Alcohol production in Russia drops 30% in a year

An increase in tax is being blamed for the drop in alcohol production in Russia.

According to Rosstat production of spirits has dropped by some 30% in the last year, and some manufacturers have cut production by as much as 80%.

The most recent statistics show a significant drop in alcohol production in January. Vodka production has been reduced by almost 77 percent, cognac production dropped by 60 percent, wine saw a 40 percent decline as compared to December 2012, Rossiiskaya Gazeta reports.

The reason for the annual January decline in alcohol production is the traditional increase in excise tax and hence the minimum retail price for spirits. Significant drop in alcohol production has also been seen compared to January 2012.

“Up until 2012 the excise tax for alcohol had been increased by 10 percent every year. Now it is being increased by 30 percent,” Vadim Drobiz, head of the Center of research of Federal and regional alcohol markets told Rossiiskaya Gazeta daily. He added that the tax has been very high compared to the west. But now it’s become “excessively” high.

“Retail sales will definitely drop. I think by 10 percent in 2013, same as production,” he added.

Another reason is the Russian New Year holidays halting production of many goods for over a week. Experienced retailers get prepared beforehand and stock up on alcohol in December.

Drobiz is pessimistic about the new statistics, fearing that increased prices for spirits may push consumers to the illegal alcohol market.