New regulations on Russia’s alcohol market go into effect in 2017

The changes concern excise duty rates and plastic bottles

Several new laws regulating Russian market of hard liquor (strong spirits) go into effect on January 1, 2017.

The changes in the legislation concern excise duty rates and PET (Polyethylene terephthalate) or better known as plastic bottle capacity for alcoholic products as well as the spread of the Unified State Automated Information System (USAIS) for producers of pharmaceutical substance.

As of January 1, 2017, under the law on amendments to parts 1 and 2 of Tax Code and specific legislative acts of Russian Federation for the planning period of 2017-2019 excise duties on most of alcoholic drinks have been raised.

In particular, the government is raising excise duty on champagne, produced from exported ingredients, by 10 rubles ($0.10) to 36 rubles ($0.60) per liter.

Excise duty on champagne produced from Russian grapes won’t be raised higher than it was envisaged in the previous version of the Tax Code - to 14 rubles ($0.20) per liter

Excise duty on wines made from Russian ingredients will remain unchanged at 5 rubles ($0.08) per liter.

Excise duty on wines made from foreign ingredients has been raised from 9 rubles ($0.10) to 18 rubles ($0.30) per liter.

Excise duty on cider, Poiret (cider based on pear mash), and mead will grow from 9 ($0.10) to 21 rubles ($0.30) per liter during the whole period of 2017-2019.

Excise duties on beer with alcoholic content between 0.5% and 8.6% and beer with alcoholic content above 8.6% will grow from 20 to 21 rubles ($0.30) per liter and from 37 to 39 rubles ($0.6) per liter respectively.

In 2017-2019, excise duties on hard liquors (drinks with alcoholic content above 9%) will be raised from 500 ($8.20) to 523 rubles ($8.60) per liter, as well as on alcohol with average alcoholic content (below 9%) - from 400 rubles ($6.60) to 418 rubles ($6.80).

On January 1, 2017, the law restricting sales of alcoholic drinks in PET (plastic) bottles comes into effect.

It bans production and sales of alcoholic products in in PET (plastic) bottles having more than 1.5 liter in capacity.

Retail sales of alcoholic drinks in PET bottles will be banned starting July 1, 2017.

From January 1, 2017, any alcoholic beverages produced in PET (plastic) bottles with the capacity of more than 1.5 liters will be subject to a fine of 100,000 rubles to 200,000 rubles ($1,644 -3,288) for individuals and from 300,000 to 500,000 rubles ($4,929 - 8,215) for legal entities.

As of July 1, 2017, retail sales of alcoholic drinks in PET (plastic) bottles will be subject to a fine from 100,000 rubles to 200,000 rubles ($1,644 -3,288) for individuals and from 300,000 to 500,000 rubles ($4,929 - $8,215) for legal entities.

Breweries have always been the main opponents to such restrictions.

A Heineken representative told TASS that the new measures have become a compromise between the position of the Breweries that believe that there is no reason to limit production and sales of alcoholic beverages in PET (plastic) bottles and the advocates of their total ban.

It is already clear that the whole volume of manufactured alcoholic drinks will not be redistributed among the other types of packaging: approximately 20% of alcoholic beverages released in plastic bottles with the capacity of more than 1.5 liter are at risk, Oraz Durdyyev, member of the Board of Directors of SUN InBev, said.

A Baltika brewery representative said that about 15% of Russian-produced beer is bottled in plastic containers larger than 1.5 liters.

"This legislative restriction of production and turnover of alcoholic products in PET-bottles will definitely have a negative impact on enterprises of the brewing industry," he said.

In order to offset the loss, the majority of volumes will be redistributed between other types of packaging, so the total losses in the category will be manageable, the representative of the Baltika brewery said.

"We expect some decline in sales volumes, which would fit in with the general market trend. In terms of value, the impact will be less, because large size packaging is mainly used in low-budget market segments," the company’s representative said.

The breweries hope that the government won’t limit use of PET(plastic) bottles in the future anymore.

As of January 1, 2017, manufacturers of pharmaceutical substances are required to keep records of alcohol in USAIS.

This measure will allow the authorities to control volumes of manufactured pharmaceutical substance which is often involved in production of counterfeit alcohol, Alexander Kulikov, a spokesman with the Federal Service for Alcohol Market Regulation told TASS.

"Our inspections showed that in recent years the number of illegal producers who give preference to this type of raw materials (pharmaceutical substances) when making counterfeit alcohol drinks has increased," he explained.

Source: Tass

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