of the State aid in the near future. Some 
distilleries  have  thus  already  made  efforts  to  prepare  for  their  entry  into  the  free  market  by 
creating  cooperatives,  investing  in  less  energy  consuming  equipments  to  reduce  production 
costs  and  increasingly  marketing  their  alcohol  directly.  However,  more  time  is  needed  to 
facilitate this adaptation process, and to allow distillers to survive on the free market. 

Considering  the  above  elements,  as  well  as  the  fact  that  Germany  explicitly  asked  for  an 
extension of the derogation, it is proposed that the Monopoly may continue for a limited time. 
Such  a  final  transitional  period  could  be  granted  in  order  to  facilitate  the  transition  and  the 
necessary restructuring of distilleries. It must however be ascertained that the restrictions of 
the access to the market for foreign companies and the synthetic alcohol producers are lifted 
as from 1 January 2011. 

It is proposed to phase out the Monopoly over a few years as follows. The agricultural bonded 
distilleries processing cereals and potatoes may continue to receive a gradually decreasing aid 
under  the  Monopoly  only  until  the  end  of  2013.  Only  the  small-scale  flat-rate  distilleries, 
distilleries  users  and  fruit  cooperative  distilleries  which  produce  very  limited  volumes  of 
alcohol (60.000 hl annually) will continue to operate under the Monopoly, and benefit from 
the aid, until the end of 2017. 

The Monopoly will not be extended beyond that date. After the end of the transitional period, 
Germany could use the possibility to transfer at least part of the funds used for the Monopoly 
into Rural Development to finance for example measures aimed at improving processing and 
marketing,  development  of  new  products  or  improving  cooperation  between  farmers  and 
distilleries  or  protecting  the  traditional  style  orchards,  which  according  to  the  German 
authorities, represent particular environmental benefits. 

10 

recital No 91 of Council Regulation (EC) No 1234/2007 (Single CMO). 

EN 

11 

   EN