Barda on the market

A rise in vodka prices is inevitable

The price of vodka in the fall may increase by about five rubles per half-liter bottle, and the increase will primarily affect varieties of inexpensive vodka. Grain prices in Russia rose by more than 10% in July . According to experts, alcohol prices will rise by 25% by the fall, and this increase will certainly affect the alcohol market. At the same time, according to participants in a press conference held on Wednesday about rising prices on the alcohol market, by the New Year other factors will come into force that will force the price of vodka to rise further. For example, the need to dispose of production waste.

At the current price of alcohol in the range of 480-520 rubles. per dal (10 liters of alcohol) the price of alcohol in a 0.5 liter bottle is only 9-10 rubles. With the expected increase in the price of alcohol to 600 rubles. per dal the price of the alcohol contents in a bottle will increase to 12 rubles. The price increase will thus be from 15 to 25%. According to calculations by Vadim Drobiz, director of the information department of the Union of Alcohol Market Participants, in this case the price of the most inexpensive vodka, sold today for 65-70 rubles, will increase at retail by two rubles.

A more significant impact on the rise in prices for alcoholic beverages, according to Mr. Drobiz, will have an increase in excise taxes from January 1, 2008 . According to recently adopted changes to the Tax Code, excise taxes will increase by 20% within three years. Already in January next year, when the first stage of indexation takes place, vodka, according to the expert, will rise in price by 4 rubles. per bottle.

There is another significant factor that will certainly influence price increases. From January 1, 2008, all distilleries in the country must be equipped with installations for the disposal of stillage (alcohol production waste). This equipment is not cheap - from 1 million to 1.5 million dollars, and not all manufacturers will be able to install such devices. For this reason, according to Vadim Drobiz, up to 30% of distilleries may leave the market, and those that remain will be forced to raise prices in order to “recapture” costs. As a result, a bottle of vodka may rise in price by another 50 kopecks. Thus, according to the expert’s forecast, the price of vodka from January 1 next year may increase by 4.5-6.5 rubles. The rise in price of vodka, according to him, will lead to an even greater decrease in the share of the legal sector of production of this product, which decreased by 10% in the first half of 2007 alone.

Other market participants are making even more pessimistic forecasts. Alcohol prices may rise by 30% by the end of the year, and vodka prices may rise by 5-6 rubles. for a half-liter bottle, says President of the National Alcohol Association Pavel Shapkin. However, he did not rule out that the price increase could be higher in anticipation of the New Year, when the demand for alcoholic beverages increases. Despite the fact that 70% of the cost of alcohol comes from the cost of grain, Mr. Shapkin does not directly connect the increase in grain prices with the rise in alcohol prices. Moreover, according to estimates from the Ministry of Agriculture, grain price growth has slowed down. According to Mr. Shapkin, there are other objective reasons for the rise in alcohol prices.

First of all, the rise in alcohol prices may be affected by the introduction of alcohol meters on November 1 this year. According to the expert, factories producing meters cannot cope with orders, and the software is also still under development. Moreover, the funds allocated from the budget for software development have not yet reached the developers. The software product being developed, according to Pavel Shapkin, may not be suitable for some types of meters at all, and as a result, by November 1 of this year, serious problems may arise in the alcohol market, including the shutdown of a number of enterprises.

Moreover, all these factors that negatively affect pricing will affect both the cheapest products and premium vodka. As Mr. Shapkin explained, the fact is that, contrary to the assurances of many manufacturers, the cost of producing cheap and expensive vodka is approximately the same. The price is influenced by marketing expenses, packaging costs, and bottle design services.

Irina SKLYAROVA