Structural Changes in the Danish Alcohol Market

Abstract

This paper examines annual (1978–1995) and quarterly (1990–1995) data on the Danish consumption of beer, wine and spirits, in order to identify changes in their respective market shares as a result of the major tax cuts introduced for beer and wine in 1991 and 1992. It is immediately clear that the sales of spirits have decreased while the sales of wine have increased. The changes are too large to be explained exclusively on the basis of the reduced level of border trade with Germany, the main motive for the tax reductions. The statistical analyses give a more detailed picture of the reasons for the decline in the market share of spirits in total Danish alcohol sales from 14 % in 1990 to 11 % in 1993. It is included that the main part of this fall, at least 2 %, is due to the tax-induced changes in price relations, while more than 1 % comes from a trend movement. The market share of beer has been relatively constant for a number of years. However, this is the net effect of a trend movement tending to reduce its market share and, on the other hand, the reduced price of beer relative to the price of spirits caused by the tax reductions, which has increased its market share. The market share of wine has been steadily increasing since the 1970s. There is no evidence of any dependencies on the prices of alcohol. This conclusion cannot, however, be sufficiently documented on the basis of the Danish data series, as it is impossible to distinguish between effects due to changing wine prices and effects due to changing beer prices, because of the parallel tax cuts for beer and wine.