In the transition to a market economy, special importance attaches to the study of the mechanism of the market, the formation and development of the supply and demand issues of balance between the needs of consumers, individual enterprises and their production capacity, levels, the structure of aggregate demand and aggregate supply of goods, and prices, revealing their internal cause and effect. The theory of supply and demand applies to all sectors of the economy, including the market of food products. Certain ratios, the identification and explanation of which is central to the modern market economy, are observed between supply and demand factors of production, costs, and revenues.
Beer is a popular drink at all times and at all levels of income. In Finland, more and more beer is consumed every year. With the strong growth of the market, there is an increasing demand for qualified personnel, and thus, business is able to maintain and develop. Policy priorities of most brewers were the development of the sales and distribution. The bulk of jobs in the market beer industry accounted for sales and about 80% of all open positions. Now the labor market is not an acute shortage of specialists in this field, but professionals that are able to bring a stable and slowly growing income of the company, and are always required.
The Finish beer market is undergoing significant changes; therefore, the brewers will have to fight for their redistribution. In light of the recent developments in the legislation, the companies will be particularly relevant experts in the field of marketing and advertising. Specificity of the managers on advertising, marketing and PR in this market are to come up with an effective way to advertise products without breaking the ban on beer advertising. The work of these professionals can make the right decisions based on a thorough analysis of the market, enhance and maintain a stable demand for products, which ultimately leads to an increase in gross profit and streamlining the company. The market is constantly changing and improving, and soon it will be able to provide with successful operation only those companies that own all the strategies and tools of marketing and promotional activities.
As for the development of the structure of the market, experts predict the process of “washing out” the medium-sized companies. In this lucrative and not very capital-intensive business, only 3-4 large players and microbreweries are expected to remain. However, it does not exclude the existence of parallel with mini plants, though it has little influence on the structure of the market, thus contributing a pleasant break in the beer selection. Comparing Finland with other countries, we can draw several conclusions. First of all, the beer market is highly fragmented. It contains a large number of players with a lot of their own brands. This diversity is difficult for the consumer to understand, and as a consequence, none of the players and none of the brands in the Finland market do not have a dominant share. Examples of developed countries show that, in the end, there is a complete consolidation of manufacturers.
The beer industry in Finland is in the focus of power throughout history as it was both allowed and forbidden. In the nineties of the 20th century, the beer industry received a new impetus in the development. A large number of breweries quickly gained its momentum, but also quite instantly. This happened due to the risk of ruin, and in such a way, companies had to combine their capacities to form a larger organization. Some of them wanted to continue the tradition of domestic brewing. They also tried to produce new varieties of alcohol products. Other companies occupied separate regional niches, producing the goods for certain areas. The beer industry was taken over by foreign capital. It forced to cease operations of many domestic manufacturers. A number of organizations and individuals tried to produce beer secretly. The beer industry has entered into the next phase of the war for existence. In doing so, residents have to decide what they will drink and why.
A large number of beer types were produced prior to the period of prohibition in Finland. However, due to the introduction of Prohibition, the level of illegal alcohol in Finland increased dramatically; the underground market grew rapidly and reached alarming proportions – the number of confiscated alcohol for several years was over 1 million liters. To prevent the further growth of smuggling, prohibition was canceled. After the repeal of Prohibition situation improved, but not much. Soon, small breweries were unable to compete and became predominated by the larger beer companies. Later the conditions changed as the brewers had a contract with the state, which has the exclusive right.
This research will be especially helpful and useful for strategic planners, international marketing executives, and also import/export managers as it contains not only the historical overview and market analysis, but also a study on the expansion of microbreweries in a developing oligopolistic market. Globalization is certainly one of the most large-scale processes that has influenced every country and has already made a significant impact on the world’s economy. Globalization leads to an increase in the number of competitors in the market. Serious and constantly increasing competition in the global market causes an increase of productivity, as well as lower prices and costs. The 2008 global financial crisis influenced today’s economy a lot. Moreover, many studies and research works are now devoted to this issue, its reasons, and consequences. Due to the rapid process of globalization, it is highly recommended to use only the most up-to-date statistics and avoid local view at the market throughout the analysis.
