Russia’s illegal vodka market soars

Russia’s illegal vodka trade accounted for 55% of the whole vodka market in 2013, while production of legal vodka declined by almost 17% in the first quarter of 2014, according to a report in The Moscow Times.

Production of legal vodka in Russia declined by almost 17% in 2013 due to an upsurge in illegal vodka

A state-enforced price increase combined with a “flourishing” illegal market, was blamed for the drop, as reported in Kommersant on Tuesday.

Igor Kosarec, vice president of distiller Russky Standart, told Kommersant: “Given the trend that we see now, by the end of the year this share will increase to 64%.”

The legal vodka market as experienced a loss in business since the state increased the minimum retail price of vodka from 170 rubles (US$4.72) to 199 rubles for 500ml bottles on 11 March.

The price is set to soar again on 1 August when the minimum price will go up to 220 rubles for a 500ml bottle.

Vadim Drobiz, director of the Research Centre for Federal and Regional Alcohol Markets, said sale of legal vodka in the lower price segment “have noticeably decreased” since.

Meanwhile Alexander Mechatin, CEO of alcohol producer Synergy, said there was also an “avalanche of stores now selling alcohol without a license”.

Producers of alternative alcoholic drinks have also been forced to reduce production during the first quarter, with production of Russian brandy dropping by almost 21% to 1.3 million decilitres.

The market has experienced several difficulties over the last few years with bans on advertising alcohol in the streets, on the internet and mass media, as well as the prohibition of selling alcohol after 11pm.