Ukraine beer production declined 28% in 2022 – vodka was up 12%

Ukraine | Despite a war raging, President Volodymyr Zelenskyy conducted a purge of high-ranking officials deemed corrupt and continued his strive to “de-shadow” the alcohol market.

Several senior Ukrainian officials were dismissed on 24 January, in the wake of a corruption scandal over illicit payments to deputy ministers and over-inflated military contracts. A total of five regional governors, four deputy ministers and two heads of a government agency left their posts, alongside the deputy head of the presidential administration and the deputy attorney general. In his nightly address, President Zelenskyy said the purge was "necessary to maintain a strong state".

Vodka production has risen

Separately, the Ukrainian news agency, Interfax, had reported on 20 January that distilled alcohol production had grown 12 percent in 2022 over 2021, while tax collections had risen 13 percent in the second half of 2022 over the same period a year earlier.

The Head of the Parliamentary Committee on Finance, Tax and Customs Policy, Danylo Hetmantsev, said in his Telegram channel that in general, tax receipts exceeded the pre-war figures by 17 percent, despite Russia’ full-scale military invasion.

Although he did not give total spirits production figures (they can only be estimated because so much is illicit), nor indicate how much is actually taxed, he was still proud to report “the positive shifts in de-shadowing the alcohol market.” Alcohol has risen in price, he said, and moonshiners are having their licences revoked.

Is the taxman turning a blind eye?

At the same time, he said that Ukraine must do better when it comes to “excise discipline”, aka collecting excise on spirits.

"Vodka is freely sold on the Internet and via illegal distribution networks. The infamous Bureau of Economic Security (BES) is not doing enough here. I am convinced that the problem should be finally resolved in the first half of 2023," Mr Hetmantsev told Interfax.

Beer production nearly down by a third

When President Zelenskyy was elected in 2019, he vowed to stamp out corruption. One of his targets was the alcohol industry. In those days, 55 percent of the market for vodka was “in the shadow” and thus untaxed, which allowed criminal groups to make a fortune. Whether the situation is much improved since, is open to doubt.

Meanwhile, Ukraine’s brewers report that beer production in 2022 dropped to 12.3 million hl, from 17 million hl in 2021, a loss of 5 million hl or 28 percent. This is despite AB-InBev-Efes having reopened its brewery in Chernihiv (Chernigivske beer), north of Kyiv.

The decline in domestic beer production is equal to the drop in GDP, which was down 30 percent in 2022.