Next to whiskey, vodka is one of the most popular liquors worldwide, especially in Europe.
In 2014, more than 4.5 billion liters of vodka were made, bought and sold worldwide, with the European market accounting for about 75% of the action.
But slumping sales are resulting in a negative growth rate for the European vodka market from 2014-2019.
High taxes and illegal trade are stunting vodka growth
High taxes on hard liquor have led to a steep rise in illegal vodka trade, especially in Central and Eastern Europe. This has hit some sections of the “vodka belt”—an informal term for a number of European countries that produce and consume a majority of Europe’s vodka—particularly hard.
Illegal trade already accounted for 64% of the Russian vodka market in 2013, and increased taxes have exacerbated the issue. In 2014, the Russian vodka market saw 1.8 billion liters of liquor bought and sold, and this number is expected to fall to 1.4 billion by 2019. As Russia accounts for a huge percentage of the European market, these slumping numbers are expected to have a knock-on effect on the market as a whole.
Curiously, one region where vodka consumption is actually on the upswing is in Nordic countries.
It’s not like these regions have escaped the European taxes. In fact, taxes on spirits in these countries far outstrip the European average of $6.78 per liter of 100% alcohol.
Comparison of taxes on spirits per liter of 100% alcohol in Nordic countries 2014 ($)
Source: Technavio, 2015
New research from Technavio indicates that demand for vodka thanks to premiumization, a rising cocktail culture, and new products is driving market growth in the northernmost region of the vodka belt.
The vodka market in Nordic countries is estimated to reach $242.6 million by 2019, growing at a CAGR of 3.45% from 2014-2019.
Vodka in Nordic Countries: Overview
Comparison of key countries by revenue 2014-2019
Source: Technavio, 2015
Denmark is the only country in the Nordic region that does not have a government monopoly in the alcoholic beverage market. The country also has the lowest taxation rate in Nordic countries and therefore, the lowest prices. The per capita consumption of vodka in Denmark was estimated to be around 0.42 liters in 2014.
In Finland, the sale of alcoholic beverages is rigorously regulated with the government maintaining a monopoly on the alcohol market in Finland with its company, Alko.
The vodka market in Iceland is also highly regulated, and largely controlled by ATVR, which has a monopoly in the retails sales of all alcohols beverages with more than 2.25% of alcohol content by volume. Advertising of alcohol beverages is banned by law in Iceland and the minimum age for purchase of alcohol in both off-trade and on-trade channels is 20.
Similar to Iceland, Norway bans advertising of alcohol products, and the minimum age for purchase of alcohol in both on-trade and off-trade channels is 20. The market is dominated by Vinmonopolet, which has a monopoly on the retail of alcoholic beverages containing more than 4.7% of alcohol by volume.
The vodka market in Sweden was estimated to be about $82.74 million in 2014 and is expected to reach $102.79 million by 2019, growing at a CAGR of 4.44%.
Sweden is the largest market for vodka in Nordic countries in terms of both revenue and volume and it is expected to register a steady year-on-year growth rate during the forecast period, which is likely bolstering numbers for the region as a whole.