It is impossible to find out the most crucial actors that are new and specific to the Finnish context and the level of influence of each factor regarding the level of competitiveness of micro breweries against larger ones without the overview of the context in Finland. Such aspects as the current situation, size of the market, number of micro as well as large breweries, a little history of their respective development, and etc. are also discussed in this paper. The study focuses on the consumption of alcoholic beverages in Finland considering the price differences and the measures of alcohol availability.
This proposal outlines details of the proposed research study which will focus on the analysis and development of Microbreweries in Finland and their competitiveness in a market predominately dominated by the oligopolies.
The research addresses the following questions:
- What are the main countries that provide Finland with the supplies of beer and beverages?
- What role does Finland play as a part of the global and regional that tends to be predominately dominated by the oligopolies?
- What are the factors that are new and specific to the Finnish context and what is the level of influence of each factor regarding the level of competitiveness of micro breweries against larger ones?
This paper will focus on the Microbreweries development in Finland and their competitiveness in a market predominately dominated by the oligopolies. This will be done in the form of a critical review of the available literature on Microbreweries in Finland, as well as the market overview. The literature review will cover the facts depicting the context in Finland, such as the current situation, size of the market, number of micro as well as large breweries, a little history of their respective development, and etc. The literature review will also cover the marketing strategies employed by the brewery industry in Finland, and how the strategies help the industry maintain its rather high turnover and the competitiveness in a market predominately dominated by the oligopolies.
The literature review will also provide the statistics on how different the beer industry in Finland is as opposed to the market predominately dominated by the oligopolies. The study will also highlight the objectives and questions that are sought to be answered. It will be made possible due to the analysis of the available research data provided in the literature review section. The objectives will be logically connected to the literature review forming the basis for the next section of the paper. The methodology section will outline how the data collected may help answer the questions derived from the objectives. This will include a review of the qualitative and quantitative data collection methods employed to retrieve data from the respondents, as well as ways of handling the data for getting the desired results. The proposal will conclude by justifying the research methods and literature review and by stating an argument derived from the analysis of the data.
Literature Review and Market Overview
The literature review showed that the consumption of alcohol has increased considerably in most Organization for Economic Co-operation and Development (OECD) countries over the last four decades. It is worth stressing that Finland has one of the highest recorded increases provided the fact that the annual consumption of pure alcohol has risen from less than 4 l to over 10 l per adult in four decades.
The rise can be mainly accounted for by the consumption of beer. Such data makes an emphasis on the importance of the beer industry and development of microbreweries in Finland. According to the statistics, in 1961, the consumption of beer, measured as pure alcohol, was about 1.2 l per adult and in 2004, the corresponding figure was 4.6 l. The 1968 Alcohol Act alone increased beer consumption by 1l per adult in 1 year. However, the highest relative increase has taken place in the consumption of wine, which rose by more than ten-fold from about 0.2l in the early 1960s to about 2.5l in 2004.
This pattern of increasing wine consumption is observed in several other OECD countries. This study examines the consumption of alcohol in Finland since the 1960. The total consumption is divided into the consumption of spirits, beer, and wine. These beverages consumption is measured as pure alcohol per adult. The study pays particular attention to structural changes in the alcohol market, as the availability of alcohol has significantly increased within the recent years (Reports: Worldwide Beer & Ale Wholesale Industry, 2012). Changes in alcohol legislation are likely to produce points of discontinuity in consumption that should be modeled clearly.
There were two periods when the beer consumption increased significantly. First, following the 1968 Alcohol Act, the consumption rose by 1l per capita in 1 year. The second upsurge occurred during the boom years in the 1980s. In the 1990s, the trend reversed and consumption declined by about 10% in 10 years. At that time, the consumption of wine showed modest but stable growth until the late 1990s. Since then, the consumption has tripled from 1 l to 3 l per adult. The rapid increase in the 1990s is associated with a fall in the real and relative price of wine with respect to spirits and beer. There have been a number of institutional changes over the last four decades in Finland, and there has also been a process of legislative liberalization; the availability of alcohol has increased over the decades. Also, the social climate has been changed in a more liberal discussion. It can be presumed that these changes have affected alcohol consumption; moreover, people have more leisure time than before, leaving them more opportunities for use of drugs.
