The federal government is proposing to increase the minimum retail prices for hard alcohol, which may cause the price of vodka to skyrocket 36 percent starting Jan. 1.
The Federal Service for Alcohol Market Regulation published a draft decree Friday stipulating that minimum retail prices for vodka could reach 170 rubles ($5.30) for half a liter, up from the current 125 rubles.
In conjunction with that, retailers wouldn't be able to sell cognac cheaper than 280 rubles for half a liter, compared with the current price of 219 rubles, according to the draft published on the service's website.
The jump could be the result of a planned 30 percent increase in excise taxes for pure alcohol. The tax rate is slated to rise to 400 rubles per liter starting in January, a representative of the service told the RBC newswire late last week.
The draft is pending approval by the Finance Ministry and the Justice Ministry, Vedomosti reported. If approved, it will go into effect next year.
The government expects that increasing the minimum retail prices for strong spirits will help in the fight against producers of bootlegged alcohol, which is usually cheaper than legal products
The minimum pricing was introduced in 2010, when the lowest possible retail price for vodka was set at 89 rubles. The most recent increase was in July.
To shrink the bootleg market, the Federal Service for Alcohol Market Regulation plans to establish total control over retail sales of alcohol across the country by 2015, with the goal of keeping track of every bottle sold, service head Igor Chuyan said earlier this year.
Piccasso, I hope you understand that this is actually a positive development for CEDC. You see, CEDC's russian brands are considered mid to premium level (and even ultra when you consider Kauffman) so their pricing won't be affected. Rather, their cheap "knock-off" competitors will suffer from "increased minimum pricing" with the intent to flush out those who are not properly disclosing and paying excise taxes.
Ultimately, while this is certainly a positive for CEDC, the greater question is whether CEDC will still be around to take advantage of it.