Systembolaget Bachelors Thesis

BACHELOR THESIS IN BUSINESS ADMINISTRATION
Atlantis Program

Systembolaget: An Examination of
State Monopoly Alcohol Retail in
the 21st Century

Daniel Knuerr
Michael Lepri
Ryan Livingston

Tutor: Anne Schmitt

Spring semester 2014
ISRN-number: LIU-IEI-FIL-G--14/01152--SE

Department of Management and Engineering (IEI)

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English title:
Systembolaget: An Examination of State Monopoly Alcohol Retail in the 21st Century
Authors:
Daniel Knuerr, Michael Lepri and Ryan Livingston
Tutor:
Anne Schmitt
Publication type:
Bachelor Thesis in Business Administration
Atlantis Program
Undergraduate level, 15 credits
Spring semester 2014
ISRN-number: LIU-IEI-FIL-G--14/01152--SE
Linköping University
Department of Management and Engineering (IEI)
www.liu.se

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Abstract
Authors: Daniel Knuerr, Michael Lepri, and Ryan Livingston
Bachelors Thesis in International Business
Linköpings University, Department of Management and Engineering, 2012.
Supervisor: Gunilla Söderberg
This thesis presents and examines the Swedish alcohol retail monopoly Systembolaget based
on findings of theoretical data which contained a synthesis of established theory on
privatization, cultural theories of alcohol, and alcohol policy theory. This theory was then
used to analyze empirical data from three selected cases of privatizations of North American
state-run alcohol retail monopolies, This data was analyzed alongside data on alcohol
consumption Sweden, as well with the results of qualitative interviews of Swedish policy
makers representing different Swedish views on the alcohol retail monopoly.
Keywords: Privatization, SOM (State Owned Monopoly), temperance culture

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Summary
Background: Systembolaget is a state corporation run by a government appointed
CEO which controls all aspects of the Swedish market in alcoholic beverages
that contain an alcohol content higher than 3.5%, (Holder et. al, 2008).
Private retailers are allowed to sell alcoholic beverages that have alcohol
content lower than this. As the sole provider of strong alcoholic beverages to
the Swedish market of nine million people, Systembolaget is one of the
largest purchasers of wine and spirits in the world. It also operates a highly
unique alcohol distribution operation in which no products are promoted over
one another and prices are controlled to generate the same profit margin from
all sales. As a state-run firm with a social health mission they do not aim to
achieve a sales volume that fully meets consumer demand for alcohol (as
their goal is to limit consumption) as a private, profit-motivated company
would be.
Aim: To identify methods and models that could be adopted by Sweden in the
event of a privatization by Systembolaget that would be economically
beneficial while maintaining controls on alcohol-related social and health
concerns.
Methodology: There have been numerous cases of privatization occurring around the
world similar to that in which Systembolaget could follow and replicate for
our empirical data. Not only this, but there has also been numerous
theoretical research we have obtained to back this up. Thus, our research will
be two-fold, in that we will be mainly focusing on empirical and theoretical
data to answer our question.
Results: Certain examined data sets (i.e. violent crime in Alberta, job creation)
reacted in anticipated ways after privatization. Trends in other sets of data
(i.e alcohol crimes in Washington, alcohol prices in Alberta and
Washington) followed unexpected patterns.
Conclusion: While somewhat inconclusive, the results show that this issue is not as
well understood as it is sometimes presented in literature on the subject.
More research that strives to be unbiased toward either side of the
question and that thoroughly attempts to focus research on areas that can
be isolated from confounding factors should be carried out to build a
comprehensive theory on an ideal model for alcohol retail.

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Acknowledgment
We are very grateful for the enormous help and advising we received from our tutor, Anne
Schmitt. Throughout the two months of writing the thesis Anne was always there to guide us
and help pave our way to completing this thesis. She made several important suggestions
which enhanced this thesis tremendously, and she did just an overall great job with a
contagious smile that lit across the room.
Thank you to Gunilla Soderburg and her hard work at organizing the 723G52 Bachelor
Thesis course. Without her council of leading the way we would have never even had Anne
as a tutor. So, thank you to Gunilla for all your time in making this organization work very
well.
We would also like to thank Linköping University for all the building blocks and laddering
that led us to completing this thesis.
A special thanks goes out to the people that gave us the time to answer some questions in our
qualitative interviews.
Finally we would like to give tremendous thanks all the sources and authors that we used in
our thesis that paved the way for us.

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Table of Contents:
Abstract…………………………………………………………………………………………
Acknowledgement………………………………………………………………………………
Table of Contents……………………………………………………………………………….
1 Introduction…………………………………………………………………………….....…1
1.1 Research Purpose……………………………………………………...……….….5
1.2 Research Aim Questions………………………………………………………….6
1.3 Outline…………………………...………………………………………..………6
2 Methodology……………………………….…………………………………………..……8
2.1 Research Philosophy………..………………………………………………..……8
2.2 Research Design………………………………………………………………..…9
2.2.1 Validity……………………………………………………..………….10
2.2.2 Reliability…………………………………………………….………..11
2.3 Limitations……………………………………………………………………….12
3 Theoretical Framework…………………………………………………………………….13
3.1 Privatization Theory………………………………………………..……………13
3.1.1 Privatization Theory History…………………………………………..13
3.1.2 Privatization Theory Summary…………………………………….….14
3.1.3 Exceptions to Privatization Theory……………………………………15
3.2 Temperance Cultures and State Alcohol Policy ……………………………...…17
3.2.1 Dev. of Temperance Culture Theories on Alcohol Consumption……..18
3.2.2 Contemporary Alcohol Retail in Temperance Countries……….……..19
3.2.2.1 Nordic Models……………………………………………... 20
3.2.2.2 North American Models…………………………………….20
3.2.2.2.1 North American Retail SOM……………….…….20
3.2.2.2.2 Private North American Retail Models……….…..21
3.2.2.2.3 The Special Cases of Maryland and Alberta…...…23
3.3 Alcohol Retail Privatization Debate……………………………………………..23
3.4 Alcohol Policy Implementation…………………………………………..……...24
3.4.1 Measures for Regulating Availably of Alcohol………….………....... 26
3.4.2 Physical Alcohol Availability Regulation..………………………..…..26
3.4.3 Alcohol Price Availability Regulation………………………….....…..28
3.4.4 Alcohol Advertising and Promotion Regulation Policies……..………29
4 Empirical Framework…………………………………………………………..…………..32
4.1 Empirical Cases of Alcohol Retail SOM Privatization……………….…………32
4.1.1 Alberta Privatization……………………………………………..……32
4.1.1.1 Alberta Economic Data…………………………………..…33
4.1.1.2 Alberta Health and Social Data………..……………………34
4.1.2 West Virginia Privatization……………………………………………36
4.1.2.1 West Virginia Economic Data………………………………36
4.1.2.2 West Virginia Health and Social Data………………………37
4.1.3 Washington Privatization.......................................................................38
4.1.3.1 Washington Economic Data...................................................39

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4.1.3.2 Washington Health and Social Data.......................................39
4.1.4 Swedish Health and Social Data………………………………………42
4.2 Interviews………………………………………..………………………………44
4.2.1 Systembolaget Interview………………………………………………45
4.2.2 Moderate Party Interview…………………...…………………………46
5 Analysis………………………………...………………………………………..…………48
5.1 Analysis of Privatization Case Data……………………………………………..48
5.1.1 Analysis of Privatization Models…………………………………….. 48
5.2 Health and Social Data…………………………………………………………..48
5.2.1 Alcohol Related Traffic Accidents…………………………………… 49
5.2.2 Alcohol and Crime……………………………………….……………50
5.3 Analysis of Economic Data……………………………………………………...50
5.3.1 Job Creation Data……………………………………………………...51
5.3.2 Tax Revenue……………………………………..…………………….52
5.4 Interview Analysis……………………………………………………………….53
6 Conclusions and Discussion……………………………………..…………………………55
Works Cited………………………..………………………………………………………...58

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List of Figures:
Figure 1: Changes in Swedish Public Opinion on Systembolaget from 2002……………..….3
Figure 2: Changes in Swedish Public Opinion on Systembolaget from 2007………………...4
Figure 3: Research Process….………………………………………………………….……10
Figure 4: The Temperance Countries…………………………………………………..….…17
Figure 5: Relationship of Consumption and Related Issues…………………………………25
Figure 6: WHO Ranking of Alcohol Policy Effectiveness……………………………….… 28
Figure 7: Spousal Homicides with Drugs/Alcohol…………………………………………..35
Figure 8: West Virginia Revenue………………………………………………….…………37
Figure 9: DUI Fatalities West Virginia....................................................................................38
Figure 10: Traffic Fatalities Washington.................................................................................40
Figure 11: Alcohol Related Washington Arrests………………………………….…………41
Figure 12: European Related Alcohol Accidents……………………………….……………43
Figure 13: Liver Disease European……………………………………………..……………44
Figure 14: Traffic Fatalities Washington/West Virginia………………………………….…49
Figure 15: Consumption and Employment……………………………………………….….52

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1. Introduction
Strident regulation of the alcohol market has been the consistent policy of the Swedish
government for over two centuries, being carried out under the auspices of alleviating health
and social concerns related to alcohol consumption (Systembolaget, 2010). In 1955
Systembolaget was established as a nationwide retail monopoly to replace former regional
and municipal monopolies and as a solution to an inefficient and unpopular ration system that
had been in place since the First World War (Systembolaget, 2010). Since then,
Systembolaget has managed to build a strong base of support amongst the Swedish
population with “...an upward trend, reaching a 66% level of support in 2009..”(Spiering,
2011, p. 11). There are 426 stores and approximately 500 total agents in Sweden
(Systembolaget, 2010). With their mandate and mission being politico-social in nature and
lacking profit motivation, Systembolaget and other alcohol retail monopolies operate in a
unique way. Instead of attempting to meet full Swedish consumer demand for alcohol with
their sales, Systembolaget intentionally fails to meet this demand to control the negative
effects on drinkers and negative externalities for others that can arise in a society with a high
level of alcohol consumption (Systembolaget, 2010).
However, since Sweden entered first the European Economic Area (EEA) in 1994, and later
the European Union in 1995, the state and Systembolaget have at times come under
significant pressures both internal and external to relinquish their control of the Swedish
alcohol market in favor of a more private system (Holder et al., 2008; Cisneros Örnberg and
Ólafsdóttir, 2008). Specifically, the Nordic states were compelled to divest all state
monopolies on alcohol (i.e. import, export, production, and wholesale) except at the retail
level (Cisneros Örnberg and Ólafsdóttir, 2008). In the case of Sweden preserving
Systembolaget as a retail monopoly was strongly supported by the general public and was a
key issue in the negotiations on EU membership (Cisneros Örnberg and Ólafsdóttir, 2008).
While surely many in Sweden hoped this would be the end of the discussion concerning
Systembolaget, this was not to be the case.

