Bootleg vodka output still rife

- Last updated on GMT

Related tags: Vodka, Russia, Ethanol

Vodka is more than just another drink to most Russians - it is a
way of life, an embodiment of the national sprit. But such a
fanatical following also has a downside, with per capita
consumption at the very limit of acceptable norms and a growing
market for cheap, bootleg vodka. And, as Angela Drujinina
discovered, it is not just bootleggers who are circumventing the
regulations.

Per capita vodka consumption in Russia is currently 15 litres a year, a level sufficiently high to raise concerns about the long-term health of the nation. But perhaps a greater risk comes from the increasing amounts of illegal vodka, often produced without any safety or quality control and which, occasionally, proves fatal.

According to retail sales statistics, Russians consume 200 million decilitres of vodka a year, about 4 billion bottles and enough to fill a cargo train stretching from Moscow to Krasnoyarsk.

But the statistics do not tell the whole story. According to data from vodka producers, last year's output was 135 million decilitres, with most distilleries working on average at just 30 per cent of capacity, which means that an additional 65 million deciliters, or 37 per cent of total vodka production, is produced through unofficial channels, Vladimir Tsigankov, vice president of the Union of Alcohol Market Operators, told Cee-foodindustry.com​.

So where does this additional 37 per cent come from? An oft-repeated joke among alcohol producers sheds some light: vodka distillers work three shifts - in the morning and in the afternoon for the state and at night for themselves.

This so-called 'third shift' is increasingly common, a means for vodka producers to supplement the meagre income from 'official' state production. According to official data, one legally produced bottle of vodka, retailing for RUR 60-120 (US$2-4), brings the producer just RUR2 of profit. The same bottle of vodka produced and sold 'unofficially' offers profits of around 50 per cent of its retail price.

With such a huge disparity, it is little wonder that even licensed producers are not averse to working 'on the black', but at least the vodka they make during the 'third shift' is still subject to the same quality controls as official output.

"With this type of illegal production, we are simply talking about the 'harm' dealt to the state, which loses revenue as a result, or to the owners of the leading brands, whose labels are often used illegally to ensure a rapid turnover from the cheaper product,"​ said Tsigankov. But, he stressed, the main difference between the legally produced vodka and the illegal one was not the lower quality of the latter (as is often thought) but rather simply that the 'unofficial' vodka never makes any appearance on producers books.

But not all illegal vodka comes from the same sources, and in an increasingly large number of cases consumers are putting their lives at risk by buying black market alcohol.

Fake vodka, as opposed to the 'unofficial' production by distilleries, frequently bears little resemblance to the Russian national drink, and generally consists of alcohol from dubious sources and for uses other than consumption. For example, Tsigankov highlighted one recent case from a town in the Yekaterinburg district, where three people died and dozens more were diagnosed with liver failure after drinking 'vodka' that was really disinfectant mixed with water.

This case is just one of hundreds which occur throughout Russia each year - official statistics suggest that about 40,000 people die there each year from alcohol poisoning caused by fake vodka. Furthermore, these 40,000 people account for a further 8 per cent of alcohol production which is also never included in official sales data.

The Russian authorities have made some progress towards stamping out fake production - in 1998, legal production accounted for just 35-45 per cent of total output, but today the figures are reversed - but the problem is unlikely to disappear completely as long as the government maintains its current taxation policy, according to Tsigankov.

There are two different taxation rates for alcohol in Russia. Alcohol for human consumption is subject to a levy of RUR135 per litre, but industrial alcohol, used mainly for cleaning, is taxed at just RUR16 per litre. This means that producing industrial alcohol and selling it as a beverage is eight times more profitable than producing drinkable alcohol - a mark-up which is clearly enough to dispel any pangs of conscious about the safety of such policy.

The state is currently losing more than RUR60 billion as a result of the 40 per cent share of illegal vodka, but cannot recoup its losses by increasing the price of official output - that would simply drive more consumers towards the bootleg product.

Indeed, Russia currently has some of the lowest vodka prices in its history, and while this has helped turn the tide against the bootleggers, it has done little to tackle the longer-term problem of alcoholism. The irony is that cheaper alcohol not only fuels greater consumption but also leaves the government with lower revenues with which to tackle the problem - an irony highlighted recently by one government expert.

"The most lamentable thing,"​ said Grigory Zaigraev, a member of the State Council's expert group on the prevention of alcoholism and drug abuse, "is that at least in the past the health of our nation was sacrificed for substantial sums of money: up to 38 per cent of government income before the Revolution, and 27 per cent on average during the Soviet period, came from alcohol taxes. Now, alcohol revenues account for just 7-8 per cent."

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