Hungarians seem to be sobering up

Hungarians spent more than HUF 550 billion on alcoholic beverages in the 12 months ending July 2024.

Most drinks are typically consumed at the end of the year around Christmas and New Year's Eve, and the least between January and March. Spending has been growing moderately and remains below average alcohol inflation from quarter to quarter. This was, unsurprisingly, particularly true when consumer price inflation was extremely high in Hungary, in 2023.

The graph below shows the change in the amount spent on alcohol products adjusted for inflation.

When it comes to products as alcohol, cigarettes or fuel, price rises do not have an immediate impact on their consumption, as it takes time for people to change their habits.

We find further evidence for this if we look at how the price of alcohol in Hungary and the European Union as a whole has changed on a fixed basis, which in our case is the beginning of 2014.The dizzying rise in prices began in 2022 in Hungary, resulting in a price increase of almost 60% in Hungary compared to the base, and less than 30% in the EU.

The picture is not very encouraging when looking at the different types of alcohol. Since these are excisable products, Hungary's tax authority NAV keeps statistics on how much of the product has been released for free circulation, i.e. how much was paid tax on.

This data gives a slightly earlier indication of longer-term changes in consumption.

Beer

The decline in beer consumption was also reported earlier by the Association of Hungarian Brewers. They mainly measured a decline in the consumption of imported beers, a rise in the share of domestic beers in total consumption and the growing popularity of premium beverages.

NAV gives the amount of beer for which excise duty was paid in hectolitres degrees (hlf). 1 hlf of product contains 1 litre of beverage converted to 100% alcohol.

In the graph, we have plotted a 12-month rolling sum to flatten seasonal fluctuations. It is clear that the trend is downwards, with demand for beer decreasing.

Pálinka

In the case of 'pálinka', Hungary's traditional fruit brandy, the plummet in 2020 is the consequence of the "freedom struggle", as the under a government decision spirits manufactured in private distilleries and contract distillation were exempted from taxes - up to 86 litres/year and 0 HUF/hectolitre up to 50 litres/year, respectively. Previously, the European Union did not allow this.

Since then, the turnover of taxable pálinka has been relatively stable at around 0.6 million hectolitre degree, although there have been examples of higher figures at the height of 2022-2023.

Wines

For wines, the excise law distinguishes between still and sparkling wines. Still wine is no different from traditional grape wine, but also includes new wine still in fermentation and must with an alcohol content of more than 1.2% by volume.

The volume of still wine put on the market increased after 2021. Since then the trend is unclear, but it is 10-11 million litres per year (in this case, not hectolitre degrees).

Sparkling wines, which include both sparkling and semi-sparkling wines, are clearly in decline, with consumption at 11-12 million litres per year.

Sparkling fermented beverages are products that differ from sparkling wines in the alcohol they contain. These can have an alcohol content of up to 13%, such as grape-based, fortified sparkling wines, but also many fruit champagnes. Their turnover is much lower than that of still and sparkling wines, at 0.1-0.2 million litres, but this too has fallen in recent years, as the graph shows.

"Other still fermented beverages" covers two main product groups. One group includes products with an alcohol content of 10% or less, such as fortified wines or wines flavoured with alcoholic extracts. The other group is made up of drinks with an alcohol content of between 1.2% and 15%, which are entirely fermented, such as spritzer (fröccs), fruit wines, ciders or sugar musts.

The volume of these put on the market is around 10-11 million litres per year, but the trend is clearly downwards since 2022. Whether this year's rebound is the start of a longer recovery or not remains to be seen.

The Excise Act treats drinks containing more than 22 degrees of alcohol separately and simply calls them "alcoholic products". However, this includes not only spirits but also alcoholic medicines and even cleaning products.

It is difficult to talk about trends in the consumption of this product range, but there is certainly no sign of a decline in this case.

As the figures attest, the consumption of alcoholic beverages tends to be on a downward trend. The obvious reason for this may be the fall in real income last year, but this year there has been an increase in household consumption and retail sales (albeit modest), so some correction might have been expected.

Alcohol consumption can be affected not only by income but also by changes in consumer habits, and we have room to reduce.

In any case, other figures from the Central Statistical Office (KSH) paint a similarly contradictory picture. The dramatic erosion of the old pub culture is reflected in the rapid decline in the number of pubs, but meanwhile, the statistics office estimates that 420,000 people, 9.3% of men aged 15 and over and only 1.5% of women, were considered heavy drinkers in Hungary in 2019.

Regular weekly drinkers drank an average of 6 glasses of alcohol per person per week, compared to half as many women, 7.1 glasses per person per week for men and more than twice as many for heavy drinkers.

The graphs below show the frequency of alcohol consumption in Hungary in 2019. The bottom one makes it evident that men drink more heavily than women.

Cover image (for illustration purposes only): Portfolio