The alcohol industry plays an important role in the economies of the 10 countries that joined the EU in May. Mark Rowe looks at the implications of EU accession for beer, wine and spirits producers in the new member countries.

Alcohol products are one of the major strengths that the new members of the recently enlarged European Union (EU) bring to its economic table. Of the 10 newcomers, six are wine-producing countries: Cyprus, the Czech Republic, Hungary, Malta, Slovakia and Slovenia. As for beer, the Czechs have a formidable reputation, one that can also be boasted by the Polish vodka industry.

The consensus of industry experts is that the biggest changes linked to EU membership will take place in the spirits industry. "There is no room in the eastern European brewing industry for more international players - Heineken, Carlsberg and Interbrew are already there," said John Band, a drinks analyst with Datamonitor. "But EU membership brings with it higher disposable incomes and that will drive the traditional trend in the drinks market - when people get richer they switch from spirits to wine."

That is not to say the beer producers in the new EU states will not benefit from EU membership. "Drinks prices tend to be lower in the new countries compared to those that border them," said Band. "You may well see 'booze cruises' or their equivalent as people in one country cross the border because the beer is much cheaper there."

The expansion of the EU comes at a time of great change in drinking habits, according to Jan Vesely, chairman of the Czech Beer and Malt Producers Association, and president of the European Brewers Convention. "We are seeing a swing from hard liquors and distilled beverages to beer," he said. "This is a phenomenon that is happening in large volumes. This will help beer sales in the region because it is not as easy to produce illegal beer in the way that you can create a grey economy in spirits."

In the Czech Republic, the benefits of EU membership will be felt most keenly in its ability to access the markets of other accession states, according to Vesely. "We haven't had duties on beer for some time, so we know our domestic market can survive because our customers like it, and it is always going to be cheaper than foreign beers. But Poland imposed duties of 21% on our beers. That must now be deleted. Sales of Czech beer to Poland are 10% of what they were in 1992. That will change significantly now we have joined the EU."

EU membership will bring significant benefits for the smaller Czech brewers. Not the least, it will smooth the red tape associated with sales, according to Vesely. "The paperwork and bureaucratic process will be fewer," he said. "This will really help smaller brewers who haven't had the skill or capacity to overcome these obstacles up to now."

Beer was not the only drink upon which Poland slapped high tariffs. Foreign vodka has been subjected to duties as high as 67%. However, Band feels that while the Polish vodka industry may look suddenly exposed, such appearances are deceptive. "Spirits in Poland tend to be run at a local level," he said. "I do a see some shift from local to global brands but I don't anticipate any massive takeovers simply because Poland is still not a wealthy country and vodka remains cheap and low-budget. It's already as cheap as you can get."

Malta's small wine industry has been heavily supported by Brussels ahead of its membership. Under EU law, Malta must stop claiming and labelling as its own, wines using must or grapes sourced from outside the archipelago. Instead, these wines will have to be labelled table wine and, tellingly, the labels are no longer allowed to mention the origin, or variety, of the grape involved, which means the wine will not be given quality status. Recognising the considerable loss this may cause to Maltese producers, the EU has given its government until 2006 to implement this requirement.

For Hungary, EU membership has also witnessed a steep correction in duties. Tariffs on New World wines, once subject to tariffs of 70%, have dropped, in line with EU duties, to between 5% and 8%. Furthermore, the annual import quota of 150,000 hectolitres of EU wine has also been lifted. However, Gabor Sellyei, secretary general of the Hungarian Spirits Association, is confident that Hungarian wine will stand its ground.

"We are strong enough to survive," he said. "Only half of the import quota was ever used. If France, Italy, Germany and the New World market themselves strongly then there is a place for them in the Hungarian market. But every year we exported every last drop of our 350,000-hectolitre quota of wine to the EU. That quota has been eliminated, so that is a major plus. We believe in rivalry. Competition is important. We need to be more creative than before and there are major challenges. Some companies will suffer but others will do well."