Vodka production drops to new low as moonshine booms
Is this a sign how bad things have become? Vodka production in Russia has fallen dramatically in the past year. According to figures released by the statistics office Rosstat, 660 million litres of vodka were produced in 2014, a decline of 22.3 percent over 2013. In November and December the drop was most marked: in December, there was a decline of nearly 47 percent.
Vodka is Russia’s national drink. It is often consumed excessively. Studies have shown that a quarter of all Russian men die before the age of 55 with alcoholism being the most likely cause.
In its fight against alcoholism, the Russian government has hiked the price of vodka considerably in recent years. But that has not diminished consumption. It only meant that consumers have increasingly resorted to moonshine. A spokesperson for the brand Russian Standard estimated that the share of illegal vodka has risen to over 60 percent of total consumption over the past 18 months.
The Russian President Vladimir Putin wants to stop this trend. In December 2014, he demanded that the minimum price for vodka should not be raised in 2015, arguing that moonshine is much more risky to health than the legal stuff.
In fact, the government has lowered the minimum price for a half-litre bottle to 185 rubles (EUR 2.40/USD 2.65) as of 1 February 2015, from 220 rubles (EUR 2.60) in August last year.
As Carlsberg’s woes underline, beer sales have also suffered. According to Rosstat, beer production fell last year, declining 8.6 percent. This is due to price increases, the poor economic situation and sales restrictions.
As a consequence, Carlsberg said at the end of January 2015 that it would shut down two of its ten breweries in sanctions-hit Russia. Late last year Carlsberg told BRAUWELT International that the two breweries located in Chelyabinsk and Krasnoyarsk had only been “idled”. The closure of these two breweries at the end of April will result in about 560 job losses. However, sales and distribution organisations will be maintained in the two cities but supplies will be sourced from the remaining eight Russian breweries.
Carlsberg, which earns a third of its operating profit in Russia, admitted that the closures would cut its Russian capacity by about 15 percent. The move would not affect 2014 operating profit beyond a pre-tax non-cash write down of about 700 million Danish crowns (USD 106 million).
The world’s fourth-largest brewer cut its profit targets twice last year, hit by a Russian beer market that has shrunk more than 30 percent since 2008.
