2016 was a good year for Systembolaget. We met most of our owner’s goals with regard to our social mandate, and our efforts to develop the customer interaction and product range have yielded results. At the same time, we have continued to strive to minimise alcohol-related risks and harm in society. Our successes are demonstrated by, amongst other things, continued high levels for both our Proof of Age checks and our Customer Satisfaction Index (CSI). Support for the retail sales monopoly, which is monitored by our Opinion Index (OPI) continues to be high, but has fallen slightly from last year’s record high. Alcohol consumption levels in Sweden have fallen by 11 per cent over the past ten years and the Alcohol Index fell in comparison with the previous year.
We continued our efforts to become a more sustainable company in 2016, in order to live up to the high expectations of our customers, employees, and owner. Our owner’s guidelines task Systembolaget with meeting its primary purpose of helping to reduce alcohol-related harm, conduct operations that promote sustainable development, act as role models, and ensure a high level of public confidence in the company. This means that we must combine economically, socially and environmentally sustainable development with generally responsible conduct. Responsible conduct includes working strategically and transparently and focusing on partnerships – and to this end, Agenda 2030 and helping to achieve the 17 global sustainability goals will, henceforth, be one of Systembolaget’s responsibilities.
Systembolaget has made progress with the development of our range and improvement of the service we provide for our customers over the past year, and has, at the same time, ensured that we sell responsibly. Important measures have, to this end, been introduced in the areas of sustainability, leadership, digitalisation, and inclusiveness.
Systembolaget does not attempt to maximise either its profits or its sales. Our revenues shall cover our costs and the owner’s dividend yield requirements, and no more. We have reviewed our operations and their cost trend over the years, and have accordingly boosted productivity levels. We have, amongst other things, reviewed the logistics process, updated the business system and conducted a frequency study that also forms the basis for a new pricing model that will be implemented in 2017 – and which will bring about a small reduction in the total surcharge, thanks to increased cost effectiveness.
Research and know-how
Systembolaget’s mandate includes educating people about the risks associated with alcohol. We do this by means of, amongst other things, in-store interactions with customers, our website, and the seminars we organise on topical themes. Over the past year, we held knowledge seminars on a range of themes, including alcohol and cancer, alcohol and stress, and the ways in which we are affected by other people’s drinking. We also held a seminar during the annual Almedalen week on the subject of Alcohol consumption in Sweden and other countries. We also, in conjunction with these seminars, presented reports and other know-how situation reports on the respective themes.
By offering a forum for debate and dialogue on the latest findings of research in the field of alcohol, Systembolaget can help ensure that people are well-informed about the risks associated with alcohol. Our annual alcohol research conference, which took place in May, brought together alcohol researchers from Sweden and other parts of the world. An annual know-how prize was awarded for the first time to a researcher who had helped increase our knowledge of alcohol.
Our independent Alcohol Research Council awarded SEK 7 million in grants to 31 different alcohol research projects. This more ambitious programme of grants was initiated last year and will grow still further next year. We have also boosted the expertise of our Alcohol Research Council by bringing international members on-board.
New strategic plan for 2017
Systembolaget decided, in 2016, to draw up a new strategic plan for 2017-2020. The plan will focus on three primary ambitions: Systembolaget shall continue to impress its customers, we shall increase our knowledge of the risks associated with alcohol, and we shall create the best possible working conditions for our 5,000 employees. We will do this by continuing to invest in developing both our skills and our operations, focusing at all times on the customer and benefits to society. These changes will form a key component of our development and monitoring of various key ratios
Reduced alcohol consumption but worrying normative shifts
The trend towards a reduction in alcohol consumption has continued, although it is levelling off. This is apparent from the most recent survey (from 2015) by The Swedish Council for Information on Alcohol and Other Drugs (CAN). The survey showed that alcohol consumption fell by just over 1 per cent, year on year, to 9.17 litres of pure alcohol per head of population aged 15 and above45. The positive trend that has seen young people drinking less and less, and making a later drinking debut, is also continuing, and over the last ten years, alcohol consumption amongst students in the 2nd year of upper secondary school has fallen sharply47. We are, however, also seeing a change in alcohol norms, with attitudes towards alcohol consumption in everyday life becoming increasingly permissive48. The Alcohol Index, which is commissioned annually by our subsidiary company, IQ, is a combined measurement of people’s attitudes towards alcohol in various situations. The Alcohol Index for 2016 fell to 63, which is below our target figure of 66. This is, however, a worrying trend towards reduced moderation, and something to which we need to pay increased attention.
Satisfied customers and continued strong popular support
Selling responsibly and providing good service is critical to Systembolaget’s continued existence and contribution to positive social development. By offering a good customer interaction and providing quality advice – both on food and drink combinations and on alcohol and health – we ensure we maintain our customers’ confidence in Systembolaget’s role and monopoly. Systembolaget is, along with Sveriges Radio, the highest rated of all companies and social institutions in the Mediakademin Confidence Barometer survey, when it comes to public confidence23.
Support for Systembolaget’s monopoly (OPI) continues to be high. We commission TNS Sifo to ask the public whether alcohol should be sold through Systembolaget’s monopoly or whether ordinary grocery stores should be able to sell it.
76 per cent of respondents said that alcohol should only be sold by Systembolaget. This is a high figure, but it is lower than last year’s record high level of support – 77 per cent. Support clearly remains strong, but this fall shows the need to explain why limiting the availability of alcohol – with the help of the monopoly – helps improve public health. This is an area in which we need to do more in the year ahead.
Our CSI remained at last year’s record high level of 84 for the year as a whole, and the fact that we received the ServiceScore®11 award in the categories of Best Service Company and Best Retail Company in Sweden for the fourth year in succession is proof that our employees’ hard work and commitment are appreciated.
