Beer prices finally take a spill

Months after the government slashed beer taxes, the price of beer finally fell by three percent

When the government slashed taxes on beer and soft drinks in July, beer aficionados nationwide rejoiced in anticipation of falling beer prices. But those hopes have remained dashed, until now.

According to Statistics Denmark, the price of beer has finally taken a spill, albeit slightly, with figures showing that beer was three percent cheaper last month than it was in October 2012.

Economic council Arbejdsbevægelsens Erhvervsråd (AE) contended that the delayed effect on beer prices was down to retailers seeking to maximise their profits.

“Beer prices should actually have fallen just after the taxes were reduced, but it looked like it was the profits [for retailers] that increased instead,” Frederik Pedersen, an analyst for AE, told Politiken newspaper.

READ MORE: Beer tax decrease only leads to profit margin increase

Media focus paid off
The government revealed last March that it would reduce the tax on beer and soft drinks by 15 percent in July, hoping that cheaper prices would cut down on the number of Danes who purchase their drinks south of the border in Germany.

Instead, the price of the golden droplets pretty much remained steady and Pedersen argued that one of the reasons that the prices have now finally fallen could be attributed to media focus on the issue.

Another argument was the poor competition in Denmark when it comes to everyday goods. Politiken newspaper’s annual discount-price check found that five discount shops had the same prices on over 38 checked goods, including milk and oats.

READ MORE: Cheaper beer – and more Swedes – on the horizon

Politiken found that there was only a 13 kroner difference between the most expensive and the cheapest shop. When the prices were increased or decreased in one shop, the same thing occurred in the others.

But Coop, the supermarket retailer that owns chains such as Superbrugsen, Irma and Fakta, argued that the new beer price reduction was largely due to a change in consumer habits.

“Primarily, it’s because there was more bottled beer sold during this period than canned beer. The average price of bottled beer is lower than that of canned beer,” Jens Juul Nielsen, a spokesperson for Coop, told Politiken.

READ MORE: Cheaper beer prices fail to materialise

Less taxes = more production
Lowering the tax has also led to an increase of production for breweries and soft drink producers.

The brewery association Bryggeriforeningen reported last month that Denmark’s breweries have produced five percent more beer and eleven percent more soft drinks after the taxes were reduced.

Despite the news, Bryggeriforeningen wants taxes on beer and soft drinks to be further slashed to reach German tax levels in order to cut down on cross-border shopping.