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Monday, October 24, 2016

The government put vodka under total control

In the near future the government will give “the last battle” surrogate alcohol: the retail sale of vodka be brought under total control and prices will inevitably increase. Game on the alcohol market with multiple objectives, including, mutually exclusive. The intermediate results are as follows: began to drink less and get sick more often. Is there a way out?

From 1 July in the Russian retail market of alcoholic beverages come into force new rules aimed to oust from the shelves of illegal vodka, which accounts, at least a fifth of all sales. But even if the state manages to whitewash legitimate retail, it is unlikely to affect the black market of counterfeit and surrogate alcohol, a high level which indicates a sharp rise in the statistics of alcohol poisoning.

The fight against the “back porch”

“The rebirth of brewing in many cities in recent years began to appear actively clubs of bootleggers and microwindow – “garazhistov”

About 30 billion rubles, or 22.5% is the estimate of the proportion and volume of illegal of strong alcoholic production in Russia, represented by the head of Rosalkogolregulirovanija (PAP) at the end of last year. The calculations of the Ministry was based on the difference between the statistics of the production and sale of alcohol. Under the illegal production in this case refers mainly vodka produced by “official” capacity, but fell in retail through the “back porch”, including with the use of fake excise stamps.

To eradicate the “left” of vodka from 1 July every shop selling alcohol must be connected to the Unified state automated information system (USAIS) measurement of the volume and the production of alcoholic beverages, which will be recorded all sales at the retail level. RAR order each retail sale of alcohol (excluding beer and food service establishments) must now be accompanied by the issuance to the purchaser of the check bar the QR code and link on the web portal to check the legality of the sale. For violation of these rules provides for fines for legal entities in the amount from 150 to 200 thousand rubles. It is assumed that the introduction of EGAIS in retail will be almost total. Certain delay due to the timing of the installation system is available only to retail companies in Crimea and Sevastopol, as well as to outlets in rural settlements where lives less than 3 million inhabitants and where is not yet posted online.

A number of experts in the Russian alcohol market no doubt that these measures will quickly demonstrate effectiveness. In particular, according to the Director of the center of researches Federal and regional alcohol markets (tsifrra) Vadim Drobish, after July 1, virtually the entire illegal alcohol will be eliminated from store shelves in illegal retail, which will make in fact unnecessary to take such a measure as the establishment of the state minimum retail price for vodka (from 13 June it set at 190 rubles for 0.5 liters). “With the introduction of EGAIS in retail the market will regulate the price of vodka is cheaper 210 rubles per bottle will not” – believes Drobiz.

Alcoholic vacillation

If this forecast is correct, in the history of the Russian alcohol market will be completed six year period from the ambiguous attempts of the state to find the best price for vodka by trial and error. For the first time the minimum price for “a pint” was defined by the order of Rosalkogolregulirovanija on 1 January 2010 and at that time was 89 rubles. Over the next four and a half years the state has followed a consistent policy of increasing excise taxes, with the result that by August 2014, the minimum price of vodka has reached 220 rubles. In other words, in a relatively short period of UEN has increased almost 2.5 times, and when translated into the currency almost reached the European level. At the rate of two years ago 220 rubles – about 6.2 per dollar, which is comparable to the cost of vodka in, say, Germany (where the price per 0.5 liter begins at about 4.5 euros).

This turn of events greatly troubled the domestic vodka producers, faced with a sharp drop in production even before the current economic crisis. According Alto Consuting Group, in 2013 the production of vodka in Russia decreased by 12.4% compared to the previous year, to 85.7 million decaliters (dal), and in 2014 fell by 22.3% (to 66.6 million decaliters). In the summer of 2013, when the minimum price of a bottle of vodka was 170 rubles (or approximately 5.2 per dollar), the Union of alcohol producers had sent President Vladimir Putin a letter with a proposal to freeze the excise tax on alcohol by three years. The producers recalled that the same level of prices for vodka the average salary in the EU and Russia differ in several times.

The sharp devaluation of the ruble and higher inflation at the end of 2014 significantly reduced the level of real incomes and consumer activity of the population, therefore the government had to include “reverse” in alcohol policy. In February of last year, the starting price of vodka in retail has decreased by 35% to 185 rubles, which was a historical low in terms of the currency – just 2.68 dollar at the then exchange rate. These measures quickly gave a certain effect for the industry – a further decline in production was stopped. As reported in January of this year at the meeting in Kazan, Deputy head Rosalkogolregulirovanija Vyacheslav Didenko, at the end of 2015, the production of vodka in Russia increased by 4%.

