In recent years, Russian lawmakers have enacted legislation intended to discourage alcohol use among citizens. Although these new policies benefit the people of Russia, they are hurting beer makers in the country.
Russia has one of the highest rates of alcoholism in the world, so concerted efforts to get people to cut back on drinking are a good idea from a public health standpoint. Perhaps the United States, who invests heavily in anti-smoking campaigns, should consider following suit since we have high rates of alcohol abuse as well.
The timing of the Russian legislation has caught breweries off-guard. Between 2005 and 2007 beer sales in Russia soared 30 percent, according to the Wall Street Journal. When brewers such as Heineken, Anheuser-Busch and Carlsberg noticed, they seized the opportunity to invest in the booming beer market in the region. However in 2010, Russian leaders Vladimir Putin and Dmitry Medvedev enacted legislation and launched anti-alcohol campaigns determined to cut alcohol consumption by half before 2020, which had thwarted beer makers.
The country’s shrinking beer market and the Kremlin’s firmer stance on booze are forcing European brewers to change their strategy, and some breweries are pulling out of Russia all together. Danish beer company, Carlsberg, posted a $372 million loss in the second quarter this year and Heineken, the 3rd biggest brewer globally, saw revenue slide by 2.7 percent. Carlsberg reports that the Russian beer market has declined 7 percent in the first half and predicts that the downward a trend will continue with a total decline of 4 to 6 percent.
The Russian crackdown on alcohol actually began while it was the USSR under Michael Gorbachev. Gorbachev banned the sale of alcohol at state functions and bulldozed vineyards in southern Russia. While the new legislation doesn’t go so far as to destroy vineyards or raid beer halls, it does make beer much less accessible while hurting bottom lines of beer makers Beer kiosks, located mostly on Russian streets and often unlicensed, have been shut down and replaced with other businesses. These street stalls accounted for 30 percent of beer sales across the country, the Moscow times reported.
Prior to 2008, there was very little regulation of the beer market in the former Soviet Union, and growth was very rapid. Beer analyst Ian Shackleton told the WSJ that “You didn’t need a license to sell beer, duties were low and there were no limits on marketing. It was often cheaper than soda.” Alcohol sales were permitted 24-7. Now, sales between 11pm and 8am are prohibited.
Alcohol deterrence is by no means a bad idea, since alcoholism is a destructive disease that costs the public a lot of money and negatively impacts quality of life. Russian leaders want to increasingly raise taxes on alcohol to deter the public from heavy drinking. In addition, deterrence taxes could raise revenue for the government.
However, this type of legislation will be met with opposition by both international and domestic breweries. Decreased beer sales mean less money in the pockets of brewers, and given the size and recent growth of the Russian beer market, losses can be in the hundreds-million dollar range. Anti-alcohol campaigns may be bad for business, though they are good for the people.
“Alcohol Use.” Cdc.gov. Centers for Disease Control and Prevention, 21 June 2013. Web. 30 Aug. 2013.
Belousov, Vitaliy. “Russia’s Losing Bet: Anti-alcohol Campaign Drives Away Foreign Brewers” RT Business. RT, 23 Aug. 2013. Web. 30 Aug. 2013.
Filed under: Addiction, Alcohol and Drugs, Latest News, Substance Abuse · Tags: alcohol, alcohol deterrance, alcoholism, Anti-Alcohol Policy, beer, beer market, Beer sales, breweries, brewers, brewery, Carlsberg, Decrease, Gorbachev, Heineken, lawmakers, laws, legislation, Medvedev, Putin, russia, Russian