What legal changes have affected the operation of alcohol wholesalers?

In recent years, a number of legal changes have taken place in Poland, which have affected the trade in alcohol, and thus - the operation of alcohol wholesalers. Apart from the dynamic changes on the market, inflation and the geopolitical situation, they are one of the biggest challenges for distributors of alcohol products.

What exactly do wholesalers have to face and what should they prepare for in the future?

Legal changes in alcohol trade

Some observe that entities trading in alcohol have been facing successive difficulties in Poland for over 100 years and are forced to adapt their activities not only to the market situation, but also to the requirements of legal regulations. Among the most important – from the trader's point of view – changes in the law are a significant increase in excise tax rates for alcohol and amendments to the Act on Upbringing in Sobriety and Counteracting Alcoholism (of October 26, 1982). One of the changes, introduced on January 1, 2022, added new tasks to municipalities: training activities in the field of solving alcohol problems, counteracting drug addiction and behavioral addictions. This is not the end of updating this legal act - the legislator provides for further extensions and amendments to the provisions that may significantly affect entities dealing in alcohol (both wholesale and retail).

The most painful and problematic change is certainly the increase in excise duty on alcohol - this is an issue felt not only by producers and traders, but also by consumers themselves. Since January 2023, the excise tax on alcoholic products has increased by as much as 5% and this is not the end of the increases: until 2027, the excise tax is to increase every year by another 5%. The aim of such action is - theoretically - to reduce alcohol consumption and increase budget revenues (while revenues from excise duty on tobacco and alcohol products amounted to PLN 78.6 billion in 2022, in 2023 the result is expected to be PLN 88.6 billion zlotys).

The change in the amount of excise duty is the most significant change in recent years and brings with it the greatest challenges for producers and traders. This is due to the fact that the real increase in costs and fees for an alcoholic product is higher than 5%: the excise tax itself is included in the product price and is charged by the producer or importer. At each subsequent stage of the commercial chain, margins are calculated, and VAT is added to the final price of the product. Thus, the entity most affected by the price increase is the consumer. However, this has an impact on manufacturers, wholesalers and retailers.

This is not the end of changes in the spirits industry, in the first quarter there were significant changes for wholesalers conducting international trade in alcohol products. From February 13, 2023, representatives of the industry lost the ability to use the Simplified Accompanying Document (UDT), which was required when moving goods with excise duty paid between EU countries. Currently, UDT has been replaced by the Simplified Administrative Document (so-called e-SAD), functioning in electronic form. And although this may be a certain simplification, it forced entrepreneurs to register on the Electronic Services Tax and Customs Platform (PUESC) and to make an entry in the Central Register of Excise Entities (CRPA).

Positive changes are also planned, especially from the point of view of traders. In October 2023, the tax on drinks with an alcohol content of up to 5%, produced on the basis of pears and apples, is to be PLN 0. So there will be cider and perry. The project aims to support the production of alcohol made from native fruit and to promote the consumption of alcoholic beverages with a lower alcohol content. Changes in the act are certainly an opportunity for alcohol traders, including wholesalers.

How did the changes affect the operation of alcohol wholesalers?

For alcohol wholesalers, the most painful change was, of course, the increase in excise duty. The increase in prices of alcoholic products translates directly into the purchasing power of products, and lower purchasing power means lower demand. The increase in prices meant that the offers of alcohol wholesalers often ceased to be attractive and in order to gain customers, wholesalers had to lower their own expected profits. The problem with the decrease in competitiveness may also be faced by wholesalers who previously exported Polish alcoholic products abroad. For a long time, Polish spirits enjoyed a good reputation in the European Union countries, and high quality matched the attractive price offer. The current changes and the growing costs of production and operation may significantly reduce the competitiveness of Polish products in comparison with the offer of Western European products.

The increase in alcohol prices also brought about a change in the structure of demand. As might be expected, alcohol consumption among consumers could not fall completely and there is a clear trend of interest in cheaper spirits of lower quality. There is also a trend of “Eastern-style” alcohol consumption: consumers more often buy cheaper and stronger spirits, resigning from regular consumption of beer and beverages with a lower alcohol content.

The provisions related to the Act on Upbringing in Sobriety and Counteracting Alcoholism are also a major challenge for the spirits industry. Pursuant to the amendment to this legal act, municipalities may impose local restrictions on the sale of alcohol. Several communes in Poland have already introduced the so-called "night prohibition", i.e. a ban on the sale of alcoholic beverages after 10 p.m. The ban on the sale of alcohol at certain times is to reduce the phenomenon of pathological consumption of alcoholic beverages. However, despite the noble assumption, it cannot be hidden that this may affect demand, which will affect retailers and wholesalers.

Changes in the act also make it more difficult to obtain an alcohol license and introduce more restrictions on its maintenance. In addition, rising energy prices and inflation mean that the number of so-called "small outlets" selling alcohol, which were often the main customers of alcohol wholesalers. Large entities, such as supermarkets and retail chains, often establish direct cooperation with producers, thus bypassing wholesalers. This poses a significant challenge to wholesalers regarding the appropriate development and price adjustment of the offer to win lost customers. This is not an easy task, requiring not only an appropriate financial strategy, but also appropriate actions at the level of business contacts.

Will alcohol consumption in Poland decrease?

Despite the increase in the prices of alcoholic beverages and the introduction of local restrictions on the distribution of alcoholic beverages, it is not expected that alcohol consumption in Poland will decrease. There are concerns about achieving the "opposite of the intended" effect: consumption will remain at a similar level, but cheaper alcohol of lower quality will be consumed more often, and the so-called the so-called "gray economy" and the trade in illegal alcohol products will return. Therefore, the question remains whether the introduced changes are really aimed at changing the eating habits of consumers, or are they rather a way for the state to obtain even more tax revenues?