Russian alcohol producers want a higher minimum price for vodka to battle bootleg booze

Russian alcohol producers want to raise the minimum retail price for vodka from $2.36 to $2.93 (185 rubles to 230 rubles) per half liter (about 17 fl. oz.). Producers believe a higher minimum price would lower the level of counterfeit liquor now on the market.

The minimum retail price for alcohol will be discussed at an Economics Ministry working group tomorrow, Thursday, January 28.

The financial control head of the Federal Anti-Monopoly Service, Vladimir Mishelovin, will also be taking part in Thursday's meeting. He says the agency supports the price raise put forward by producers.

The Federal Service for Alcohol Market Regulation notes that a new minimal price for vodka has not yet been defined, and discussions with the industry are only just getting underway. 

According to figures from the Siberian Alcohol Group, the 230-ruble minimum price can be broken down as: 35 rubles for vodka production costs; and then a 100 ruble excise tax is added; labor for manufacturing adds 5 rubles; value-added tax adds 25 rubles; logistics considerations add another 5 rubles; and finally there is a retail margin of 60 rubles.

Minimum prices for alcoholic beverages were established in 2009. The decision to establish a minimum price was intended as a measure to fight the “shadow,” counterfeit alcohol sector.

The minimum price for vodka has fluctuated lately. In 2014, it increased twice—on March 11 and August 1. However on February 1, 2015, it was reduced down to a retail minimum of $2.36 (185 rubles). The Federal Service for Alcohol Market Regulation's decision to reduce the retail minimum drew criticism from alcohol producers.

Russian alcohol producers argue that low prices for vodka encourage illicit production. In November 2015, Federation Council Speaker Valentina Matviyenko said a catastrophe had taken place in the alcohol industry. He cited a drop in Russia's legal alcohol production, while levels of consumption remained the same. According to Matvienko, bootleg alcohol accounts for 65 percent of the market. However, the Federal Service for Alcohol Market Regulation estimates the share of counterfeit booze stands at 22.5 percent.