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As Cisneros Örnberg and Ólafsdóttir relate, “In the years following accession, the longevity
of this settlement [on the retail monopolies] was in question, since it was challenged in court
cases filed by Nordic citizens” (2008, p. 141). In 1997 these pressures eventually culminated
in the Franzén case, which would prove to be the seminal Swedish case on retention of the
Systembolaget monopoly (Cisneros Örnberg and Ólafsdóttir, 2008; Moritz, 2002). The case
began when Franzén, a Swedish grocer who had been found to have sold wine illegally in his
store challenged the ruling of the Swedish court, and therefore Swedish alcohol policy in
general, as being contrary to EEA and EU laws protecting the free movement of goods
(Moritz, 2002). Swedish courts opted to refer the case to the European Court of Justice,
which upheld the right of Sweden to retain its monopoly on alcohol retail as it met the criteria
of being maintained over public health concerns and being non-discriminatory in practice
(Cisneros Örnberg and Ólafsdóttir, 2008). While Cisneros Örnberg and Ólafsdóttir conclude
that these and other pro-retail monopoly court rulings basically eradicated the legal threat to
the Nordic retail monopolies. However, Moritz (2002) argues that, at least in the Franzén
case, several relevant clauses of the applicable laws were ignored in court proceedings
leading to a final verdict that was political in nature and made to avoid offending the new
Nordic member states or give them reason to reconsider their new EU membership.
Further pressures on Systembolaget and Nordic alcohol retail monopolies came in 2004 when
European travellers allowances, quotas limiting the amount of alcohol private individuals
could bring from one country to another, were abolished in Denmark, Sweden, and Finland
(Bloomfield et al., 2010; Cisneros Örnberg and Ólafsdóttir, 2008). Bloomfield et al. relate
how this development combined with the ascension to the EU of Estonia, a country adjacent
to Sweden with substantially lower alcohol prices at the time, raised fears in Sweden that
cheap alcohol would pour over the borders and increase alcohol-related problems, though
they conclude that this generally did not come to pass. Cisneros Örnberg and Ólafsdóttir
(2008) describe these same developments as constituting serious threats to Systembolaget,
and wider Nordic alcohol policy, which was answered by a trend of cuts on alcohol taxes
across the Nordic countries.
With cracks appearing in its former monolithic control of the alcohol market, the Swedish
government began a concerted effort to shore up public support for Systembolaget. Another
contributing factor to the launch of this campaign was growing criticism of the monopoly for

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issues ranging from possible embezzlements to lack of transparency. In 2003 specific
allegations of corruption were brought against a number of Systembolaget employees
(Cisneros Örnberg and Ólafsdóttir, 2008). In 2007 a Web- and newspaper-based campaign to
build upon public support was launched (Cheng et al., 2011) in which evidence from Holder
et al. (2008) was heavily cited to emphasize the necessary role of regulating public health and
safety played by Systembolaget. As Figure 1 demonstrates, this campaign was successful in
increasing support for the monopoly amongst a majority of the Swedish population in 2002
along with figure 2 which shows the support in 2007.
Figure 1: Changes in Swedish Public Opinion on Systembolaget from 2002
(Cheng et al., 2011)

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Figure 2: Changes in Swedish Public Opinion on Systembolaget from 2007
(Cheng et al., 2011)
Besides the public support campaign Systembolaget has also focused on providing high
quality customer service and increasing their product range to keep to keep customer
satisfaction high (Cisneros Örnberg and Ólafsdóttir, 2008). This marketing strategy is
reflected by this statement on their official website, “Systembolaget shall use its expertise on
its customers’ behalf, both with regard to the taste characteristics of individual drinks and
with regard to their effects on people’s health, and shall thereby inspire our customers to
make informed choices about drinks” (Systembolaget, 2010, p. 1). This trend towards
increased customer service can trace its development to 1991 when Systembolaget outlets
began transitioning from counter-service to self-service in an attempt to increase consumer

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satisfaction (Cisneros Örnberg and Ólafsdóttir, 2008). The success of these strategies in
guaranteeing the continued survival of Systembolaget have seen it and Sweden go on the
offensive in more recent years as it has worked in concert with other Scandinavian countries
to develop a united Nordic alcohol policy within the EU and even gone international with
paid promotions in print media toting the value of a state alcohol retail monopoly (Cisneros
Örnberg and Ólafsdóttir, 2008).
Systembolaget has outlasted other Swedish state monopolies, including its former monopoly
on pharmaceutical retail, Apoteket. While public recognition of Systembolaget remains high
both in the public and professional sectors, negative perceptions associated with such
monopolies played a role in the decision by the Swedish government to divest itself of
Apoteket. In 2009 Sweden began partial privatization and deregulation, divesting itself of
about 70% of its Apoteket operations (Lakemedelsverket, 2014). “Of 1000 pharmacies 615
of them were sold, while 330 stayed with Apoteket AB” (The Branding Source, 2011, p. 1).
Unlike Systembolaget, and its current acceptance by Swedish citizens, the privatization of
Apoteket has also been well received due to its resulting benefits. While the long-term results
of the privatization of Apoteket AB cannot be analyzed as of yet, there have been several
notable short-term effects. Expansion of the pharmaceutical market, greater availability, and
satisfaction of consumer demand are among the noted benefits post-privatization (Willach
Pharmacy Solutions, 2010).
1.1 Research Purpose
Holder et al. (2008) claims that currently there is no ongoing discussion or debate in Swedish
media or politics on replacing the Systembolaget monopoly with a private retail system, even
though the EU and WTO pose external threats to it and other Scandinavian state alcohol
monopolies despite the perceived victory of Nordic retail monopolies in their transition era
trials. This is arguably a short-sighted state of affairs as the aforementioned pressures have
forced Sweden to reform its public alcohol policy in the past and could conceivably do so to
a greater extent in the future. The purpose of the research presented in this paper is to
examine various methods and models of privatization that Sweden could employ in different
scenarios involving some degree of liberalization of its alcohol market.

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1.2 Research Aim and Questions
The aim of the present paper was to collect data on several empirical examples of
liberalizations of alcohol retail state-owned monopolies (SOMs as they will be referred to
from this point) with the goal of identifying privatization models and compare and contrast
them with potential liberalization scenarios that Systembolaget could experience. Therefore,
the research presented herein was directed towards comprehensively describing North
American alcohol retail SOMs that were privatized during the past 25 years. Research
direction was further focused by two specific questions:
1. Do accepted theories on alcohol consumption and its negative effects and how they relate
to certain models of alcohol retail hold up when examined with empirics from alcohol retail
privatizations within a relevant cultural context?
2. Can the results of the first question be extrapolated from to comment on the necessity of
Systembolaget and open a discussion on the merits of privatization of the Swedish market in
alcohol retail?
1.3 Outline
The opening chapter of the present paper is meant to give context to the current state of the
Swedish alcohol retail SOM Systembolaget as well as detail the purpose of the research
presented herein. In the second chapter the methodology behind this research and the analysis
of it is presented. The third chapter features the theoretical framework of the paper, a
synthesis of established theory on privatization, cultural theories of alcohol, and alcohol
policy theory. The following chapter is a summary of the empirical data gathered during the
research of this paper. It is comprised of data on the three selected cases of privatizations in
North American alcohol retail SOMs, and data on Systembolaget in Sweden, as well as
qualitative interviews of Swedish policy makers representing different Swedish views on the
alcohol retail monopoly. The fifth chapter contains the analysis of this empirical data and is

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followed by the sixth and final chapter in which a concluding discussion on the findings of
the analysis is presented.

