Russia’s illegal vodka market takes hold

Russia’s illegal vodka trade accounted for 55% of the country’s entire vodka market in 2013, while its legal vodka production dropped by 17% in this year’s first quarter, according to a report by The Moscow Times.

The drop in legal production was blamed on a state-enforced price increase which has caused sales to decrease and allowed the illegal trade to “flourish”, Kommersant reported on Tuesday.

The state increased the minimum retail price of vodka from 170 rubles (£2.81) to 199 rubles (£3.29) for a half-litre bottle on March 11, with the minimum price set to increase again to 220 rubles (£3.64) for a half-litre bottle on 1 August.

In 2013, illegal vodka accounted for 55% of the country’s entire vodka market, which Igor Kosarev, vice president of distiller Russky Standart, telling Kommersant it was likely to rise.

He said: “Given the trend that we see now, by the end of the year this share will increase to 64%.”

According to research by Infoline market analysts, 16% of Russian stores are operating illegally and without a license.

Within other drinks categories, production of Russian brandy fell nearly 21% to 1.3 million decaliters, table wine fell 14.5% to 6.3 million decaliters and sparkling wines fell 15% to less than 2 million decaliters, according to The Moscow Times.

While Isaac Sheps, chairman of the Union of Russian Brewers last year predicted Russia’s beer market could shrink by as much as 30% this year, Vedomosti reported.