Since the early twentieth century, the , monopoly of the state has been the sale and manufacture of beer in Finland. An interesting fact is that many beers are named in honor of some well-known persons, for example, President Urho Kekkonen and Marshal Mannerheim, as well as – Sinebrychoff Nicholas, the legendary breeder. The Finns believe that the greatest influence on their country had the Emperor Alexander II, who gave political freedom; Vladimir Ulyanov, who signed an act that granted the state independence of the Finns; and Nikolai Sinebrychoff – the founder of the beer empire.
Sinebrychoff came to Finland with the Russian troops, when the Swedish province was ceded to Russia after the Russian-Swedish War of 1808-1809 years. Engaged in trade, construction, gold mines in Siberia, Sinebrychoff supplied vodka, food, and building materials to the Russian garrison. At an auction in 1818, he bought the exclusive right to manufacture in Helsingfors, as they called on the Swedish fashion Helsinki, beer and other beverages, as well as their sales in Finland for 10 years. In October 1819, after 10 years from the moment, the rights of Finland became the Grand Duchy of the Russian Empire, Sinebrychoff received official permission from the authorities for the construction of Hietalahti brewery in Helsinki. On the 13th October, 1819, when the petition had been granted Nicholas Sinebrychoff opened his biography “beer empire,” and started the unofficial holiday of beer in Finland. This date was called ” Sinebrychoff ,” and now it is also known as the Day of Finnish beer.
Thus, the emergence of national brewing in Finland was pledged by Russian merchant Nikolai Sinebrychoff, who started the construction of the first brewery in the country in 1819. Now, the company Sinebryuhoff has a factory in the city of Helsinki, Kerava, Tampere, Pori, and is one of the leading breweries in Europe; thought, there was no descendant of the Russian merchant dynasty. Beer KOFF, is perhaps the most advertised and popular Finnish beer in Russia.
In Finland, in 1920, the production and distribution of beer was taken over by the state. In 1959, this monopoly was reduced, but the Brewers had an agreement with the government, which still has the exclusive right to distribute the “strong” (i.e. containing more than 4% alcohol) beers. The excise duty on beer in Finland is 40%, above which you have to pay an additional 16% VAT (Nelson, 2005). In 1968, according to the law adopted by the Parliament, beer must contain not less than 2.25% and not more than 3.7% alcohol. In Finland, as in many other European countries, you can have a beer while driving, but not more than 2 cans of low-alcohol (Nelson, 2005). It should be stressed that, on Sundays, in any store, you will be not sold strong beer.
For a long time, the largest producer of beer in Finland was the company Mallasyoma Currently, the undisputed leader is Concern Hartwall, which is included along with Swedish Pripps to a group of BBH and produces mainly gold, quite strong (5.3% alcohol), light beer under the name Lapin Kulta, and others variety of bottom fermentation, such as Aura and Karjala. Some kinds of beer are produced according the Austrian wheat beer recipes. Concern Fyynikki (mark Amiraali) produces stout and English ale. Finland is known for its clean ecological fields and the limited use of chemical fertilizers. For over 100 years, Polttimo remains the main producer of malt in Finland. Polttimo is one of the largest malting companies in Europe and has manufacturing facilities in Sweden and the Baltic countries. Lahad Polttimo plants (now the company is called Polttimo Companies Ltd.) have a strong research base, which allows to design and implement a variety of production of malt extracts.
The most important change was the 1968 Alcohol Act, which came into force at the beginning of 1969. The Act allowed grocery stores and cafeterias to sell beer for consumption off the premises. This, in particular, increased the availability of alcohol in the rural areas. The law also lowered the minimum age at which alcohol might be purchased from 21 to 20 (spirits) and 18 (wine and beer). In 1970, the number of stores that were licensed to sell beer were 16 522.
The peak occurred in 1972, when the number of licenses climbed to 17 200, and in 1980, the corresponding figure was 12 000. Since then, the number had come down, settling at around 8000 in the early 2000s. Another important factor in availability is the increase in the number of state-owned alcohol stores (under the name Alko), which had a monopoly in the sale of spirits and wine. The number of Alko-outlets over the estimation period has risen three-fold, from 94 shops in 1960 to 320 shops in 2004.