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2 Methodology
Primary research focus was of a theoretical nature, with the intention of synthesizing current
thought on privatization and the relation between alcohol consumption trends and resulting
interventionist state policy in relation to “temperance culture”. This synthesis was necessary
to construct a theoretical framework through which the scenario of a potential privatization of
Systembolaget could be analyzed. Empirical data was also of paramount importance to the
success of the study, as it was needed to back up the theoretical arguments presented within.
The empirics were compiled from academic case studies, government data sources, and
media reports on the privatization of specific North American alcohol monopolies and on
Systembolaget and the state of alcohol in Sweden. We link the Swedish context to examples
in Canada and the United States due to their aforementioned relation as “temperance
cultures”, a group of Nordic and English-speaking countries that in the nineteenth and
twentieth centuries shared large-scale and long-term temperance movements to control
overall consumption of alcohol (Levine, 1993, P 2). The paper takes on the tone of a
scientific recommendation to Swedish government in preparation for a privatization of
Systembolaget by independent policy advisors to the Swedish government.
2.1 Research Philosophy
The study presented here conducted research through the quantitative approach, with some
aspects of qualitative research. This is clear as the tone and structure is highly deductive in
seeking to test established theories on privatization and alcohol policy through the collection
and analysis of mainly numerical data. Epistemologically the study is positioned within the
realm of quantitative research as it is highly positivist, meeting several of the criteria laid out
by Bryman and Bell (2007, p. 17)
1. Phenomenalism- Only observable phenomena or knowledge that can be confirmed by
the senses is valid, an important concept to keep in mind for researchers working on a
subject as politically and culturally sensitive as Systembolaget

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2. Deductivism- By testing existing theories (such as privatization and alcohol policy)
new hypotheses can be devised dealing specifically with the case of Systembolaget.
3. Objectivism- Science can and must be conducted in a way that is value free
This third criteria, objectivism, is perhaps the most important for this study in terms of
methodology. This is because the researchers feel that to successfully analyze a hypothetical
Systembolaget privatization it is essential to remain culturally and personally unbiased and
focus solely on empirical fact and accepted theory to form new theses. It was with this
approach in mind that the business research paradigm took on a regulatory approach, defined
by Bryman and Bell (2007) as being the opposite of a revolutionary paradigm in that it does
not seek to make a moral or political judgement of Systembolaget or Swedish alcohol policy
or advocate radical changes. Instead it merely aims to suggest how some degree of
privatization of the monopoly could be carried out successfully as a business reform with a
conscious eye towards social responsibility.
The qualitative aspect of the study stems from the interviews carried out during the research
phase. These interviews were qualitative in nature as they were concerned with the
viewpoints on the subject of those interviewed, and how they may differ. This is a crucial
way in which qualitative interviews differ from quantitative ones (Bryman and Bell, 2007).
2.2 Research Design
The research design behind the study presented in this paper is inherently comparative,
seeking to draw links between Systembolaget with cross-cultural examples of alcohol retail
SOM privatizations from North America, this type of cross-culturalism often being a factor in
comparative research (Bryman and Bell, 2007). To be more specific, research took the form
of a quantitative meta-analysis where comparisons were drawn between the results of various
case studies of alcohol retail SOM privatizations that took place with the context of the
previously defined “temperance cultures”. Adapting the rudimentary quantitative research
process model depicted by Bryman and Bell (2007) to the specifics of our study we
developed our own research process, leading from the synthesis of concepts of the theoretical
framework to an analysis of the data with the aim of identifying privatization methods and
models that could be used by the Swedish state to develop an ideal Systembolaget

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privatization model (i.e. with desirable social control of alcohol consumption as well as
competitive equilibrium promoted), which is outlined below in Figure 3
Figure 3: Research Process
(Bryman and Bell, 2007)
2.2.1 Validity
As defined in Chapter 6 of Business Research Methods validity “refers to the issue of
whether or not an indicator (or set of indicators) that is devised to gauge a concept really
measures that concept” (Bryman and Bell, 2007). Internal validity, mainly an issue of
proving causality, was especially necessitated in this case by the aforementioned research
questions (Bryman and Bell 2007). The research design of the study presented above was

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devised to prove causal connections between the independent variables of certain alcohol
policies and alcohol retail models and resulting dependent variables of an economic or social
nature. The causality between increased alcohol consumption and an increase in the plethora
of well known alcohol-related health and crime problems has already been well established
(Holder et al., 2008). Therefore the presented research was greatly directed towards
identifying instances where health or crime variables did not demonstrate an expected
upward trend post-privatization, and on gathering economic data from privatizations and
linking them to arguments based in privatization theory. Through careful source selection the
research has to attempted to avoid bias and and detail only verifiable, objective data.
In terms of external validity, it is the belief of the researchers that the conclusions presented
on the data analyzed here could be applied to any alcohol SOM being operated within the
context of a temperance culture. Bryman and Bell (2007) describe external validity as being
“concerned with the question of whether the results of a study can be generalized beyond the
specific research context” (2007, Page 43). In the opinion of the researchers, the conclusions
on alcohol retail SOM privatization presented herein, while limited in specific scope to
Systembolaget and Sweden, could be applied to these other cultural contexts through careful
self-criticism on the part of the researchers to avoid self-bias and the testing of temperance
culture theory empirically through a variety of samples for the meta-analysis.
2.2.2 Reliability
A key concept in research reliability is stability. As Bryman and Bell explain, “This
consideration entails asking whether or not a measure is stable over time” (2008, p. 158). It is
the opinion of the researchers of this study that the results presented will demonstrate their
own stability as they span a relatively long-term range (over 20 years) with short- and long-
term results not fluctuating greatly in their expected values. Further reliability was provided
by biweekly meetings with our peer study group and student advisor to check on the progress
of our research and report.

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2.3 Limitations
The primary practical limitation of this study was that it was entirely reliant on document
analysis for the body of empirical data analyzed. While the sources of empirical data were
carefully vetted, they still represent secondary information. However, as an undergraduate
research team with an accelerated time schedule, it was simply not possible to gather
significant amounts of primary research from populations spanning several countries and
continents. Secondary limitations include possible cultural bias, although rigorous self-
criticism and periodical peer group critiques were employed to mitigate this factor as much as
possible, and issues with external validity due to possible limitations of our theoretical model
in terms of linking results from different temperance countries to the context of Sweden.

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3 Theoretical Framework
To form a theoretical context with which the empirics could be analyzed it was necessary to
synthesize theory stemming from literature relating to privatization, cultural views of alcohol
consumption, and alcohol policy, especially as it relates to retail. The first section of the
chapter deals with privatization theory. The following section explains the evolution of
theory on state alcohol policy, specifically within the Western cultural context of
“temperance cultures”, and how it was has resulted in the two contemporary models of
alcohol retail present in countries influenced by those cultures. Following this, the next
section outlines how the regulation of alcohol markets is implemented in both retail models
(monopoly vs regulation). The concluding section of the chapter summarizes the current state
of debate on privatization of alcohol retail systems.
3.1 Privatization Theory
Privatization, while not an overly complex concept, can be a misleading term. It is both
politically charged and subject to different cultural interpretations. For example, in the United
States privatization refers to the contracting of government service to private contractors
(Lopez-de-Silanes et al., 1997), while in most of the rest of the world it refers to a process of
transitioning individual firms, industries, or even entire economies from a system of state
control to one of private ownership (Megginson and Netter, 2000). This more international
definition is the one with which privatization is referenced in this paper.
3.1.1 Privatization Theory History
Privatization theory stems from the economic programs implemented by British Prime
Minister Margaret Thatcher in the 1980s which led to the divestment of a high volume of
British SOMs (State Owned Enterprises) to the private (Megginson and Netter, 2000).
Privatization was marketed by its proponents as a way to both raise revenue for the state and
improve efficiency across the economy by reducing government interference in firm activity,
introducing greater competition, and subjecting SOEs to market discipline (Megginson and
Netter, 2000). In some ways, privatization was simply a reversal back to the system of broad
private ownership of the means of production and distribution of goods and services that had

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existed before the twentieth century. The Industrial Revolution had spread this system
throughout Western nations and their colonial empires during the nineteenth century
(Megginson and Netter, 2000). Tumultuous events of the twentieth century including The
Great Depression, the World Wars, the collapse of colonial empires, and the spread of
Communism all shook global society and saw many states take a much more active role in
managing their economies (Megginson and Netter, 2000).
This shift towards broad “nationalization” of economies had become so entrenched by the
1980s that many, including economists, were skeptical of privatization when Thatcher first
proposed it to the British public (Megginson and Netter, 2000). Despite this initial doubt, by
the early 1990s privatization had spread from Britain and been embraced not only in Western
Europe but also by developing economies in Latin America, Asia, Africa and in the countries
of the former Soviet bloc (Megginson and Netter, 2000). As the effects of this political and
economic trend began to be studied differing views arose on the matter. Some economists
supported the argument that privatization improved efficiency while others contended that
cases studies contained methodological flaws such as a lack of data reliability and
consistency or selection bias that were leading to invalid conclusions (Megginson and Netter,
2000). While the privatization phenomenon has slowed down in recent years, and
dissatisfaction with capitalism in general has increased due to global economic downturn,
privatization is still widely viewed as being beneficial for economic development
(Megginson and Netter, 2000).
3.1.2 Privatization Theory Summary
Theoretically, privatization is rooted in basic capitalist economic and political thought in
which it is implicitly assumed that the only role the state should play in the economy should
be to promote efficiency (Megginson and Netter, 2000). These theories, stemming from
fundamental welfare economics, also hold “under strong assumptions” that private ownership
of the means of production and distribution of goods and services creates both a competitive
equilibrium and maximizes efficiency, and that government intervention should only be
sought in the case of market failure (Megginson and Netter, 2000). This theory can be
applied throughout most fields of business.

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For example, an accountant or financier may argue that a lack of general financial discipline
in SOE management is due to the fact that they are not subjected to capital market stresses
and have relatively “soft” budget constraints due to state funding, leading to less
parsimonious management of funds than would be the case in a private firm (Meggginson
and Netter, 2000). If one were to talk to a manufacturer or distributor they might argue that
privatization boosts productive efficiency, something that naturally evolves from competition
in a private setting (Megginson and Netter, 2000). A report on the effect of privatization on
marketing in Poland demonstrated that marketing capabilities were enhanced and became
more pro-active, with specific results including the adoption of longer term priorities,
increased emphasis on delivering superior quality to customers, and improved development
of new products (Shipley et. al., 1998).
States can benefit directly from privatization as well. An article from the National Center for
Policy Analysis states that, “Shifting some or all aspects of government service delivery to
private sector provision is a strategy to lower the costs of government and achieve higher
performance and better outcomes for tax dollars spent” (Leonard Gilroy & Adrian Moore,
2013, p. 1). Also the Ochieng & Ahmed (2014) study demonstrates that privatization not only
fiscally benefits the privatized firm but also the state in some instances where government
subsidies to industries or firms are scaled back as a result of privatization. “Privatization
reduced subsidies to Kenya Airways which led to increase in government income especially
when taxes paid exceeded the sums previously as the government profits when it was a
public utility” (Ochieng & Ahmed, 2014 p. 9). In summary, privatization theory basically
holds that private ownership and operation of a firm is almost always preferable to state
ownership and operation due to the increased economic efficiency brought on by the
mechanism of the free market. Therefore, the divestment of SOEs is fiscally beneficial to
states in the short-term, with greater efficiency developing throughout an economy overtime
in the long-term.
3.1.3 Exceptions to Privatization Theory
There are exceptions to privatization theory in certain instances where the theoretical
assumptions behind it are not met in reality. These exceptions have been noted by academics

