Wine in Russia may rise in price by 15% due to labeling

The Wine Union Association (which includes Kuban Wine, Phanagoria, Milstream Black Sea Wines, etc.) addressed a letter to Russian Deputy Prime Minister Dmitry Grigorenko about the inexpediency of introducing the Honest Sign label for wine products. The general director of the association Boris Katryukhin confirmed his sending to Vedomosti. A government spokesman said the document had been received but did not answer further questions.

An experiment on the labeling of certain types of alcohol from June 1, 2022 to August 31, 2023 was proposed by the Ministry of Industry and Trade. The relevant draft resolution is posted for discussion on the portal of draft regulations. The list of goods for participation includes grape wines (including fortified), vermouth, liqueurs, alcoholic tinctures, etc. Such experiments are carried out before the mandatory implementation of the system.

In its letter, the association points out that the introduction of labeling will increase costs for manufacturers. For example, the digital code itself costs 50 kopecks. per piece, and marking labels – not less than 20 kopecks. etc. In addition, the costs of purchasing equipment, spare parts, system maintenance, hiring additional staff, etc. will be required, the appeal said. The increase in costs, in turn, will lead to higher selling prices for products (depending on the type and volume of packaging) by 4-8%, which together with trade margins and additional costs for code processing will be at least 15% for the end user. The letter also said that due to the low purchasing power of Russians, such growth will reduce the consumption of quality legal drinks and tax revenues. The authors of the appeal do not see the point in implementing a new system for alcohol – such products are already marked with federal special marks, and all transactions with it are reflected in the EGAIS system.

The “Honest Sign” label has been introduced in Russia for several years to combat illicit trafficking, the system has become mandatory for mineral water, dairy products, cigarettes, fur coats, medicines, etc. From December 1, 2022, it will be mandatory for beer . The operator of the system is the Center for the Development of Advanced Technologies (CRPT), which belongs to the structure of USM Holdings Alisher Usmanov and his partners, the state corporation “Rostech” and the managing partner of Almaz Capital Partners Alexander Galitsky.

A representative of the CRPT assures that none of the above will happen to winemakers: the digital code of the label will be placed on a paper stamp, which manufacturers already apply to their products, no new costs will be required. There will be no duplication of the EGAIS system – it will be integrated with the “Honest Sign”, the interface will be the same. A similar approach has already been applied to dairy products, says a representative of the CRPT. He also does not agree with the rise in price of products – in other categories, where the label was introduced, this did not happen. But this system leads to whitewashing of markets, he adds.

The Center for Consumer Market Development of the Moscow School of Management “Skolkovo” estimated the illegal alcohol market in 2021 at 26-35% of total consumption in the country. In reality, the share is lower – a maximum of 15%, says a person working in the alcohol market.

Earlier, the Union of Alcohol Producers (SPAP), the Federation of Restaurateurs and Hoteliers, Opora Rossii, and the Committee for Alcohol Producers addressed a similar request to Prime Minister Mikhail Mishustin to abandon the label. EGAIS is an effective state system, it is unclear why it should be duplicated, says Maxim Kashirin, vice president of Opora Rossii and president of Simple Group. According to him, “the operator of the” Honest Sign “is a private company – it raises questions from everyone.” The introduction of the new system will increase the administrative and financial burden for all market participants, Kashirin continues. Take water labeling as an example, the actual cost of imported products is twice the preliminary estimate. This can lead to a 15-20% increase in the cost of imported mineral water in retail.

It is still difficult to predict an increase in the price of alcohol, but given that the bulk of consumption is low-cost products (200-250 rubles per bottle), it is “obvious that the rise in prices may be significant,” said the expert. In the best case, the marking can duplicate EGAIS, SPAP President Igor Kosarev agrees. In his opinion, the situation with the consumption of illegal products will not be affected. He reminds that the shadow trade is often concentrated, for example, in unlicensed stores, while there is no such alcohol in legal retail. Not another control system can help here, but the liberalization of legislation, Kosarev said. For example, it is possible to allow individual entrepreneurs to obtain a license, who currently do not have such an opportunity. The Ministry of Industry and Trade is not yet familiar with the content of the letters, his spokesman said. A representative of Rosalkogolregulirovaniye did not respond to Vedomosti’s request.

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