Russia has lowered its mandated price minimum on vodka by 16%. According to a CNBC article citing the Moscow Times, in 2014, the price was raised from 89 rubles ($1.20U.S.) to 199 rubles ($2.80 U.S.), before being hiked to a record high of 220 rubles ($3.16 U.S.) per half liter.
Russia had mandated a price minimum on vodka as a response to people binging on the high-proof, illegal alcohol in 2009. Now, the same state regulator is getting a crash course on the consequences of stringent regulation in markets are compelled to reduce those minimums to deter people from seeking more affordable options – high-proof alcohol on the blackmarket.
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CNBC cited the Moscow Times, reporting a statement from Vadim Drobiz, head of the Center for Federal and Regional Alcohol Market Studies think tank, that they have seen counterfeit alcohol consumption increasing up to 65% since the price minimum was introduced. By increasing sales of the state regulated vodka, The Russian government hopes to increase tax revenues and stimulate the economy.
There’s no denying that Russia’s economy is suffering the consequences of the enormous decline in global oil prices and Western-sanctions that had been imposed for their involvement in the Ukraine conflict. Additionally, food prices in Russia have risen and the weakened currency resulted in the increase cost of imported goods.
Falling beer consumption in Russia saw Carlsberg close two of its ten breweries in the country last week.
It is safe to say that Putin’s plans to cut alcohol consumption in half by the year 2020 will likely be put on hold.