16

and privatization proponents themselves as Megginson and Netter (2000) note. The
exceptions include:
1. Externalities- A text book definition is any cost or benefit incurred by an outside
party to some economic activity, with it being implicit that said party did not not
choose to incur this cost or benefit (Buchanan and Stubblebine, 1962). Negative
examples of this include pollution or, in the context of this paper, societal problems
related to alcohol consumption.
2. Public Goods- Megginson and Netter (2000) explain that states feel the need to
provide public goods, such as national defense, state education, or dissemination of
information deemed important for public knowledge. This tendency is demonstrated
by the Swedish government in its health care system’s support of Systembolaget
(Systembolaget, 2010).
3. Monopolist Market Structure- With the common view being that private
monopolies are the only thing less desirable than a state monopoly, the theoretical
benefits of privatization do not hold in the context of a market that is monopolistic in
structure, such as a utility (Megginson and Netter, 2000).
4. High Information Costs- As with most financial activity, privatization is only
desirable in scenarios with low information costs (Megginson and Netter, 2000),
these being defined as any costs incurred in the process of analyzing the merit capital
investment.
These exceptions are highly relevant to our scenario of a hypothetical Systembolaget
privatization, especially number one, as the need to educate the public on the dangers of high
alcohol consumption and to ultimately minimize irresponsible consumption of alcohol are the
main arguments made for the existence of a Swedish alcohol retail monopoly.

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3.2 Temperance Cultures and State Alcohol Policy
The term “temperance cultures” refers to a collection of countries with either Nordic or
English-speaking backgrounds that range geographically across Europe, North America, and
Oceania, which in the nineteenth and early twentieth centuries experienced large-scale and
long-term temperance movements to control and lower societal consumption of alcohol
(Levine, 1993, p 2). The individual countries are depicted in Figure 4 below.
Figure 4: The Temperance Countries’
(Levine, 1993)
As a geo-cultural term temperance culture is meant to differentiate from other Western
nations (i.e. Belgium or Italy) where alcohol consumption is an important part of culture but
where the historical trend of influential temperance movements was not experienced (Levine,
1993). Two other important denominators of temperance cultures noted by Levine are that
all societies exhibited high proportions of their total alcohol consumption being in distilled

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liquors (i.e. whiskey, gin, vodka) as well as containing predominantly Protestant populations.
It is interesting to note that the first recorded instance of significant Swedish regulation of
alcohol was over distilled liquor when it was discovered in the fifteenth century
(Systembolaget, 2010). However, Levine contends that it was the impact that Protestantism
had on these cultures and the individuals embedded within them, and not a preference for
distilled liquor, that was the major factor in; the development of temperance cultures.
3.2.1 Development of Temperance Culture Theories on Alcohol Consumption
The argument that Protestant cultural pressure was the driving factor in the formation of
temperance cultures is a persuasive one for two reasons. Firstly, while some temperance
movements did develop in non-Protestant societies, they either did not last or had little effect
(Levine, 1993). Secondly, a major characteristic of these Protestant temperance cultures was
and is a strong ideological commitment to capitalism, a system that is not generally in favor
of state monopolies on any sort of retail (Levine, 1993). This highlights how serious a
problem alcohol consumption was viewed as, so much so that it compelled these states to act
against their economic and political nature in restricting markets. Furthermore, this view can
not be explained only by the “disruption hypothesis” (Levine, 1993, p. 7).
The disruption hypothesis, as Levine (1993) explains, basically states that temperance
movements and culture sprang up as a reaction to drinking preferences and habits (favoring
more potent hard-liquor and binge drinking culture) that caused major social disruption, or, in
terms of this paper, unacceptable levels of negative externalities. Levine goes on to dispute
this hypothesis arguing for one that temperance activity was not significant in other countries
that experienced social disruption from proportionally high consumption of hard liquor (i.e.
Russia or Poland), and that it ignores the relation of the temperance movements to other
progressive movements gaining traction in the Western world at the time (Levine, 1993).
These movements (i.e. prison reform, children’s welfare, sexual liberalization) were focused
on raising the standard of living and protecting groups such as women, children, and other
marginalized demographics. This sentiment is echoed in modern alcohol policy by the
concept of “vulnerable groups”, of which youth are an often discussed section, a term used
by both Holder et al. (2008) and European Commission in their 2006 report for the WHO.

19

The second argument Levine makes involves the case of Denmark, a Nordic country which
met both the criteria of being dominantly Protestant and favoring distilled-liquor but did not
experience a significant temperance movement. Levine cites (Eriksen, 2009) who further
reveals that it was a specific branch of the religion that gave rise to temperance. This “Anglo-
American revivalist” sect found was comprised of the same American and British Protestant
organizations that were linked to both their native temperance movements and their Nordic
counterparts, including in Sweden. Eventually temperance and the greater body of theory on
alcohol consumption would move from the sphere of religion to the social sciences, and are
today championed in temperance countries largely by academics and now secularized
organizations such as Alcoholics Anonymous (Levine, 1993). Eriksen and Levine strongly
link this development of cultural, political, and economic theories on alcohol in Sweden and
the Nordic countries to their parallel development in North America.
3.2.2 Contemporary Alcohol Retail Models in Temperance Countries
The general consensus in North America and Scandinavia, and most other places, is that
alcohol causes problems, and that regulating the retail of alcohol is the best way to minimize
the consequences. To this end two models have been devised. One is of course the model of
an SOM, exemplified by Systembolaget and its other Nordic counterparts. However,
examples also exist in the United States and all the provinces of Canada with the exception of
Alberta. The second model is that of the private retail system.
As mentioned earlier, alcohol retail SOMs are most prominent in the Nordic countries,
though they are also the norm in Canada and are the mode of retail in a minority of US States
(Campanella and Flanagan, 2012; Cisneros Örnberg and Ólafsdóttir, 2008). North American
and Nordic alcohol retail SOMs share common strategic and political orientations in that they
are operated with the goal of addressing social welfare and public health concerns and not
profit maximization (Room, 2001). The concept of a retail monopoly on alcohol was the first
“self-conscious” form of alcohol market control to be proposed, in that it arose from a public
discourse on controlling alcohol to promote public order and health, and was not imposed
from above by a monarchy (Room, 1991). The generally given reason for the SOM alcohol
retail model is that it reduces alcohol-related problems better than private alcohol retail
models because regulations such as age restrictions and tax compliance are more easily and

20

effectively enforced by an SOM than by profit-motivated entities in a privatized model
(Holder et al., 2008; Room, 1991; European Commission, 2006).
3.2.2.1 Nordic Models
Although temperance culture was spread from English-speaking nations to Scandinavia, it
was in Sweden in 1859 that the first modern alcohol retail SOM was proposed in the
“Gothenburg System” (Robin, 1991). From here it spread to both the English-speaking world
and the other Nordic states all of which, besides Denmark apart from the Faroe Islands,
currently maintain SOMs on alcohol retail (Levine, 1993). These monopolies evolved over
the twentieth century from localized monopolies to national ones (Cisneros Örnberg and
Ólafsdóttir, 2008), with Systembolaget being formed while the post-World War II
nationalization trend was in full swing (Megginson and Netter, 2000). The individual national
models of the Nordic retail SOMs function in essentially identical ways, with Sweden and
Norway’s being noticeably similar (Cisneros Örnberg and Ólafsdóttir, 2008). As described in
the introduction, in recent years the Nordic countries have attempted some degree of alcohol
tax harmonization to bring about comparable alcohol prices and have also worked towards
creating a unified Nordic alcohol policy within the EU.
3.2.2.2 North American Models
The United States and Canada, unlike the Nordic countries with the single standout of
Denmark, have for some time decentralized alcohol retail policy within their respective
federal frameworks. In the United States alcohol retail model is decided on a state by state
basis, while in Canada it is left to the provinces. Both countries have examples of both types
of alcohol retail models.
3.2.2.2.1 North American Retail SOMs
In the United States, adopting an SOM model for alcohol retail was seen as an alternative to
the failed policy of prohibition (Room, 1991). When alcohol retail was re-legalized 18 US
states opted to adopt the SOM model in lieu of a private one and became known as “control”
states (NABCA, 2014). Today the term control state no longer implies that the state

21

represents a true SOM model, as all but 3 of the original 18 have privatized some or all
aspects of alcohol retail (Gilroy, 2011). An obvious difference found between American and
Nordic SOM models are jurisdictional scale, with the American monopolies in individual
states being reminiscent of the prototype local and regional Nordic SOMs, though in terms of
relative scale many of the control states and their respective SOMs are comparable to their
Nordic counterparts. Another major difference is that the American SOMs have historically
faced greater pressure to compete with private retail systems in neighboring states, resulting
in greater pressure to privatize themselves (Robin, 1991). It is in this context that American
SOMs have seen a transition from control mentalities to marketing mentalities, with resulting
“enormous profitability” being their main political capital, as opposed to the public health
arguments of Nordic monopolies (Robin, 1991).
The Canadian SOM model is more akin to the Nordic one as it was formerly a nationwide
policy, albeit operated in separate entities at the provincial level, although like its
counterparts in the United States it’s existence was the result of a failed experience with total
prohibition (Campanella and Flanagan, 2012). That is generally where the similarities
between the Canadian and American SOM models end as Campanella and Flanagan (2012)
explain that, “In Canada, liquor prices are too low to allow governments to recoup all of the
costs related to the public health and social consequences of alcohol consumption” (p. 5).
Essentially, as they incur net losses to provincial budgets due to low prices, Canadian SOMs
are wholly reliant on public health and order arguments and are also mostly reliant on
measures to limit the physical availability of alcohol.
3.2.2.2.2 Private North American Alcohol Retail Models
While 18 states chose to adopt SOM models for alcohol retail when prohibition was repealed,
it is perhaps unsurprising that in a country with an economic attitude as notoriously laissez-
faire as the United States the vast majority of states opted for the alternative of private retail,
with Alaska and Hawaii also taking this route upon their respective entrances into the Union
a few decades later (NABCA, 2014; Gilroy, 2012). While a private retail model is the norm
in the United States, the specific variations on this trend are many. As mentioned before
some states, including some “control states”, have fully privatized retail, with state control
only being exercised in the form of regulatory laws (Gilroy, 2012). Certain non-SOM model

