Visitors to Iceland are often surprised to find that beer and wine are not available for sale in Icelandic grocery stores. For the past century, alcohol has exclusively been available for purchase through the state liquor store, Vínbúðin. The state’s near-monopoly on retail alcohol sales came to an end earlier this year, however: legislation passed on June 15, 2022 allows Icelandic breweries to sell their products directly to customers. Several retailers have begun selling alcohol online as well, and despite the fact it remains illegal, authorities have not stepped in to stop them.
Iceland’s government appears poised to relax legislation on alcohol sales even further, and according to recent polls, a majority of the nation is in favour of the development. The following is a closer look at Iceland’s changing legislation on the sale of alcohol and its potential social and economic impact.
History of liquor sale laws
In the early 20th century, the general opinion in Iceland grew that excessive alcohol consumption was the root of many social ills. The country held a referendum on whether to ban all production, consumption, and import of alcohol and the nation voted in favour. The ban was implemented in 1912 and stayed in place until 1922 when it was partially lifted to allow Iceland to trade salt fish for Spanish wine. (Spanish sailors had complained when their Icelandic counterparts had stopped buying their product in exchange for bacalao.)
That same year, the state liquor store ÁVR was established. The acronym stands for Áfengisverslun ríkisins, or “The State Alcohol Store,” and to this day Icelanders often say they’re on their way to “The State” to pick up some booze. Between 1935 and 1992, ÁVR was not just the only retailer but also the only producer of alcohol in Iceland. From 1922, the alcohol ban was lifted in stages, but beer remained illegal in Iceland until March 1, 1989 – for 74 years in total. Until December 1, 1995, ÁTVR (the T stands for tobacco, which was consolidated with ÁVR in 1961) even had a monopoly on the import and wholesale of alcohol, but from that date importers, producers, and wholesalers holding a special licence issued by the National Commissioner of the Icelandic Police were permitted to resell alcohol.
From 1922 until very recently, alcoholic beverages in Iceland were only sold through the state-run liquor store Vínbúðin, operated by the State Alcohol and Tobacco Company of Iceland, ÁTVR. There are 50 Vínbúðin stores located across the country, 13 of them in the capital area. They are always closed on Sundays, as well as on most holidays, and the store’s countryside locations often have limited opening hours. The Vínbúðin store in Kirkjubæjarklaustur, Southeast Iceland, for example, is open between 2:00 and 6:00 PM most weekdays and for only two hours on Saturdays.
Advertising alcohol is illegal in Iceland, but producers occasionally skirt these laws by advertising low-alcohol versions of their products.
Other legislation governing alcohol sales and consumption is stricter in Iceland than in much of Europe. The legal drinking age in Iceland, for example, is 20. Advertising of alcoholic products is prohibited, though producers do skirt these laws occasionally by advertising the low-alcohol versions of their products.
Online sales begin
In 2020, online craft beer retailer Bjórland, which had been selling wholesale to businesses, began selling craft beer directly to customers. The sales were technically illegal, but the company had found a loophole in the legislation that even MPs had previously pointed out: foreign-based retailers could legally sell alcohol directly to Icelandic customers although Icelandic companies could not. All Bjórland had to do was establish a foreign-based company through which their beers were sold, and the sales became perfectly legal. The following year, Santewines SAS started online sale of wine directly to consumers through a company based in France and other retailers have followed suit, including grocery delivery company Heimkaup, the first grocery chain of sorts to sell alcohol in Iceland.
In response to these developments, ÁTVR called on the Reykjavík District Court to halt online retailers’ sales, asserting that they broke the law that granted the state a monopoly on alcohol sales and had led to financial losses. The court did not comply, and sales have continued. Icelandic authorities have not stepped in to stop them.
In some ways, retailers’ move to sell alcohol online was in direct response to developments in Iceland’s Parliament, where MPs have been drafting bills to legalise online sales of alcohol since at least 2019. The Icelandic government is not able to ban foreign-based retailers from selling their alcoholic wares to Icelandic customers and realised it made little sense to forbid local retailers from doing so as well. In fact, it was joining the EEA that compelled Iceland to privatise its import, export, wholesale, and production monopolies for alcoholic beverages in the 1990s – in an increasingly connected world, Iceland’s government has lessening jurisdiction to maintain protective legislation such as that governing alcohol sales. Iceland’s legislators have been introducing bills aiming to relax alcohol sales since at least 2003, normally suggesting small steps, such as permitting the sale of alcoholic beverages under 22% in stores or permitting private retail of alcohol in specially-licenced stores.
