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. Last Updated: 07/27/2016

Alcohol Industry Opposes Monopoly

The alcoholic beverage industry on Thursday came out against a recent proposal to create a state alcohol monopoly, saying it would be costly to implement and do little to address the problem of alcohol-related deaths.

Distillers and industry experts contacted for this article said they opposed the idea of a state monopoly on alcoholic beverages, which was floated last week by State Duma Speaker Boris Gryzlov and subsequently endorsed by the powerful United Russia and Rodina factions.

"The introduction of a monopoly would seriously harm competition, but most importantly, it would do nothing to prevent a certain portion of the population from consuming alcoholic beverage substitutes," said Yury Nikulin, general director of Liviz, a distillery in St. Petersburg.

"It would also be very hard to implement," said Dmitry Dobrov, a spokesman for the Union of Producers of Alcoholic Products, adding that the government would have to set up its own chain of retailers.

Moscow alone has around 11,000 retail outlets, Dobrov said.

Nationwide, the introduction of a monopoly would cost from $3 billion to $5 billion, said an industry analyst who asked not to be named because his organization has been warned against criticizing the authorities.

It costs from $30,000 to $100,000 to open a retail outlet and there are about 100,000 retailers across the country, all of them private, he said.

Although few details of the monopoly proposal have been made public, brewers seem convinced that their products will be exempted.

The monopoly "should not have a direct impact on the country's beer market," said Alexei Shavenzov, a spokesman for SUN Interbrew in Russia.

Gryzlov and other political leaders have raised the prospect of an alcohol monopoly amid a flurry of press coverage about alcohol-related deaths across the country, many from drinking various surrogaty, or substitutes, a broad term that has been applied to anything not expressly intended for consumption, including the denatured alcohol found in cleaning products and perfumes.

Gryzlov himself said the the number of alcohol-related deaths was actually down this year, however. As of Oct. 1, 17,000 people had died this year of alcohol poisoning, a drop of 4,000 from the same period last year, Gryzlov said.

Some observers, including former Soviet President Mikhail Gorbachev, have suggested that the media blitz was being orchestrated for a specific purpose.

Gorbachev said last week it was hard to avoid feeling that "someone wants to achieve something" from the recent wave of alcohol-poisoning cases across the country. "It could be a reaction by producers to the state's increasing control in this area, or perhaps someone wants to increase this control even further -- to introduce a monopoly," Gorbachev said.

While the politicians who advanced the idea have offered few specifics, the government this week took several steps that could indicate a gradual move to increase control over the alcohol industry.

The State Duma on Wednesday gave initial approval to changes in federal liquor laws that would exempt from regulation products that contain alcohol but are not intended for consumption.

The Finance Ministry has drawn up a series of proposals for combatting bootleggers, such as setting a minimum retail price for vodka.

And the Federal Service for Ecological, Technological and Atomic Inspection announced Tuesday that producers of alcoholic beverages would be subjected to stricter inspections.

Many in the alcoholic beverage industry say the state already has enough levers for controlling production and distribution, as evidenced by this week's developments.

Alexander Romanov, a spokesman for the Alcoholic Beverages Committee with the Association of European Businesses, said strict new licensing laws and the introduction of the Unified State Automated Information System, or EGAIS, gave the government sufficient control of the industry.

Any further steps toward state control would amount to nationalization, Romanov said.

The Federation Council has been exploring the idea of a state liquor monopoly for nearly six months, Romanov said.

"Do you remember when there was a state monopoly on the production and sale of everything?" said Romanov, referring to the Soviet era with its chronic shortages of consumer products. "State monopolies always lead to a fantastic range of products," he said.

Others in the industry dismissed the proposed monopoly as a populist idea advanced by ambitious politicians in advance of next year's parliamentary election.

"Unfortunately, the alcohol sector has become a bargaining chip for the political parties," said the industry analyst who asked not to be named because his organization had been warned against criticizing the authorities.

"The government understands that this will not solve the problem," the analyst said. "This is a way for the officials to report on the job they've done, not a way to protect consumers."

Romanov said fixing a minimum vodka price might not be a market instrument, but could prove helpful in cutting the number of deaths from consuming denatured alcohol.

"At least there won't be vodka going for 20 or 40 rubles [75 cents to $1.50]," he said.

But the industry analyst who insisted on anonymity said the minimum price would not help, since retailers would find ways to sell bootlegged vodka and substitutes on the cheap -- by offering two-for-one deals, for example.

From 10 percent to 15 percent of the population cannot afford to buy good-quality liquor, and therefore risk their lives drinking everything from cheap perfume to windshield wiper fluid, the analyst said. "They have always drunk this stuff, and they always will."

The tough new stance adopted by the Federal Service for Ecological, Technological and Atomic Inspection had nothing to do with improving the current state of affairs, and would simply push up the amount of bribes by another $10,000, he added.

The Finance, Agriculture and Economic Development and Trade ministries, which would likely be involved in the creation of a state liquor monopoly, all declined to comment Thursday.



Staff Writer David Nowak contributed to this report.