22

“control states” operate through contract systems, ostensibly controlled by the state but with
management contracted to private individuals, that function essentially as private firms
motivated by competition and profit-maximization (Gilroy, 2011). Models also exist that
have been partially privatized by type of beverage, generally with the state maintaining a
monopoly on the retail of spirits but permitting private sales of beer and wine, sometimes in
conjunction with a contract system (Gilroy, 2011).
The private alcohol retail model, also known as the “license” model, is typified by the control
of alcohol retail outlets by private owners or state-licensed private agents who behave in
essentially the same way (European Commission, 2006; Cook, 2014). The obvious practical
difference between this model and the SOM model is that private alcohol retailers operate
according to fundamental capitalist economics of profit maximization. In terms of
philosophical differences, the private model is implemented when the state, voters, and
consumers reach consensus that alcohol consumption can be controlled at least equally as
well by regulation as by monopoly. It should also be noted that private models also include
partially privatized models, a concept that will be expounded upon in more depth in the
following subsections.
Governments allowing private retail of alcohol use taxes to regulate prices just as
governments maintaining an SOM model do (European Commission, 2006). All US states
are authorized to set their own excise taxes on alcohol sales, as well as decide if general state
sales tax applies to alcohol (Tax Admin, 2014). Controls on physical availability vis-a-vis
number of outlets and outlet density are determined by regulatory laws, also differing in each
state (Gilroy, 2011). Essentially since the repeal of prohibition the United States theory on
alcohol retail models, and alcohol policy in general, has been one of decentralization, with
each state being left to assess its own alcohol situation and decide on policy accordingly. The
only universal aspect of alcohol retail models in the 50 states is that the legal age to be
eligible to purchase alcohol is 21 years in all states.

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3.2.2.2.3 The Special Cases of Maryland and Alberta
Maryland, located on the northeastern seaboard of the United States, is worth mentioning
because it features a unique form of partial privatization. This form will be defined here as
geographical privatization. It is denoted as such because, although Maryland is technically a
license state permitting private sales of all types of alcohol by authorized vendors, three
counties maintain localized SOMs on retail of all types of alcohol within their county borders
(American Medical Association, 2004). This demonstrates another variation of partial
privatization which can implemented to maintain a degree of control, in this instance
delineated geographically, on the alcohol market.
Alberta, the only Canadian province to date to have privatized its alcohol retail monopoly,
provides a reverse example of geographical privatization. In 1991 the Liquor Control
Amendment Act was passed in Alberta granting new liquor administration regulation with it,
this paved the way for full privatization two years later (AGLC, 1994). All assets of the
Alberta SOM were sold, many being reopened as private liquor stores, and new laws
established a license system along the lines of American versions (AGLC, 1994). In some
ways it is like the opposite of the example set by the three Maryland counties, in that it is a
holdout of private retail otherwise surrounded by SOM retail models.
3.3 The Alcohol Retail Privatization Debate
In its contemporary context privatization of alcohol retail arose as an issue of public debate in
Canada and the Nordic region, countries strongly aligned to SOM retail of alcohol, in the
1990s before fading in importance, at least in the Nordic countries, over the following years
(Cisneros Örnberg and Ólafsdóttir, 2008; Campanella and Flanagan, 2012). In the United
States the debate has existed at the level of state politics since the repeal of Prohibition but
since 2009 has increasingly come to the forefront of discourse in some states due to the
perceived economic benefits privatization could have during a time of downturn in the
aftermath of the financial crisis (Gilroy, 2011). Essentially the debate is between proponents
of these economic benefits, and detractors who cite the negative consequences for health and
public order (Campanella and Flanagan, 2012).

24

The economic arguments for alcohol retail privatization include lowering prices for
consumers, increasing tax revenue on alcohol sales, raising employment by creating more
jobs in the alcohol industry, and improving efficiency in the market by lowering government
interference (European Commission, 2006; Campanella and Flanagan, 2012; Gilroy, 2011).
While the data on many of these arguments is inconclusive, the rationale for maintaining
SOMs on alcohol retail has never been an economic one, just as the rationale for their
privatization has generally never been that it will improve public health or order. Therefore,
the debate over alcohol retail privatization necessitates a cost-benefit analysis in regards to
whether or not the economic merits of a private system outweigh the social merits of a public
one within a determined context.
3.4 Alcohol Policy in Implementation
The main reason for any government of any scale to regulate alcohol markets stems from a
desire to control overall consumption and minimize these consequences, which include
negative externalities (Holder et al., 2008; Campanella and Flanagan, 2012). The
management of externalities has been well noted as an exception to private markets theory
(Megginson and Netter, 2000). However, this section demonstrates that states generally have
the same set of alcohol control policy methods at their disposal regardless of whether they
preside over a monopolistic or private market.
Figure 5 demonstrates that it is the interaction between the total volume of alcohol consumed
by a population and the patterns of drinking present in that population that determines the
nature and frequency of alcohol-related health and social problems. Therefore government
policies that seek to curb negative externalities and consequences for alcohol consumers must
address both of these factors.

25

Figure 5: The Relationship Between Alcohol Consumption and Alcohol Issues
(Rehm et al., 2004)
While applicable in most conceivable alcohol market settings, the alcohol policy methods
discussed in this section are generally those that have evolved in a Western geo-cultural
context as European Commission (2006) note that most of the studies that form the body of
alcohol policy theory have been conducted within North American, European, or Oceanic
contexts. They name five types of alcohol policies that governments can implement:
Alcohol Policy Methods
1. Policies that reduce drinking and driving
2. Policies that support education, communication, training and public awareness
3. Policies that regulate the alcohol market
4. Policies that support the reduction of harm in drinking and surrounding
environments
5. Policies that support interventions for individuals
(European Commission, 2006, p. 240)

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As the subject of this paper is Systembolaget and other alcohol retail SOMs, which are
technically only examples of the third policy type enumerated by European Commission
(2006), the regulation of alcohol markets, this is the type of alcohol policy methods that is
focused on in this section. While the wider mission of Systembolaget encompasses the first
and fourth policy types in an indirect manner as it seeks to keep alcohol consumption levels
down, and drinking behavior appropriate, it does so only peripherally and therefore a more
detailed examination of these methods is beyond the scope of this paper.
Policies that regulate the alcohol market include those that regulate the price of alcohol
(defined here as price availability), the location, density, and opening hours of sales outlets
(defined here as physical availability), and those that regulate the promotion and advertising
of alcoholic beverages (European Commission, 2006). The authors cite a study in which
these policies have been found to have a significant impact on reducing negative externalities
related to drunk driving (Grube and Stewart, 2004). They also argue that there is “very strong
evidence for the effectiveness of policies that regulate the alcohol market in reducing the
harm done by alcohol” (2004, p. 7). This section will detail theories on reducing harm from
alcohol through regulating availability and promotion.
3.4.1 Measures for Regulating Availability Measures of Alcohol
When discussing market goods, availability is a very broad term. In this paper we break
down the availability of alcohol as a good in terms of price and in a physical sense. States
seeking to lower total consumption of alcohol and instill responsible drinking habits in their
citizens must regulate the availability of alcoholic beverages in both these senses. This
subsection breaks down these two main approaches to regulating an alcohol market, both of
which are necessary to lower the total volume of alcohol consumed by a population and to
hopefully instill responsible patterns of drinking within a population.
3.4.2 Physical Alcohol Availability Regulation
As mentioned earlier, physical availability of a good is defined within this paper as the ability
of the customer to encounter and acquire that good in the physical marketplace and. In terms

27

of an alcohol market, European Commission (2006) state that physical availability of
beverages is determined by factors such as outlet density (number of stores), the business
hours of those stores, the product range of beverages carried at these stores, and eligibility
restrictions on the purchase and sale of alcoholic beverages. Regulation of physical
availability is carried out in both private and SOM alcohol retail systems.
Under a monopoly system like Systembolaget, the state obviously exercises total control over
factors of physical availability as it maintains ownership and management of all retail outlets,
allowing it to control the number of outlets and all their retail activities more or less directly.
In a privatized alcohol retail setting, the state can still set policy controls over physical
availability through licensing, in which authorization from some local or central state
administration in the form of a license is needed for private citizens to be eligible to sell
alcohol for consumption either on or off of the premises of sale (European Commission,
2006). Licensing systems are useful for regulation of private alcohol retail markets as they
allow states to maintain controls on outlet density and other availability standards such as age
limits or business hours (Lehto, 1995).
In 2003 the Oxford Medical Publication presented a publication, Alcohol: No Ordinary
Commodity (Babor et al., 2003), which analyzed the effectiveness of different policies for
regulating the physical availability of alcohol. They concluded that minimum drinking age
laws and maintaining a SOM on alcohol retail outlets were the most effective policies for
reducing the physical availability of alcohol, with regulating outlet density and business
hours of outlets being somewhat less effective policies. This conclusion is also supported by
the WHO, as depicted in Figure 7 below. This is unsurprising as a state will inherently have
greater control of physical availability if it directly operates all alcohol retail outlets and
manages their day-to-day activity through a monopoly instead of trying to maintain an
indirect control by regulating the activity of privately licensed owners.