Sales and premiumisation
Sales by volume increased by 2 per cent from 470.7 to 479.6 million litres in 2016, and revenues increased from SEK 27.6 to SEK 28.5 billion. The increase was due both to the increase in sales volumes and to the so-called premiumisation trend, which is seeing many customers choosing to buy our more expensive products. Demand for alcohol-free and organic products continued to increase – 55.8 million (43.9) litres of organic products were sold during the year, corresponding to an increase of 27 per cent. Organic products accounted for 12 per cent (9) of total sales by volume during the year, and we have, therefore, already achieved our goal of 10 per cent of sales which we had set for 2020, showing that our customers share our far-reaching ambitions in this area.
Our customers’ interest in buying more expensive products is particularly apparent in the beer segment. The number of small-scale producers, who are often craft brewers, is increasing apace with customers’ interest in and knowledge of this kind of product. In order to highlight the breadth and depth of our beer range, we have developed our classification to include 60 different styles of beer from which our customers can choose.
We have been working on the development of a new store concept since the autumn of 2014, and in 2016, we opened another two trial stores in Stockholm and Malmö. Our new graphic profile was also introduced throughout our store chain in the autumn of 2016 after trials and evaluations in these stores. The trials yielded well-founded recommendations on the most effective way to roll out material choices, work activities, and cost issues, amongst other things.
Sick leave and inclusiveness work
Ensuring the health of our just over 5,000 employees is an important and obvious part of our role as managers. The sick leave rate for 2016 has remained at the same high level as in 2015, i.e. 5 per cent. We are working actively to map and get to grips with the various factors contributing to sick leave.
It is, however, pleasing to see that our employees perceive their work as offering a good performance environment at work and meeting their basic requirements. The performance index increased from 77 to 78 in 2016, and we consequently achieved our goal for the year.
We have been working to increase internal awareness of the need for inclusiveness in 2016, and employing more people with a foreign background ensures that our workforce more closely mirrors Sweden’s population as a whole.
Sustainability continues to be a high priority
We continued to prioritise our efforts to increase sustainability throughout the value chain in 2016, both within our own operations, and amongst producers and suppliers. Systembolaget has conducted a wide-ranging materiality analysis as part of dialogues with other stakeholders and had, on the basis of this analysis, begun working on an increasingly integrated basis with sustainability issues from a broader perspective. We also note that although we have come a long way, we still face substantial challenges in this area, not least when it comes to working and living conditions in the supply chain.
As a major player, with substantial influence and a unique position in the market, Systembolaget has real potential for influencing developmental trends in the industry as a whole, which is why we view our efforts to promote the development of the global drinks industry towards sustainability as a natural and vital part of what we do. We focus on areas such as working conditions, human rights, environmental issues, and anti-corruption, both within our own operations and throughout our product chain. In 2016, we increased the number of producer audits and have decided to increase the number still further in the years ahead, with focus on at risk countries.
Unsatisfactory working and living conditions for vineyard workers in South Africa were highlighted in the autumn of 2016. These are high priority issues for Systembolaget, and our Code of Conduct enables us to make clear demands of our suppliers in order to ensure good conditions, all the way from the individual vineyard to the products that our customers buy. This is a long-term programme and one that needs to be conducted in collaboration with the producers, where we are successively taking small steps towards better working and living conditions.
Our sustainability work is based on the ten principles of the UN’s Global Compact with regard to human rights, working conditions, the environment, and anti-corruption, and to which Systembolaget has been a signatory since 2013. In 2016, Systembolaget reported in accordance with the Global Reporting Initiatives (GRI) guidelines, G4, for the third time.
Reducing our climate impact is one of Systembolaget’s strategic sustainability goals, and our climate goal for 2020 will entail a reduction in emissions of 14,000 tonnes of CO2 equivalents per year from the base year figure in 2014. Our own operations only account for 2 per cent of our total climate impact, however, and if we are to become a more sustainable business, we must, therefore, involve our suppliers and producers in our work. We have continued our dialogues on the subject of lighter weight – and hence more sustainable – packagings in 2016, and have also highlighted the importance of packaging in our communication with customers.
Challenges for the future
Systembolaget currently enjoys both high levels of public confidence and high levels of customer satisfaction, but rising expectations mean that the change management work must continue. Increased expectations when it comes to our digital presence, transparency, a sustainable offering, and a clear premiumisation trend must be met. It is also vital, given our mandate, that the improvements we make in relation to product range and customer interaction do not result in increased consumption.
Our employees are Systembolaget’s primary resource, and it is through training and the desire to learn that we can continue delivering a world-class customer interaction. Generating the preconditions for this development poses a challenge, both in our everyday operations, and in terms of our long-term strategic development work, as do ensuring a reduction in sick leave rates and increasing our company’s diversity.
The increasingly prevalent view of alcohol poses a substantial challenge. The normalisation trend is directly antithetical to our vision of a society in which alcohol drinks are enjoyed with due regard to health considerations so that no one is harmed. Alcohol is being increasingly widely marketed, not least in social media, and the number of regulatory breaches is increasing. This is an area in which clearer regulations are a must if advertising is not to result in a shift in norms amongst the young people who encounter alcohol marketing on a daily basis in their social channels, the lower age limit of 20 notwithstanding. Commercial operators who circumvent the intentions of Sweden’s alcohol policy in a variety of ways is another problem, and Systembolaget consequently welcomes the legislative proposals and investigations initiated by the Government.
I look forward to the future with every confidence. We must impress our customers while, at the same time, help reduce the harmful effects of alcohol. This is how we will continue to be an important component of a responsible alcohol policy.
President of Systembolaget