A minimum retail price may be introduced for beer and cider in Russia

In Russia, minimum retail prices (MRPs) for beer and cider can be established. The topic of introducing a minimum wage has been discussed for several years, but if previously the Ministry of Finance considered the arguments of small producers who advocated this innovation unconvincing, now the ministry intends to work on the issue of state regulation of prices for weak alcohol. Moreover, the State Duma deputies called for this from the financial department. MK was looking into how this would turn out for Russian consumers.

The Ministry of Finance announced that it is currently considering an appeal from deputies regarding state regulation of prices for beer, beer drinks, cider, poire and mead. Officials explained the need for this measure by the fact that additional regulation will reduce the illegal circulation of weak alcohol, ensure competition, and also bring additional revenue to the budget.

Now, let us remind you, prices for vodka, brandy, cognac and alcoholic beverages with a strength of over 28% are already regulated. In addition, a minimum retail price for sparkling wines has been established.

Meanwhile, back in February 2020, some market participants asked to establish an MRP for beer. The Union of Russian Brewers (URB) in a letter to the Ministry of Finance indicated that the Russian market is “oversaturated with so-called promotional beer at critically low dumping prices.” Disagreements over the minimum price led to the three largest producers – accounting for about 70% of production in Russia – demonstratively leaving the Union.

The RSPP commission, as well as major market players, oppose the introduction of the MRP. Large corporations are not interested in setting minimum wages. They can sell goods at bargain prices – turnover allows. Small regional producers, due to dumping by the giants, have to reduce prices for their products to cost in order to somehow maintain consumer demand. The Ministry of Finance was in solidarity with the market giants and considered the introduction of minimum prices for beer premature.

The topic will be continued in 2022. Then the Ministry of Finance, the Ministry of Industry and Trade and the Ministry of Economic Development again considered the introduction of minimum retail prices for beer inappropriate. The Federal Antimonopoly Service (FAS) was also against it. “The introduction of the MRP for beer in combination with an increase in the excise tax in 2022 may lead to an increase in retail prices for beer and beer drinks,” said a representative of the service. As a result, the minimum wage was not introduced, but prices still increased.

Since April last year, brewers began to increase prices for final products by 5–20% due to increased prices for containers and raw materials. Experts noted rising prices for malt, hops, juices, aluminum cans, film, packaging and labels. In the summer of 2022, Rosstat admitted that over the year the increase in beer prices amounted to 107.16%.

Now major players in the low-alcohol market believe that “state regulation of prices for beer, beer drinks, cider, poiret and mead” means the introduction of minimum retail prices for these products. If this is so, then the measure will increase the marginality of illegal production and turnover. According to the Association of Beer, Malt and Beverage Producers, which unites the largest players in the Russian market, the introduction of the MRP will lead to an increase in consumer prices, which is critical in the context of the population’s declining purchasing power.

Earlier, the head of the National Union for the Protection of Consumer Rights, Pavel Shapkin, noted that demand for cocktails, ciders, mead and beer will increase in Russia. At the same time, according to him, today beer already accounts for 80% of all alcoholic beverages consumed. “Beer drinks are often produced illegally; they are cheap, but not always safe. Although such drinks are easily sold in stores today,” he said.

Large players in the beer market, regardless of whether a minimum retail price is introduced in Russia or not, will feel good, but small producers will have a hard time – it will be very difficult to withstand competition with the products of brewing giants, says a member of the Council for Financial, Industrial and Investment politics of the Chamber of Commerce and Industry of the Russian Federation Anna Vovk. According to her, most of the players – up to 90% – are at risk of leaving the market.

“They will not be able to compete with large players who have accessible capital, large profits, and opportunities for dumping,” the expert is convinced. — The market forces of small and large producers are incommensurable. Giants can work in the red for months just to remove their competitors from the market.”