28

FIGURE 6 WHO Ranking of Alcohol Policy Effectiveness
(Campanella and Flanagan, 2012, p. 18)
3.4.3 Alcohol Price Availability Regulation
Of all potential alcohol policies the most studied has been the impact of changes in price
availability on consumption levels (European Commission, 2006). The report for the
European Commission cites several studies as demonstrating that “price-elasticities for
alcoholic beverages estimated in different studies have shown that when other factors remain
unchanged, an increase in price has generally led to a decrease in alcohol consumption, and
that a decrease in price has usually led to an increase in alcohol consumption, with the size of
the elasticities sometimes dependent on the relative presence or absence of other alcohol
policy measures” (p. 259). Besides the effects of other policy measures, the report found that
alcohol-price elasticity was also influenced by national context, with certain types of
beverages having differing elasticities from country to country. It also concluded that, “The
price elasticities indicate that demand for alcoholic beverages is more easily controllable by
excise taxes in the northern European countries than elsewhere” (p. 260).

29

American studies have also concluded that a majority of research supports the thesis that
increasing alcohol prices by increasing excise taxes can effectively reduce total alcohol
consumption and therefore reduce alcohol consumption-related harms and negative
externalities, and that taxes on specific types of beverages can impact consumption
reductions in targeted groups such as teenagers and young adults (Chaloupka, Grossman, and
Saffer, 2002). It is interesting to note that, although alcohol retail SOMs like Systembolaget
control pricing of all significant alcoholic beverages, the Nordic countries choose to utilize
excise taxes to set prices high as is done in the United States, rather than raising them
artificially through their monopoly leverage (European Commission, 2006). This is likely due
to Systembolaget and other Nordic alcohol monopolies obligation to their respective publics
and to the European Union to be non-profit motivated and non-discriminatory towards
products.
3.4.4 Alcohol Advertising and Promotion Regulation Policies
A number of studies dealing with the effect of advertising and if it has a direct correlation to
consumption of alcohol will be discussed in the upcoming section. In 2012 Spirits Europe
(2014) produced an article on alcohol advertising and consumption. They make the point
that “alcohol advertising does not create the desire to consume, therefore banning advertising
will not significantly reduce consumption, and alcohol related harm will not automatically
decline” (Alcohol Advertising and Consumption, 2012, p. 1).
Anderson et al (2009) reviewed 13 studies (two of which were European), and found that
twelve of the thirteen studies concluded an impact of exposure on subsequent alcohol use,
including initiation of drinking and heavier drinking amongst existing drinkers. Smith and
Foxcroft (2009) reviewed a quasi-similar body of literature and observed that ‘the effect of
alcohol portrayals and advertising on the drinking behaviour of young people is a matter of
much debate’. This review shows a modest relationship between exposure to marketing and
drinking among young people, with the the strength of the association varying between
individual studies. This study concludes with a question: ‘Does this systematic review
provide evidence that limiting alcohol advertising will have an impact on alcohol
consumption amongst young people? Not directly:..we cannot rule out that the effects

30

demonstrated in these studies are due to residual confounding’ (Alcohol Advertising and
Consumption, 2012, p. 3 ).
Lastly in Nelson’s (2010) study, which reviewed a body of literature very similar to the two
previous studies mentioned, he concludes that a ‘brief review demonstrates that the evidence
on alcohol advertising and youth is mixed, contradictory and inconclusive (Nelson, 2010). He
also states, “Although studies present a conflicting set of results they are cited in an uncritical
manner” (p.3). In a 2010 comprehensive review of all the literature – not only the
longitudinal ones – Nelson finds that there is evidence of a “selection bias in the
interpretation and use of results by researchers and health policy interest groups... Most
research claiming to evidence a causal link indeed rely on a “cherry picking” selection of
literature – often excluding “neutral” or negative studies – the ones which do not find
evidence” (p. 3). A main conclusion of Nelson’s (2010) meta-analysis is that ‘the effect of
alcohol marketing on adolescent drinking is modest, but the evidence indicates that it may
not exist at all for mass media and other exposures.
In all, these studies show that the balance of evidence does not support a direct link between
alcohol advertising and young people’s drinking levels. Additionally a study done by
Donovan (2004) though shows that the principal influences on youth drinking are mostly
from parents and peers. Even so, the EU has actually set up legislative framework that lays
down a series of provisions to protect children and young people from exposure to alcohol
advertising (Alcohol Advertising and Consumption, 2012).
The EU Audiovisual Media Services Directive prohibits advertising for alcoholic beverages
aimed “specifically at minors”, and the 2001 Council recommendation prohibits references to
youth culture and ads featuring children or underage people (Alcohol Advertising and
Consumption, 2012). In addition to this legal framework, advertisers have voluntarily agreed
to a number of detailed rules specifically for minors, including on the content of their
advertising, and the media used for commercial communication. Alcohol advertisers have
committed not to advertise in media “of particular appeal” to underage audience (Alcohol
Advertising and Consumption, 2012). This means that any media with more than 30% share
of underage audience does not contain alcohol advertising.

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An international study conducted on whether alcohol advertising broadcast bans were
effective (Letho, 1995) analysed the effects of advertising bans in 17 Organisation for
Economic Co-operation and Development (OECD) countries between 1977 and 1995.
Results indicate that advertising bans have not led to the decrease of alcohol consumption or
alcohol abuse. There have also been studies of the effects of alcohol advertising bans that
have been conducted in Canada, where some provinces have outlawed alcohol advertising
and subsequently lifted them. For example in Manitoba, a 7-year long beer advertising ban
did not reduce beer sales but on the contrary they increased (Malkowsky et al., 1991).

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4 Empirical Framework
This chapter presents the data collected during the empirical phase of the research process of
this paper. The opening section presents empirical data gathered from the selected cases of
alcohol retail SOM privatizations in Alberta, West Virginia, and Washington followed by
data of Systembolaget in Sweden. The chapter concludes with a section dedicated to the two
qualitative e-mail interviews that were conducted with a respective representative of
Systembolaget and the Moderate Party, the only mainstream political group in Sweden to
have voiced support for a privatization of Systembolaget.
4.1 Empirical Cases of Alcohol Retail SOM Privatizations
The data is presented case by case in this order: Alberta, Canada; West Virginia, United
States; and Washington, United States. The cases were carefully selected to meet the criteria
of a temperance culture context and also provide empirics on both short- and long-term
outcomes of alcohol retail privatization. This section is followed by a section dealing with
empirical data on academic estimates of changes in health/social variable values and the
online presence post-privatization for Systembolaget in Sweden.
4.1.1 Alberta Privatization
Until 1993 Alberta, like the rest of Canada, maintained a SOM over alcohol retail throughout
the province. The Alberta Liquor Control Board controlled 208 stores, with another 530
Hotel off-sales, and 65 additional private retailers for a total of 803 total liquor retailers in the
Alberta area, which in total carried 2,200 products that were made available to the public
(AGLC, 2014). Privatization led to gradual market growth; compared to a provincial grand
total of 803 alcohol retail outlets in 1993, by 2013 there were 1,333 privately licensed retail
liquor stores alone (AGLC, 2014). Furthermore, Alberta’s store hours are now quite long,
being allowed to remain open from 10:00am till 2:00am on Monday through Saturday and
are also open on Sundays. In total, Alberta has 112 hours per week of alcohol availability
(Campanella and Flanagan, 2012).

33

Despite this the privatization of the Alberta alcohol retail SOM was carried out with
conscientious effort made towards maintaining a healthy drinking culture, as their official
strategy highlighted, Six priorities are identified for the Alberta Alcohol Strategy they are as
follows:
1. Promote healthy perceptions, attitudes and behavior toward alcohol use.
2. Ensure social responsibility in the production, distribution, regulation
and service of beverage alcohol.
3. Foster the development of context-specific alcohol policies.
4. Enhance the province wide continuum of alcohol treatment services.
5. Expand harm reduction programs for alcohol.
6. Support enforcement efforts to reduce alcohol-related crime.
(Alberta Alcohol Strategy, 2008)
With the following goals in mind for Alberta’s alcohol safety: reducing intoxication, heavy
drinking and other risky patterns of alcohol consumption, improving community safety by
reducing alcohol-related harm, and increasing public awareness of the risks associated with
alcohol consumption, they created two special training programs to better train bartenders
and security staff at bars (AGLC, 2014). Alberta also created a comprehensive licence system
to enforce these alcohol strategy priorities (AGLC, 2014).
4.1.1.1 Alberta Economic Data
When Alberta privatized “the large expansion of retail outlets raised the costs of product
distribution, marketing and retailing and to the surprise of the Albertan government, and
Albertan consumers, prices increased. The ensuing negative consumer reaction required
Alberta to reduce alcohol taxes on three occasions following privatization in an ultimately
unsuccessful attempt to stabilize prices” (Flanagan, 2014, p. 2). Going into greater detail
Flanagan found that Alberta retail liquor prices were up 8.5% (1993-1996), while wholesale
prices dropped 3.4% (Fraser Institute, 2003).
A comparison of Alberta with its close neighbor Saskatchewan (which maintains an alcohol
monopoly), shows that prices at Albertan private retailers are 18% higher than Saskatchewan

