Vodka Woes: Russia’s Continued War in Ukraine Could Cause Alcohol Prices to Increase

(Photo: AP Photo/Gene J. Puskar)

As Russia’s war in Ukraine continues, alcohol producers are pressuring government authorities to increase vodka prices. The Union of Alcohol Producers in Russia proposed a 7% increase to vodka’s minimum price. The increase is meant to deal with costs associated with Vladimir Putin’s invasion. On Thursday, the Russian media company Kommersant reported on the proposal. 

Moscow’s attack on Ukraine has created issues for Russia’s alcohol industry including growing excise taxes, rising prices for imported materials and logistical complexities. The Union of Alcohol Producers has lobbied Finance Minister Anton Siluanov to increase the minimum price in order to deal with the costs caused by the persistent war. If the proposal is accepted, vodka prices would increase to $602 rubles per liter ($5.80) starting in 2024.

Vodka makes up about 35% of the minimum retail price market category according to those familiar with the alcohol industry in Russia. While vodka producers do not want to give ground to competitors, the profit margins are consistently shrinking due to the war. Big businesses’ play to increase the minimum cost of vodka across the board. The move is presumably meant to force all the major producers to comply and use the government to prevent undercutting. 

Bacardi Rus reportedly saw an increase in profits since the war began. The increased profits are likely due to several global competitors having ended trade with Russia, meaning foreign competition has lessened. 

However, Putin may be hurting Russian alcohol producers with an alleged secret deal to smuggle booze into the country. The deal was supposedly meant to sustain the grey market for alcohol. While the increase in the minimum price for vodka may help some of Russia’s vodka producers, it appears to be a bandaid for problems created by the continued war. 

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