Breweries can sell to customers
Despite remaining in a legal grey area, online sales of alcohol are booming in Iceland. Regulations in other areas have already been relaxed: from July 1, new legislation permitted Icelandic breweries to sell directly to consumers. Ólafur Stephensen, CEO of the Icelandic Federation of Trade, celebrated the change, saying he hoped to see legislation concerning alcohol sales relaxed even further. That particular bill was intended to boost tourism-related business in the countryside but excluded some larger breweries due to their size, as well as distilleries of spirits, which Ólafur believes have just as much a right to sell their product directly to consumers as smaller breweries.
While business owners and many others in Iceland celebrate the relaxation of legislation governing alcohol sales, dissenting voices have also been heard. Opponents to relaxing the state monopoly on alcohol sales say that making alcohol more easily available will increase rates of alcohol consumption as well as problem drinking, negatively impacting public health and society.
Iceland’s legal drinking age is 20.
Control and consumption
But are there data that show a link between control and consumption? Studies conducted in Canada and the United States have found a correlation between partial or full privatisation of alcohol sales and increased rates of alcohol consumption. In high-income countries like Iceland, where alcohol is a leading risk factor for disease (second only to tobacco), increased consumption would inevitably mean worse public health and higher healthcare expenditure, not to mention social impacts. Besides disease rates, some studies have found relaxed control of alcohol sales and increased alcohol consumption to correlate with increased instances of assault, suicide, and traffic accidents. Other studies have shown that private retailers are less likely to have well-trained staff and less incentive to prevent sales to minors than state-run retailers.
Data are not yet available on whether alcohol consumption has increased in Iceland since online retailers started selling alcoholic beverages. Past data could give some clues: an Icelandic study from the early 2000s showed that adding late-night trading hours was associated with alcohol-related problems. The year the beer ban was lifted, alcohol consumption per capita spiked from 4.5 litres per person (aged 15 and older) to 5.5. However, over the following four years, it dropped steadily and took nine years to rise above 5.5 litres again. The impact on public health over time is not clear, but fears that the ready availability of beer would cause a complete societal breakdown were not realised.
Do Icelanders have a drinking problem?
While Icelanders themselves will often joke that the nation drinks a lot, the numbers disagree. Data from the European Health Interview Survey published in 2017 showed people in Iceland drank less frequently than their counterparts in other Nordic countries. In a survey of 29 European countries, Iceland had the seventh lowest proportion of people who drink at least once per week, just over 20%. The UK, for comparison, had the highest rate at 52.5% and Denmark came in third place at just over 51%. Iceland also had the fourth lowest rate of heavy episodic drinking (defined as consuming 60 grammes of ethanol on a single occasion).
These figures do not mean that alcoholism and alcohol abuse are a non-issue in Iceland. In a recent interview, Anna Hildar Guðmundsdóttir, director of non-profit addiction resources centre SÁÁ stated that around 20% of the nation struggle with alcohol use. She called the developments in relaxing laws on alcohol sales a “huge change of direction from the government,” implying that it would increase rates of problem drinking and questioned what the government would do to support those who struggle with their alcohol use. Iceland’s chronically underfunded and understaffed healthcare system, where waiting lists for admission to rehab centres are the norm, is ill-equipped to handle additional strain.
The cost of drinking
The question is whether partial privatisation of alcohol sales would in fact increase rates of alcoholism in Iceland. One study linked with the World Health Organisation suggested disincentive alcohol pricing had the widest impact and strongest empirical support among more than 30 policies intended to reduce alcohol consumption. It not only lowered drinking rates, but led to reductions in trauma, social problems, and chronic disease associated with alcohol use.
When buying alcoholic beverages online, customers must use an electronic ID to confirm they are of legal age.
Alcohol prices are certainly a strong disincentive for imbibing in Iceland. According to Eurostat figures from 2020, alcoholic products in Iceland cost more than 2.5 times the EU average. Much of this difference can be attributed to high taxation: according to 2019 figures from Spirits Europe, Icelandic taxes on alcohol were anywhere between 33% and 200% higher than in the EU countries with the highest rates (Finland and Sweden). Partial privatisation of alcohol sales is likely to lower alcohol prices. Santewines’ website already boasts that their prices are as much as 20% lower than Vínbúðin’s.
Iceland’s government has been discussing abolishing the state monopoly on alcohol sales for years, and even discussing relaxing legislation governing alcohol advertisements. Some of these changes are clearly spurred by the globalised retail environment, which provides Icelanders with access to alcohol from abroad and exposes them to advertisements through foreign media. In such a world, privatised sales of alcohol and legal – though strongly regulated – advertisements could prove a financial boon for the state treasury, now emptier than usual after a two-year pandemic. The question is whether the increased revenue and the economic boost would be offset by higher healthcare and social costs.