Swedish vodka sale prompts monopoly debate

By Nigel Cassidy
Business reporter, BBC News, Stockholm

A cool glass of vodka or a national treasure?

If you want to find out more about the finer points of vodka in Sweden, there is only one place to start.

So I donned my silver, fur-lined cape and insulated gloves, and sat down on a convenient chunk of glacier for a chat with Anders Johansson, hotel industry entrepreneur and boss of the City's famous Absolut-themed Icebar.

Vodka is to the Swedes what whisky is to the Scots. Mr Johansson says the locals remain especially proud of the fact that a pure product made solely in a corner of southern Sweden had become a global best-seller - second only to Smirnoff.

It is one reason why some Swedes cannot see the need for the Absolut company to fall into the hands of an overseas buyer.

"The tradition of making vodka... goes back centuries to the Middle Ages," says Mr Johansson. "A glass was seen as a reward for Swedes who did a good job".

Fear of alcoholism

They've been producing bottles with Absolut on the label since 1879.

Stockholm's Vin & Sprithistoriska Museet - a wine and spirits museum - has a fine portrait of the be-whiskered father of Absolut, entrepreneur Lars Olsson Smith. He succeeded in producing a purer-tasting product and sold it outside the city boundary, taking sales from the official vodka monopoly.

But by 1917, the Absolut company had been nationalised. With the recorded strains of classic Swedish drinking songs in my ears, I strolled round the museum, where working exhibits trace how the state took control of the entire industry, amid worries about mass alcoholism.

Yet while most of the world's government-owned drinks brands have now evaporated - or already been sold - the Absolut enterprise has continued to prosper under state control.

Monopoly power

A past ban on Russian vodka kick-started sales in the Nordic region.

Absolut is a global brand

But much of Absolut's more recent sales success is thanks to clever marketing and product development, backed up by a distinctive, long-running advertising campaign created by the TBWA agency.

The big complication in the sell-off is that the Absolut company, Vin & Sprit, is a dominant player at home in Sweden.

Although wholesale drinks production has been liberalised since the country joined the EU, all alcoholic drinks except weak beer are still sold from official government shops.

You do feel somewhat sheepish going into one, as if you are buying something that does not entirely meet with public approval.

More to the point, in competition terms, Vin & Sprit products represent more than half those on sale inside.

Anticipated offers

Vin & Spirit's management chose not to be interviewed during my visit. Understandably perhaps; the company's 700 or so employees are generally opposed to any break up prior to a sale.

Many Swedes would resent a sale to a foreign buyer

But it is a crucial issue in the privatisation. So I went to see the country's financial markets minister, Mats Odell and asked him if Vin & Sprit might first have to be divided in some way - to avoid turning a public monopoly into a private one.

"We are examining all these aspects" Mr Odell says. "Together with our advisers we will decide how and when to sell.

"Right now, possible bidders are trying to convince the Swedish people they want to develop the company and keep jobs here - even to create more employment."

Possible buyers tipped include France's Pernod Ricard, Bacardi of Bermuda and America's Fortune Brands.

The official offer period is likely to open in October.

But, as one leading Stockholm financier says, a sale to a rival drinks multinational is not a foregone conclusion, especially if the bidder already own vodka brands.

Events may also be complicated by concerns in Brussels that Sweden's remaining restrictions on the retail sale of alcohol are inhibiting the free market, encouraging consumers to drink beer made by Swedish breweries, which is more freely available than imported wines and spirits restricted to government shops.

Yet what is certain is that while the Swedish-produced Absolut product will live proudly on, these are the last days of the state here concerning itself with producing and distributing alcoholic drinks.