Bootlegged Booze Sales Fall 14%, Industry Says

Fewer Russians are choosing bootlegged spirits and industrial alcohol over legally produced vodka and liquor, Pavel Shapkin, the president of the National Alcohol Association, said Wednesday.

"Bootleg sales continue to dip," Shapkin said. "Last year alone, they dropped to 28 percent, even though the volume of legally produced vodka and liquor has remained the same since 2005."

The bootleg sector, which is calculated as the difference between total retail sales of vodka and other spirits and the volume of legal production, imports and exports, fell 14 percent last year, down from 42 percent in 2006.

Excise duties from production and turnover of ethyl alcohol as well as other alcohol products in 2007 rose 21 percent to 84.3 billion rubles, indicating a growing preference for legally produced spirits.

Russians also appeared to have cultivated a taste for more refined beverages, such as cognac and whisky, at the expense of vodka, the national drink, Shapkin said.

"There is a paradigm shift in the market, affecting tastes and preferences," Shapkin said. "While vodka remains the mainstream beverage for Russians, brandy and whisky are fast replacing it."

Compared with 2006, consumption of whisky grew 78 percent, making it the country's fastest-growing tipple of choice, he said.

The unusually warm winters over the past two years have also led many Russians to shift to beer, with consumption jumping 30 percent since 2005, the association said.

"I believe the consumption of vodka will continue to fall," Shapkin said. "Our country is shifting from a temperate pattern of beverage consumption to that of a subtropical way of life."

The shift in preferences could have as much to do with economics as climate change.

Andrei Verkholantsev, a consumer analyst with Antanta Capital, said the main impetus for the change was rising wages, which are always a step ahead of inflation.

"Brandy, whisky and beer form the most dynamic segment of the alcoholic drink market," Verkholantsev said. "Consumers, especially in big cities, are abandoning the traditional vodka for more prestigious whisky and brandy."

Excise duties on vodka and liquor rose by 7 percent in January, compared with 6 percent for the whole of last year, giving consumers another reason to shift to "lighter stuff," Shapkin said.

He said new legislative measures, such as tougher licensing controls on the production and supply of spirits, heavier taxation and new declaration requirements for wholesalers, have all contributed to a shrinking of the market for bootleg alcohol.

The National Alcohol Association said the market for legally produced vodka and other spirits in Russia amounted to 1.38 billion liters in 2007, while retail sales totaled 1.91 billion liters.

Legal production of vodka in 2006 was 1.24 billion liters, while sales for that year reached 2.12 billion liters.