Why is Lithuania’s alcohol market shrinking?

“First of all, the shrinkage of the beverage market is tied to demographic indicators – Lithuania’s population is falling. However, alcoholic beverage sales are dropping a bit faster. We’re also observing trends in the illegal alcohol market and we’re seeing shrinkage there as well. We think that the trends indicate that people are gradually drinking less. This is good. It could be linked to improvements in the economic situation or with a general improvement in people’s moods,” said Romas Apulskis, president of the Legal Business Alliance.

Though alcohol production has not changed, alcohol sales in Lithuania are dropping. Last year was the worst in a decade, when sales of all legal types of alcohol fell by 3 percent. Compared to the peak of alcohol sales in 2007, the alcohol market has shrunken by exactly one fourth.

The only beverage whose sales have increased is wine. Natural fruit wines, which are classified as more of a luxury product, enjoyed a 5-percent increase in sales from last year, and an increase of 15 percent compared to 2007. However, this increase did not outweigh falling sales for other beverages. The greatest fall in sales was in fortified wines, which fell by a fifth.

Compared to the pre-crisis period, the greatest drop in sales have been for hard liquor – especially for vodka. Last year, almost 40 percent less hard liquor was purchased than in 2007.

The illegal alcohol market shrunk by almost one fifth, but it still occupies 22 percent of the entire market. Black market alcohol sales have been falling for the past four years, but experts believe that this may soon change. New regulations on legal alcohol may increase growth in the black market.

“The shrinkage we see in the black market is good. However, we must keep in mind that this won’t last forever. If something were to happen, if we were to regulate that market or if the economic situation were to worsen, the black market would once again grow,” said Vytautas Žukauskas, vice-president of the Free Market Institute.

Some of the new legal proposals for stricter regulations of alcohol sales include a shorter window of time to sell alcohol, the restriction of alcohol sales to special stores, and limits on alcohol advertising.

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