At the same time a significant reduction of the minimum cost of vodka was not accompanied by a reduction in excise duties on alcohol in the past year, they remained at the same level as a year earlier (500 rubles per liter), resulting in the structure of the minimum prices the share of excise tax exceeded half. High excise taxes quickly led to the weaker profit performance of a number of alcohol companies. For example, team “synergy”, one of the largest Russian producers of alcohol, the net profit in 2014 due to growth in excise taxes has decreased by 29.3% to 1.1 billion rubles, which was the worst figure for six-year period. And last year the net profit of the holding generally has fallen in 4,5 times – to 241 million rubles, although the company is explained by the increase in the cost of funding. With the fall of profitability has faced other well-known manufacturers. In particular, the capital’s famous liqueur-vodka plant “Crystal”, according to “SPARK-Interfax”, last year showed a net loss of $ 281,8 million roubles against the net loss of 47.8 million rubles a year earlier, and revenue of the company decreased from 1,687 billion to 421.5 million rubles.

All this encouraged producers of alcohol to put before the government the question is now about increasing the minimum cost of vodka. This initiative in October last year, was supported by the head Rosalkogolregulirovaniya Igor Chuyan, although the new minimum price is not mentioned. Over the next few months there were different options – from 199 roubles (expectations vodka) to 240 rubles (FAS), but in the end the increase was purely symbolic – only 5 roubles. “They did not think this measure to solve someone else’s problem – either producers or consumers. It’s just a price increase to inflation in the cost of production of vodka”, – says Vadim Drobiz.

Distillates for aesthetes

Gradually increasing minimum prices on vodka, the government sought not only to replenish the budget, but “to raise money” the population in the past decade, accustomed to cheap booze. With the latter point of view, the experiment with the constant increase of excise duties can be considered relatively successful. If in 2010-2011 the level of alcohol consumption in Russia amounted to 18 liters per capita per year, in the middle of last year the chief psychiatrist-narcologist of the Ministry of health Yevgeny Bryun said about reducing this figure to 13.5 liters.

But this is only the official figure, because it practically doesn’t give an accurate assessment of the share of this segment as counterfeit and surrogate alcohol, but you can safely say that this proportion is growing. This was discussed three years ago in the letter to manufacturers of alcohol, Vladimir Putin, and at the end of last year, the speaker of the Federation Council Valentina Matvienko has given the absolutely catastrophic assessment. According to her, while keeping overall consumption the share of legally produced in Russia alcoholic production is only 35%, and its sharp decline for the third consecutive year. Because of this, added Matvienko, the budget will receive less 200-270 billion.

Significant increases in the consumption of counterfeit and surrogate products means, above all, the increase in the number of cases of alcohol poisoning, including mass. In the days of Saint-Petersburg Institute of emergency care named Dzhanelidze has published the following statistics: in 2014, outpatient care in the Institute received more than 2 thousands of patients with a diagnosis of “toxic effect of ethanol’, last year their number increased three times – up to 6 thousand people, and this year is expected to 9 thousand cases. This is despite official statistics on the reduction of consumption of alcoholic beverages. A similar picture doctors say in other regions of the country. For example, in the Yamalo-Nenets Autonomous district in 2014, there were 44 cases of acute alcohol poisoning and its surrogates, and in 2015 – already 53, although the sales of vodka in it according to the Northern tradition of hard drinking region in the same period plummeted from 628 to 445 thousand gave.

A form of the reaction of citizens to the rising cost of legal alcohol was a significant increase of sales moonshine stills – still in 2014, he appeared three times. You can purchase the device for home distillation can be very inexpensive – from 10 thousand rubles, and the revival of brewing in many cities in recent years began to appear actively clubs of bootleggers and microwindow (“garazhistov”). “It all started with the fact that I bought the cottage with the old vine – it turned out that this grape can do best chacha”, says one of the participants of such communities from Rostov-on-don. Your brand distillate “akvavit”, made according to an old Norwegian recipe, he sells to everyone on 500 roubles for a bottle with a capacity of 0.7 liter – much cheaper than the beverages of the same class in the official retail.

This “garage” production for connoisseurs is a relatively innocent hobby of the urban middle class. The share of the poor remains an outspoken surrogate, including legally commercially available under labels of type “port”, and the establishment of full state control over alcohol retail here hardly will change something. “In the fight against counterfeit and surrogate should be more actively involved CPS, but, unfortunately, this is the reality: the poor in Russia have to use either low-quality or adulterated food and drink,” – says Vadim Drobiz.

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