34

government prices (Boyd, 2011). Since 1993, retail alcohol prices in Alberta have increased
by a whopping 67% (Flanagan, 2014). Flanagan also concluded that a move to a more costly
and less efﬁcient deregulated liquor sales system will result in higher, not lower, consumer
prices unless signiﬁcant tax reductions occur to compensate for increased retail and
distribution costs. This can be further explained as a result of a recent provincial government
tax hike, and rising warehouse and distribution costs (SGEU, 2013).
Some of Flanagan’s findings have been disputed. According to Mark Milke of the Fraser
Institute said that, “Alberta’s privatization model has its critics. The self-labelled Consumers
Association once claimed Alberta’s prices were mostly higher than British Columbia. One
University think tank claimed the Alberta government lost $1.5 billion in revenue since
privatization..Both claims are incorrect..The Consumers’ study used median prices (not the
lowest prices available in Alberta) and surveyed just 53 products. Also, the group ignored
one of the cheapest sources of beer wine and spirits in Alberta: the Real Canadian
Liquorstore chain (a division of the Superstore/Loblaws group)” (Milke, 2013, p. 1).
With this, it is also important to note that with the privatization of alcohol in Alberta that
employment increased. Employment increased in retail stores from around 1,300 to 4,000
(Dick, 2013). As for the satisfaction of this privatized alcohol market, 82% of Albertans are
satisfied with the conducts of Alberta’s liquor business (AGLC, 2014). Alberta made $729
million dollars in tax revenue from alcohol in 2013 compared to $404.8 million in 1993
(AGLC, 2014).
4.1.1.2 Alberta Health and Social Data
According to some studies privatization of Alberta’s retail system was associated with an
increase in spirits consumption (Trolldal, 2005), with suicide (Zalcman & Mann, 2007),
criminal activity such as break-ins (Laxer et al., 1994), but not with alcohol-related traffic
crashes or fatalities (Trolldal, 2005). Data recovered from cases examined by the Alberta
Alcohol Strategy (2008, pp. 11-12), it is said, “based on annual sales data, trends since the
early 1990s indicate that Albertans continue to drink more per capita and spend more on
alcohol than the national average” (Statistics Canada, 2006). The spousal homicide rate in
Alberta is considerably higher than the national rate, and in the years directly following

35

privatization the majority of cases of spousal homicide involved consumption of alcohol or
other drugs at the time of the incident, also this rate decreased over time (Statistics Canada,
2006).
Figure 7: Percentage of Spousal Homicides Involving Drug/Alcohol Consumption as a
Contributing Factor
(Statistic Canada, 2006)
Dick (2013) showed a different view on the effects of privatization in Alberta. Citing a 2009
Frontier Centre study he found that Saskatchewan, a province with a plethora of government
run liquor stores and comparatively low overall sales and alcohol consumption rates, still
showed the highest, second highest, or third-highest rates of alcohol-related harm with
respect to friendships, marriage, work, studies, employment, finances, legal problems and
physical violence.

36

4.1.2 West Virginia Privatization
Sales of alcohol at both the wholesale and retail level were under the control of the state in
West Virginia until the early 1990s. Some control was maintained through the ABC (Alcohol
Beverage Control) stores until they fully privatized (West Virginia Budget Division, 2011).
Privatization legislation included the creation of the Retail Liquor Licensing Board (RLLB)
to establish market zones and manage bids for retail liquor outlets throughout West Virginia
(West Virginia Alcohol Beverage Control Administration, 2013). During the fiscal year of
1991 public bids were held at auction resulting in the sale of retail liquor stores licenses in
many places throughout the state, the result being possible market growth of up to 214
privately owned liquor stores, with 178 privately owned liquor stores now operating in West
Virginia 22 years later. (West Virginia Alcohol Beverage Control Administration, 2013).
Like Alberta, West Virginia privatized through creation of a license system. In 2012, the
Class A retail license was passed to conduct responsible nonintoxicating beer and liquor
sampling events with certain requirements on any day but Sunday (West Virginia Alcohol
Beverage Control Administration, 2012). The Class B license created in the same year
allowed wine sales at professional baseball stadiums (West Virginia Alcohol Beverage
Control Administration, 2012).
4.1.2.1 West Virginia Economic Data
Since 1977 there has been a slow and steady increase of the alcohol tax revenue that West
Virginia accrued as seen in the table below (Tax Policy Center, 2013).

37

Figure 8: Alcohol Tax Revenue
(Tax Policy Center, 2013)
4.1.2.2 West Virginia Health and Social Data
The figure below demonstrates data obtained from Alcohol Alert (2014), showing traffic
fatality statistics from West Virginia between 1982 and 2011, also detailing which cases
involved alcohol consumption, and which involved DUI consumption (i.e. involving alcohol
consumption over the legal blood alcohol content level of 0.08%). It shows a downward trend
in the number of traffic fatalities involving alcohol.

38

Figure 9: DUI Fatalities
(Alcohol Alert, 2014)
4.1.3 Washington Privatization
In November 2010 two initiatives were proposed in Washington state that would have
privatized the sale and distribution of alcohol were rejected by Washington voters. However,

39

a year later in November 2011 voters approved an initiative which would cease state liquor
distribution operations by June in 2012 (Washington State Liquor Control Board, 2011).
With privatization, the state believed 1,500 retail licenses would be a reasonable
accommodation of consumer convenience (Gilroy, 2012). Since its recent privatization
alcohol stores have grown from 329 state run stores to 1,400 private retailers in just about a
years time (The Columbian, 2013). “There are now 10 times as many retailers selling spirits,
including national retailers like BevMo and Total Wine — increasing selection for not just
liquor drinkers, but beer and wine as well” (Minton, 2013, p. 1). Keeping in mind that
Washington’s privatization was very recent the data presented in this section still shown
discernable short-term trends.
4.1.3.1 Washington Economic Data
About $392 million dollars in tax revenue was collected by Washington in fiscal 2013, up
from $309 million in fiscal 2011, and the total is estimated to reach $425 million before the
end of fiscal year 2014 (The Columbian, 2013). According to Flanagan (2014) when
Washington privatized its retail prices rose in similar fashion to what occurred in Alberta.
The prices raised so much that many people went to Oregon (a close neighbor outside of
Washington) to buy their alcohol and sales in Oregon increased by 30%-35% (Flanagan,
2014). According to Keystone Politics (2013) prices in Washington increased because of
new taxes, not privatization. With intention to raise state revenue, the ballot measure created
a new 17% retail license fee for all spirit sales revenue with an annual retail license renewal
fee of $166, plus a new distributor license fee of 10% of yearly revenue (which would drop
after three years) with a yearly renewal fee of $1,320 per distributor license. If these taxes
and fees do not generate enough revenue for the government in 2013, distributors would have
to pay another one-time fee (Keystone Politics, 2013).
4.1.3.2 Washington Health
Figure 11 demonstrates data obtained from Alcohol Alert (2014) that shows traffic fatality
statistics involving alcohol from Washington between 1982 and 2011. The figure shows a

40

downward trend in the number of traffic fatalities involving alcohol similar to the one seen in
West Virginia.
Figure 10: Alcohol-Related Traffic Fatalities in Washington by Year
(Alcohol Alert, 2014)

41

The most recent drunk driving fatality statistics that could be obtained are from 2012 and
demonstrated the downward trend continued with 157 alcohol related traffic fatalities
(MAAD, 2012).
In an article by Michelle Minton (2013) she examined the case of Washington and the fact
that now that consumers can purchase their liquor while they do their food shopping, the
likelihood that they will be sober when they do their alcohol purchasing is greater. This is
backed up by other studies she examined including one done by Patrick McCarthy (2003).
McCarthy examined 111 California cities and found that a higher number of take-away
alcohol stores actually correlated with decreases in fatal and non fatal alcohol related car
accidents. In a study done by, Tenaya Marie Sunbury (2010), she discovered that a higher
alcohol retail density actually correlated with lower alcohol consumption, lower rates of
binge drinking, and fewer rates of drunk driving.
Further information demonstrates that alcohol crimes have decreased since Washington’s
privatization. According to Competitive Enterprise Institute (2013) minors in possession of
alcohol has decreased since privatization. There were 1,483 instances from 2008-2009 and
only 777 during 2012-2013 (Minton, 2013a). Other alcohol-related arrests have also been on
the decline, as shown in Figure 12.
Figure 11: Alcohol Related Arrests Washington 2008-2013
(NBC, 2013)

42

4.1.4 Swedish Health and Social Data
According to the Swedish Retail Institute (2009) in the official statistics, the total Swedish
alcohol consumption, compared to other European countries, has been low for many years.
However, during the past 15 years a change has occurred. Swedish alcohol consumption has
sharply increased, by almost 30%. The foremost reason behind this trend is the substantial
increase in personal imports by travellers and smuggling from other countries with
significantly lower alcohol taxes than Sweden (Swedish Retail Institute, 2009). Adding on,
“Systembolaget, which through high prices and restricted availability is meant to keep
alcohol consumption low. However, due to the free movement within Europe of both people
and goods, the Swedish alcohol policy has encountered problems. The possibility of legally
bringing in large quantities of alcohol or buying via other people who have been abroad and
purchased alcohol (smuggling) is large” (Swedish Retail Institute, 2009, p. 5).
Information from the Swedish Retail Institute (2009) almost 30% of the beer over 3.5%
alcohol that is consumed today comes from personal imports by travellers or smuggling and
is, thus, neither taxed in Sweden nor sold via legal channels within the country. During the
last 15 years, a sharp transition from weaker to stronger beer has also occurred. In 1994, beer
with an alcohol content of up to 3.5 percent constituted 64 percent of all beer consumed
while today it only constitutes 33 percent. Swedes, thus, drink more of stronger beer and a
great part of this increase comes from private imports and smuggling (Swedish Retail
Institute, 2009).
When comparing Sweden to other countries in terms of alcohol related traffic accidents it
ranks quite low just like the other privatized cases were. Figure 12 below shows that in 2004
Sweden had one of the lowest rates of alcohol-related traffic accidents of the selected
European countries (World Health Organization, 2004). It is important to note that some
other outside factors may have contributed to the conclusion of this data.

43

Figure 12: European Alcohol Related Traffic Accidents by Country
(World Health Organization, 2004)
In a report from 1995 (Holder et al., 1995) a group of leading scientists studying alcoholic
behavior predicted that a 1-litre increase in per capita-consumption would result in a 9.5%
increase in total alcohol-related mortality in Sweden. Since then the consumption per capita
in Sweden has increased by more than 2 liters which, according to those predictions, would
have lead to an increase in alcohol-related mortality by more than 20%. There are no official
statistics supporting such a development or something even close to it. (Swedish Retail
Institute, 2009)
Another study conducted by the World Health Organization (2002) surveyed the number of
deaths from alcohol liver disease, and as Figure 14 demonstrates Sweden again ranked very
low amongst European countries (Swedish Retail Institute, 2009).

