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Beer tax decrease only leads to profit margin increase
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September 11th, 2013
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Beer prices stagnant despite this year’s 15 percent tax decrease
When the government decided to implement a 15 percent tax cut on beer and soft drinks, it was hoped that cheaper prices would cut down on the number of Danes who purchase their drinks south of the border in Germany. But while the tax cut came, the cheaper prices did not.
Politiken newspaper reported that beer prices were a mere 0.1 percent lower in August of this year compared to August 2012, based on calculations provided by industry advocates Arbejderbevægelsens Erhvervsråd (AE). The 15 percent tax cut on beer and soft drinks went came into effect on July 1.
"It is obvious that the [beer] prices have barely gone down, otherwise the general tax reduction would be reflected in the prices consumers pay in stores," Frederik Pedersen, an analyst at AE, told Politiken. "There is a greater decrease in soft drink prices, though still not as significant as it should be."
READ MORE: Cheaper beer – and more Swedes – on the horizon
Slightly better soft drink prices
While the change in beer prices may be close to nonexistent, soft drink prices are slightly more reflective of the tax decrease, with a price drop of 2.8 percent this year compared to last. Nonetheless, AE maintains that customers are still not reaping the full benefits of the tax decrease.
"It looks as though there has been an increase in profit margins as opposed to a decrease in prices," Pedersen said. "Danish shops are generally good at raising their prices but they have trouble when it comes to lowering them again."
Stores are reporting that consumers' purchasing habits have also changed, namely in a shift toward the purchasing of canned beer over bottles, despite the per litre prices of cans being higher.
"In August we saw a growth of 6.9 percent in canned beer purchases, which makes up for 55 percent of total beer sales," Jens Juul Nielsen, a spokesperson for Denmark's largest retailer Coop, told Politiken. "The growth in soft drink purchases is even higher."
Can't beer drinkers catch a break?
This is not the first time that Danish beer drinkers have had to swallow a broken promise on cheaper suds.
In March 2012, City Council dropped an outdoor service fee that was supposed to allow cafes and restaurants to lower their drink prices. A spot check by Berlingske newspaper seven months later revealed however that nine of eleven establishments in Nyhavn had not reduced their prices. The other two locations dropped the price of beer by a whopping two kroner.
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