Vodka may become unaffordable to many in several years

From 1 January 2013, the price on a half-liter bottle of vodka may rise by 36 percent, resulting in a minimum price of 170 rubles per bottle ($5.6). The Federal Service for Alcohol Regulation said that the price on Russia's most popular alcohol drink will grow in the context of a sharp growth of excise taxes on strong alcohol. As usual, market experts predict the growth of production and consumption of counterfeit vodka.

Today, the minimum price for a bottle of vodka in Russia makes up 125 rubles per 0.5 liter ($4.1). Stores sell vodka at 200-300 rubles ($8-10). The next three years will become the time when legal vodka will continue to get more and more expensive. In the beginning of 2013, Russia will see the largest growth of excise taxes on alcohol. Since January 1, 2013, the fees will rise by 33 percent - to 400 rubles per 1 liter of absolute alcohol.

The Federal Service also proposes to raise prices on cognac and brandy. Today, the minimum price for a 0.5-liter bottle of cognac is 219 rubles ($7.3). The prices on other alcohol products stronger than 28 degrees will be determined in proportion to prices on vodka, depending on the content of ethyl alcohol in the drink.

In October, representatives of the Service for Alcohol Regulation announced an intention to set minimum prices on sparkling wine and champagne. In connection with this, the price on 0.75-liter bottles from manufacturers should not exceed 95 rubles ($3.1), from wholesalers - 104.5 rubles ($3.4) and in retail - 115 rubles ($3.8).

In 2014, the excise tax on alcohol will rise to 500 rubles, in 2015 - to 600 rubles ($20). The average price of a bottle of "vodka" by 2020 may thus rise to 1,000 rubles against the current 200-300 rubles ($30 vs. $10).

"By 2020, the share of excise tax in a bottle of vodka will grow at least 3.5 times, which may lead to a decrease in the turnover of alcohol. As a result, producers will be forced to raise prices to justify their costs," the head of the Center for Development of National Alcohol Policy Pavel Shapkin said.

As usual, experts make different forecasts about the changes in the structure of market and consumption after another price increase. Wholesalers will have to face problems in this connection, because the difference between wholesaler's and retailer's price with new minimum prices will reach 23 percent. The difference between the factory and wholesale price will reach 4.5 percent. This may push retailers towards establishing direct retail purchases from manufacturers.

As for the ratio of consumption and production, experts predict a twofold decrease in the sales of inexpensive vodka (less than 140 rubles ($4.6) per 0.5 liter). The cheapest vodka takes 45 percent of the market.

According to official figures, the volume of vodka sold on the Russian market doubles the amount of produced vodka. In 2011, the statistical difference was 40 percent. Factory counterfeit products, produced in the "fourth shift", are available in all cities of Russia and take about one-third of the market - one billion bottles.

This is left unnoticed because corrupt officials receive about 25 percent of proceeds from the sales of illegal vodka. The turnover of the black market is evaluated at $ 4.5 billion, whereas the legal market accounts for about $7.8 billion.

According to a report from the World Health Organization, one in five Russians dies from alcohol-caused diseases, car accidents and suicides. Alcohol consumption leads to 450,000 deaths a year. The UN estimates that alcohol may kill 11 million Russians by 2025.

In 2011, the consumption of pure alcohol per capita in Russia, according to official estimates, reached 15.75 liters. According to the concept of anti-alcohol policy, it should be halved by 2020 not to exceed eight liters per person.

Vitaly Salnik


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Author`s name Dmitry Sudakov