44

Figure 13: 2002 Death Rates from Alcohol-Related Liver Disease by European Country
(Swedish Retail Institute, 2009)
4.2 Interviews
While theoretical frameworks and case studies provide the foundation upon which this thesis
is built it is important to recognize the Swedish perception. To accomplish this interviews
were utilized to gain the perception of Swedish citizens in authority positions who stand on
both sides of this debate. The interviews while not important in numbers allow access to
information on where different parties stand on the issues of systembolaget, privatization, and
alcohol policy. In order for any model of privatization to be implemented there will need to
be consensus throughout the country and political system. These interviews help us to gauge
the current climate of the debate.

45

4.2.1 Systembolaget Interview
On May 6, 2012 data was obtained from the Head of Public Relations at Systembolaget. Her
name is Ann-Therese Enarsson. The data that was obtained was from a set of interview
questions sent to her via email. The questions asked were as follows along with the answers
given:
1.) Do you perceive external significant pressure from the EU or the WTO
privatize?
“NO”
2.) Is there a strategy/contingency plan that has ever been discussed if Systembolaget
were privatized? If so, what was it?
“NO”
3.) Do you think regulation could help minimize the negative societal effects of
alcohol consumption?
“That is why we exist as a state owned retail monopoly, if you need scientific
arguments please visit WHO homepage.”
4.) Do you think Systembolaget could still carry out its mission of maintaining a
healthy culture in a partially privatized environment perhaps by maintain it's harder
alcohol?
“Our mission is to limit alcohol as a monopoly. Partially privatized would increase
consumption and therefore increase the harmful effects of alcohol. A monopoly does
not exist in a partially privatized environment.”

46

4.2.2 Moderate Party
On the 15th of May, 2014 an email was sent to the Linköping Deputy Mayor and Moderate
Party councilor Christian Gustavsson that contained the same interview questions sent to the
Systembolaget Head of Public Relations. The interview was conducted in order to understand
a Swedish viewpoint on Systembolaget dissenting from the majority consensus. A Moderate
Party representative was selected to
1.) Do you perceive significant external pressure from international organizations
such as the EU or the WTO to privatize Swedish alcohol retail?
“The model of government controlled retail stores for alcohol, Systembolaget, was an
issue when Sweden joined the EU. Sweden has been able to keep the the retail
monopoly, after opening up our borders for private import and opening up the market
for competition for non-consumer distribution.”
2.) Is there a strategy or contingency plan that has ever been discussed if
Systembolaget were to be privatized? If so, what was it?
“The issue has been discussed, and are always discussed, within The Moderate Party
and the government coalition. At the moment there are no plans to privatize
Systembolaget, or to open up the market for competition. There is an ongoing
discussion within the government coalition about opening up the consumer market
when it comes to small farming businesses selling locally produced alcohol (wine,
beer).”
3.) Do you think regulation could help minimize the negative societal effects of
alcohol consumption?
“I believe there are scientists with different opinions. A believe there are small
benefits when it comes to controlling consumption of alcohol, but today alcohol is
also quite accessible in society in other ways.”

47

4.) Do you think Systembolaget could still carry out it's mission of maintaing a
healthy culture in a partially privatized environment, perhaps by maintaining it's
monopoly on hard-alcohol?
“Yes, but as long as other retail stores only have the possibility to sell alcohol within
a controlled license.”

48

5 Analysis
In this chapter the theoretical framework synthesized earlier is applied to the empirics
detailed in the preceding section to analyze theories of alcohol retail and privatization within
the context of temperance country examples. The first section contains a meta-analysis of
overlapping data from the three selected cases of alcohol retail SOM privatizations as well as
data relating to Sweden and Systembolaget. The next section analyzes the qualitative data
concerning advertising and Swedish opinions of Systembolaget. The final section analyzes
the qualitative interviews performed.
5.1 Analysis of Privatization Case Data
The meta-analysis of the cases of alcohol retail privatization in Alberta, West Virginia, and
Washington is carried out here, at some points in conjecture with Swedish data. The first
section analyzes the details of how each privatization was implemented. The following
section analyzes a set of data presented can be broadly categorized as “health/social” data,
while the second set is that which describe the economic and business consequences of
privatization.
5.1.1 Analysis of Privatization Models
Alberta, Washington, and West Virginia all employed markedly similar privatization
models (AGLC, 2014; West Virginia Alcohol Beverage Control Administration, 2013;
Gilroy, 2012). All three chose to replace their monopolies with license systems. All three also
sold off their assets through a bidding process. This would seem to indicate that this has
become the prefered method of privatization.
5.2 Health and Social Data
The varying health, social, and crime statistics gathered via the case studies and their
relationship to privatization are analyzed below. The analysis takes into account figures such

49

as alcohol related traffic accidents and alcohol related crimes, and compares and discusses
the numbers in terms of the privatized market as well as the SOM.
5.2.1 Alcohol-Related Traffic Accidents
A common trend found in Washington and West Virginia was that alcohol-related traffic
fatalities actually decreased following privatization. This trend is represented in Table 15
(Alcohol Alert, 2011, 2014; MAAD, 2012). It is important to note that Washington
privatized in 2011 while West Virginia privatized a 20 years earlier in 1991.
Figure 14: Alcohol Related Traffic Fatalities in Washington and W. Virginia
(Alcohol Alert, 2011, 2014; MAAD, 2012)
While hard numbers on fatalities in Alberta were hard to come by, Trolldal (2005) states that
there was no relationship between privatization and drunk driving fatalities between his

50

studies from 1950 to 2000.This analysis offers strong evidence that drunk driving is not
significantly influenced by the alcohol retail models. Furthermore as Figure 11 demonstrated
earlier Sweden ranked low amongst other European countries in the category of alcohol
related traffic accidents. Taken together this data seems to suggest that a shift to a privatized
alcohol model would not have significant effects on the alcohol related traffic accidents in
Sweden.
5.2.2 Alcohol and Crime
In Alberta privatization was followed by increases in crimes ranging in seriousness from
burglary to homicide (Statistics Canada, 2006). However, when compared by Dick (2014)
with its SOM retail neighbor Saskatchewan, Alberta had lower rates of legal problems and
physical violence. This seems to suggest that the apparent correlation between alcohol
consumption and violent crime could be due to confounding variables. When contrasted with
Washington data on post-privatization crime the picture becomes even more muddied.
According to the Competitive Enterprise Institute (2013) the stats on minors in possession
and sale to minors have been decreasing since privatization (Minton, 2013a). While it seems
clear that alcohol consumption has some sort of causal relationship with crime, the dynamics
of the relationship may not be as well understood as previously thought, and as Anderson and
Baumberg (2006) suggest, is highly influenced by the presence of other alcohol control
policies besides ones which regulate the market.
5.3 Analysis of Economic Data
In the following sections we will be presenting financial and economic data to support our
idea of the privatization of Systembolaget. With the move to a commercially driven market it
is important that privatization improves the financial circumstances for not only the consumer
but for the alcohol market and national economy as well. While goals of privatization often
include fiscal benchmarks it’s important that these economic factors not only improve but do
so in a responsible way. By analyzing the cases presented we hope to find a trend of
improvement in economic factors such as job creation and tax revenue. It is important to
prove and establish how much economic variables can be improved, because factors such as
employment and revenue can have far reaching effects into other areas such as government

51

spending in social-works projects, and increased spending in the consumer marketplace.
While the privatization shift may appear to create a change in market goals from controlling
and protecting consumers within the market, to that of purely financial means, it is important
to establish that this is not necessarily the case.
5.3.1 Job Creation Data
After privatization the number of retail outlets in Alberta rose from 803 locations in 1993 to
1,333 in 2013 (AGLC, 2014). “Along with this increased number of outlets came a nearly
fourfold increase in employees within the sector” (Cowan, 2014). While it was too recent for
highly exact data to be extracted, Washington likewise experienced an increase in outlets
post-privatization, with around 1,400 new private stores up-and-running, compared to only
329 in 2011 before privatization (The Columbian, 2013). Although increase in outlets does
not necessarily equate to increase in employment, the case of Alberta demonstrates a positive
correlation between the two.
In the case of Sweden, it is possible that privatizing Systembolaget could also lead to
increased employment because of increased outlets as well as increased consumption. Holder
et al. (2008), and possibly common sense as well, indicate that privatization would lead to
increases in both. However, as mentioned before, there has been inconclusive evidence
supporting positive correlation between consumption and employment in all situations, as
Figure 16 demonstrates.

52

Figure 15: Heterogeneity of Correlations between Alcohol Consumption and
Employment
(European Commison, 2006, p. 58)
While at first glance Figure 16 may cast doubt on the job creation theory, further analysis
reveals that it may actually support it, at least in Sweden’s case. The chart depicting
consumption and employment in Finland shows a strong correlation in net increases of both
over the period of 1995 to 2001. This demonstrates a triangulation of data from three separate
temperance countries supporting the theory that increased consumption leads to increased
employment. This suggests that a privatization of Systembolaget would result in increased
employment in Sweden in the alcohol industry.
5.3.2 Tax Revenue
One of the more prominent economic arguments for alcohol retail privatization has been an
increase in tax revenue from alcohol sales. In 1993 Alberta made $404.8 million in tax
revenue (AGLC, 2014). While this is not a low number, in 2013 Alberta made $729 million
dollars in tax revenue respectively (AGLC, 2014). Adjusted for inflation this represents an
11.8% increase in revenue. Additional support of this argument of this can be seen in the
privatization of West Virginia and Washington.
While West Virginia's privatization process wasn’t as immediate as Alberta’s, spanning from
1981 to 1991, yet the results of the transition are similar. According to figure 8 (Tax Policy

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