846.5 million liters of beer, cider, low-alcohol cocktails, soft drinks, and mineral water were produced by members of the Finnish Federation of the Brewery and Soft Drinks Industry in 2006, and the growth in domestic sales was determined to be 2.5% higher than in 2005 (Nelson, 2005). Last year, Finland sold 425.7 million liters of beer, which is almost the same level as in 2005 – the dynamics of + 0.05% . 77% of beer sales were reported at retail, 20% – in restaurants, and about 3% – in specialized stores Alko. Moreover, if the proportion of beer sold through the retail network has increased, the proportion of beer sold through restaurants and Alko has reduced. The segment of beer in returnable bottles was 61.1%, while the share of beer on tap – just over 17% (Strenk, 2008). Significantly, the segment of can beer has increased from 12.5% to 22.1%, due to the change in the tax package. The Finnish Federation of Beer and Soft Drinks Industry represents manufacturers of beer, cider, low-alcohol cocktails, mineral waters of the country.
A similar change that has made alcohol more widely available is the increase of the amount of restaurants licensed to sell beer and wine up to 22% alcohol by volume. The number of restaurants in this category has risen from 124 to about 200 over the same period. This change illustrates the availability of wine and spirits for consumption on licensed premises and also reflects the changes in the Finnish culture towards a more liberal attitude to alcohol usage in public places.
Competition is an essential aspect in the beer market in Finland, and this process changed throughout decades. Competition is a necessary and crucial aspect for good functioning of the market economy; thought, it has certain pros and cons as every phenomenon. The positive features include: strengthening the innovation process, a flexible adaptation to the demand, high product quality, high productivity, low cost, the implementation of the principle of payment for the quantity and quality of labor, as well as the ability to control the state. Among the negative consequences, there are the “victory” of some and the “defeat” of the others, the difference in terms of activities, leading to dishonest methods, over-exploitation of natural resources, environmental violations, etc.
Excessive monopolization, that includes the emergence of competition between monopolies, without proper control by the government may lead to a so to say “state within a state.” Monopoly also results in a slowdown of technological progress, conserves low quality products, making these products non-competitive in the global market, lost incentive to find more effective solutions to the functioning of the economy, etc.
Speaking of the negative practices of competing, it must be noted that, while there is still competition, there will be industrial espionage. The reason is that these two phenomena are linked, and it is impossible to deny the effectiveness of industrial espionage, for example, it has a significant impact on the development of the military-industrial complex. Despite the efficiency of industrial espionage, it cannot replace the development of any industry, national and global scale, scientific research, or discovery, because if you use stolen material, it ultimately leads to regression.
In general, the competition has less negative points than positive ones. Thus, the competition is a much lesser evil than a monopoly that abuses its position in the economy.
The competition is a defining condition for the maintenance of economic dynamism and for creation of more national wealth at a lower cost of each product, as compared to the monopoly and planned economies.
In order to be effective, the competitive system should be open and free, and participants should be comparable. In such a way, the competition is the solution of many buyers and sellers of supply and demand that determine the market price. This means that individual producers and suppliers of resources can only adapt to the wishes of customers, as the market system detects and informs the sellers. Competing manufacturers that obey the will of the market system await earnings and hardening their positions and those who violate the laws of the market are suffering losses and ultimately bankruptcy. Growth of monopoly dramatically alters the situation. Monopoly is a situation in which the number of sellers is so small that every seller can influence the total supply, and therefore, the price of the product sold. Monopoly replaces competition; sellers can influence the market or manipulate prices in it to the society’s detriment. Due to the ability to regulate the total supply, monopolists can artificially limit the amount of production, and thereby, receive for it a higher price and very often sustainable economic profit. Monopoly causes misallocation of economic resources, disincentives to technological innovation, and therefore, less attractive from the point of view of society, than any form of competition. Therefore, the objectives of the anti-monopoly in the market economy are not so much anti-monopoly, but in the maintenance.