Initiatives to introduce state alcohol monopoly have appeared after numerous reports of alcohol poisoning.
Photo: Nikolay Cyiganov
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Vertical of Drunkenness
Duma’s speaker raises a glass to state alcohol monopoly
The Russian State Duma’s speaker Boris Gryzlov spoke in favor of setting up state alcohol retail monopoly, which may mean creating a state-owned alcohol retail chain. If this option is chosen, retail will incur large-scale losses and shortage in alcohol.
“It’s time to decide on the issue of creating state monopoly over alcohol sales,” Boris Gryzlov said Tuesday. The Duma’s speaker believes that this is the best way to defeat sales of illegal alcohol products. Gryzlov reported that as much as 17,000 people had died in the first nine months of the year because of low-quality alcohol. Duma deputies “are already working over the issue”, he said.
Neither the Duma’s stuff, nor the economic policy committee was able to explain to Kommersant on Tuesday who is in charge of studying the speaker’s initiative. “As far as I know, no one at the committee is drafting any projects of state monopolies,” the committee’s deputy head Yury Medvedev said.
The statement of the Duma’s speaker, however, goes in line with the overall sentiment of official statements the last week. An outbreak of alcohol poisoning is being widely covered at state-owned TV channels, and most federal officials have already voiced their opinions on the problems. A proposal to introduce state monopoly on ethyl alcohol has been the most radical one so far. The Federation Council’s speaker Sergey Mironov has also supported the idea. Russia’s chief physician Gennady Onishchenko spoke in favor of it on Tuesday. He said “clear state policy on the circulation of alcohol productions is needed.”
Viktor Zivenko, president of the Kristall vodka producers says: “There is so much confusion going on. Two weeks ago, President Putin said he was dissatisfied with the actions of officials during the introduction of the informational system of ethyl alcohol circulation calculation [which virtually halted alcohol supplies for retail during the launch this summer].” He explains that “now agencies are trying to think up new ways to influence the market using news of alcohol poisoning.”
There are two major options for introducing state monopoly on alcohol sales. First, Russia may establish the state company to mediate between alcohol producers and distributors, similar to the state stock corporation that drafters of the bill on ethyl alcohol state monopoly suggested. The second option is more drastic since the state may set up state monopoly on retail alcohol sales. A similar system exists in Finland where alcohol stronger than 4.7 degrees is sold only at 314 stores of the Alko state-owned chain. Vinmonopolet stores sell spirits in Norway and Vinbud is the official alcohol retailer in Iceland.
Voices to introduce state monopoly on alcohol retail sales have already been heard at the parliament. The Federation Council’s member from Ivanovo Region Vladimir Gusev submitted to the State Duma amendments to the law On the State Regulation of Production and Circulation of Ethyl Alcohol and Spirit-Based Products saying that every region of Russia should create companies with exclusive rights of buying alcohol from producers and selling it in their own retail chains. The final version of the amendment was not added to the law, though.
Market participants lambaste both versions. Dmitry Dobrov, spokesperson for the Union of Alcohol Producers, says the creation of a state-owned retail chain “will take time and enormous funds. Also, it does not guarantee that people will not be able to buy vodka “at alternative places of sales”. The Union of Alcohol Producers estimates that there are up to 100,000 stores licensed to sell alcohol products in Russia. From $30,000 to $100,000 is needed to open one store. Therefore, the creation of a similar federal chain will cost authorities $3-10 billion. The state, however, may open only 50,000 stores, spending half as much, an expert says.
“Thousands of logistic and distribution companies are operating on the alcohol market now. The state will find it hard to replace this segment; it will take way too much time,” Viktor Alexeev, director general of Kristall-Lefortovo, says. “We will end up with a shortage in retail and the queues we had in the 1980s.” Every state-owned company on the market has financial difficulties. Making the market dependent on a potentially unprofitable chain means hampering its development, says a market participant. Head of the PR department of the Sinegria group Andrey Malafeev fears that the appearance of the state monopolist on the retail or wholesale market will increase the risk of corruption.
The state-owned retailer will take a significant portion of the turnover from “the traditional retail market,” says Viktor Alexeev from Kristall-Lefortovo. Igor Nikolaev, head of the development department from the Viktoria Group (Viktoria and Kvartal chains), says that alcohol products account for 20 percent in the total turnover of Russian food retail worth $241 billion last year, according to estimates of KIT-Finans. “Obviously, this cut on the market will have a negative effect,” Nikolaev says. “However, it may prompt an even more intensive development of retail chains as single stores which often take up half of the turnover will be leaving the market.”
Alexander Demchuk
All the Article in Russian as of Nov. 01, 2006
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