Structural Changes in the Danish Alcohol Market

Abstract

This report researched yearly (1978–1994) and quarterly (1990–1994) data on the Danish consumption of beer, wine and spirits in order to identify changes in the market shares of each of these types of alcohol which were caused by major tax reductions for beer and wine in 1991 and 1992.

Plots of the data immediately show that the sales of spirits decreased while the sales of wine increased. These changes are too large to be explained only by the reduction of the cross-border trade with Germany. Cross-border trade was the main reason for the tax reductions. The statistical analyses give a more precise picture of the reasons for the reduction in the market share of spirits in the total Danish alcohol sales, from 14 percent in 1990 to 11 percent in 1993. The main part of this reduction, at least 2 percent, is caused by the tax-induced changes in price relations, while, at most, 1 percent comes from a trend movement. The market share of beer has been almost constant for many years. However, the statistical analysis shows that a trend movement tends to reduce market share, while a reduction in beer price, relative to the price of spirits caused by tax reductions, has increased the market share, resulting in minimum change for the beer sector. The market share of wine has been steadily increasing since the 1970s and no dependencies on the prices of alcohol was found.