Analysis - Russia's battle to curb its drinking
The Russian authorities appear to have succeeded in curbing alcohol consumption in the country. But, to what end?
Between 1997 and 2007, Russia proved a glorious stomping ground for brewers. A sharp jump in GDP in 1997 prompted rising beer volumes for the next ten years. At the same time, the grouping of Brazil, India and China with Russia to create the BRIC bloc indicated the huge potential for international companies in these four markets, as consumers developed more international tastes, not just for beer, but also for spirits.
Increased alcohol consumption, however, became a headache for the Russian Government, which began to consider measures to deter irresponsible drinking. While brewers had to deal with a 200% rise in excise tax in 2010, the minimum price of vodka has more than doubled in the last four years. Bear in mind also, the banning of beer sales from kiosks, a ban on alcohol advertising and the introduction of limited trading hours for the sale of alcohol above a certain percentage abv.
Consequently, per capita consumption of legal alcohol in Russia has fallen by around 20% on its peak in 2007, and has fallen back to the levels of 2001, according to figures quoted by Bernstein in a note earlier this week. While vodka consumption was down in 2013 by 6.7% year-on-year, beer consumption fell last year by 22% on the record highs of 2007 and 2008.
But, are Russians really drinking less alcohol?
The country has a long – and fiercely proud – relationship with home-made alcohol. Anecdotally, I remember in 2002 travelling on the Trans-Siberian railway and being offered some 'Samagon', a self-produced white spirit drink, probably akin to moonshine, that packed quite a punch.
Today, Bernstein warns, illegal vodka has become “the huge elephant in the room” for Russia. Now that the Government has exercised its fiscal muscle, will it turn its attention to said elephant?
“Given the alleged close connections between the manufacturers of illegal vodka and the political elite,” Bernstein warns this week, “we do not think this likely.”
It makes you wonder what exactly the authorities' original intentions really were.
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