Storm in a Pint Glass: The Uncertain Future Of Alcohol Sales In Iceland

Now that cigarettes have gone the way of bear baiting and emptying your chamber pot out the window, alcohol is one of the last of the classic vices that still enjoys relative popularity. But the landscape is changing and the future of the sale and marketing of alcohol is more mercurial than ever. The retail sale of alcohol remains effectively illegal, the state being the sole party allowed to sell and distribute alcohol within Iceland, but this has failed to hamper the growth in new sales avenues, with multiple private enterprises wilfully taunting the government over the past 4 years. The government has yet to take significant action against this and there is little agreement among private and public parties on how to tackle the issue, or where things may be heading. This shot of sambuca is spilling over the bar table and recent developments may just be the match to set it alight.

The major players

For the better part of a century, the retail sale of alcohol has been restricted to the state-owned Alcohol and Tobacco Company of Iceland (ÁTVR). The first major step to relax those restrictions came when breweries were permitted to sell directly to consumers on July 1, 2022, with the aim of supporting small businesses and regional economies. Although this regulation did not extend to distillers, that did not stop many of them from shifting some of their sales online, in addition to the emergence of online alcohol retailers without ties to any single manufacturer; such as Santewines, Desma and Heimkaup.

“Stakeholders are left confused and forming awkward alliances, with little agreement on the best way forward.”

No legislative progress has been seen on the issue since 2022 and the government has not forced the closure of those sales sites. With neither those retailers pushing for the relaxation of alcohol legislation nor the government gaining ground, stakeholders are left confused and forming awkward alliances, with little agreement on the best way forward.

In the spring of 2024, both Hagkaup, Iceland’s oldest running supermarket chain, and Costco announced that they would be joining the fray. Costco has been gradually expanding its alcohol sales, which initially had been limited to those with an enterprise membership. Hagkaup is not known for reckless business moves, so this indicates how entrenched these sales have become.

When we spoke to Hagkaup CEO Sigurður Reynaldsson he insisted that Hagkaup will be taking greater steps in electronic authentication to ensure age restrictions and to encourage responsible purchasing behavior. He also stated that they expect and welcome any “fine-tuning of the legislative framework”. However, it is clear that this marks a significant development and the combined market share of those two businesses could place added pressure on the government to eliminate any uncertainty.

The people vs Sante

The webstore Santewines has been at the crest of the wave since 2021 and puckishly sparring with the authorities ever since. The company is ostensibly based in the fairytale village of Beun, in the Burgundy region of France, but distributes primarily to Iceland and other Nordic countries. This led to a highly-publicised court case with ÁTVR — and a counter-lawsuit by Santewines — where the state-run alcohol company pressed the judiciary to take legal action against Santewines. The state concluded that it lacked the basis to take action against a private enterprise based outside the jurisdiction of Icelandic alcohol regulations. But the feeling was more of a stay of execution than a decisive victory.

“If the legislature closes sites like Sante, this would need to be enforced by an internet police like we see in China.”

Arnar Sigurðsson (pictured) is the CEO of Santewines. “The court took our side on every point,” he says. “This would have been a violation of the freedom of enterprise, as there is no legal basis for stipulating a ban on the operation of online stores. If the legislature were to close sites like Sante, then this would need to be enforced by an internet police like we see in China, and would mean withdrawing Iceland from the EES agreement.”

Ívar Arndal, the director of ÁTVR, stated in the company’s annual report in 2022 that permitting the sale of alcohol online is tantamount to fully legalising the retail sale of alcohol. When asked, Ívar said that ÁTVR has witnessed a reduction in its share of the alcohol fees over the past years, stating: “It is logical to assume that this is mostly due to the illegal online sale of alcohol, and that if nothing will be done about this then it is likely that we would need to cut our services down significantly over the coming years to offset those losses.”

Caught in the middle

Many of the brewers and distillers we spoke to fear that it will jeopardise their future if nothing is done about online alcohol sales of large-scale retailers like Heimkaup, Costco and Hagkaup.

The RVK Brewing Company has been running a tap room from its inception, but since the relaxation in 2022 they’ve expanded into a major integration of their brewing operation and direct sales, with an expanded tap room opening in the former bingo hall Tónabíó. “Since the change in 2022, direct sale has become an integral revenue stream for us,” says Sigurður Snorrason, the founder of RVK Brewing Co.

“This could be the death of artisanal breweries, as they would be priced out of the market.”

However, Sigurður has reservations about the full retail legalisation. “In my view, one of the biggest threats for the small producers is if the sale moves to parties which need greater margins,” he says. “This could be the death of artisanal breweries, as they would be priced out of the market.”

This concern is shared by veteran distillers like Snorri Jónsson at 64° Reykjavik Distillery.
“We have always insisted on adhering to the local laws, and have avoided operating in the grey area despite sacrificing revenue,” he says. “But we are exhausted by the government’s insufferable inaction and its failure to act to eliminate the uncertainty around the sale of alcohol.”

Snorri also expressed his frustration about the ethics of influencer marketing and other recent marketing avenues. Many producers have ventured into advertising their wares, despite the complete ban on advertising alcohol that has been in place in Iceland since 1989. This is just one of many points of contention among independent producers.

alcohol vínbúðin ÁTVR by Danninja/Wikimedia Commons

What lies ahead

As the Icelandic consumer has enjoyed increasing access to direct sales of products or services outside of Iceland, the thorny issue of the legality of alcohol sales is becoming impossible to avoid. Icelandic consumers can purchase and import a range of products from retailers based outside of Iceland — and alcohol sales are only one example.

“Iceland is flooded with products of dubious origin that often aren’t subject to European health and safety protocols.”

Iceland is flooded with products of dubious origin that often aren’t subject to European health and safety protocols. This leads to regulatory agencies struggling to provide oversight in a range of categories, including heavily regulated sectors like sport betting, where international gaming companies regularly partner up with Icelandic schools and sports tournaments, in addition to their robust social media presences.

The opposition to relaxing restrictions on the sale of alcohol remains strong within the political parties, with only the conservative Viðreisn and Independence Party pushing regularly for privatisation. These sales would divert money from the state but, with no changes to Iceland’s high alcohol taxation, it’s unclear whether this would yield any price cuts for the average consumer, as the independent stores would likely require higher margins than state-run alcohol stores.

For the time being we are left with a Mexican standoff between the authorities, producers and retailers, and only time will tell how it all plays out.

Read more about eating and drinking in Reykjavík here.