This year the Ministry of Finance (Minfin) would like to once again increase the minimum retail price (MRP) for vodka. The minimum purchase price by the manufacturer is proposed to be established at 177 rubles for vodka in a 0.5-liter container (currently it equals 165 rubles), and the suggested minimum purchase price by wholesalers is 182 rubles (currently 174 rubles). According to the Ministry’s draft, vodka will not cost less than 219 rubles in retail. This figure is 15% higher than the current MRP of 190 rubles.
The Ministry of Finance is basically setting the MRP for special cases of production, as if we had traveled back to the first half of 2014. It used to be 220 rubles, but now there are 5 rubles more in the excise duty ‘bottle’, not to mention inflation has taken place during the 3 years. In addition, it is unclear why the MRP is to be implemented only in half a year. However, as we have already established, the MRP blends in the background in terms of product legality control against the EGAIS implemented in city retail, where over 75% of vodka is sold. This implies that either vodka at 219 rubles will be legal, or there will be none, or the decrease in the real price will be covered by manufacturers as bonuses to networks.
One could form the following scale of vodka prices (from the bottom up, with the excise duty rate of 500 rubles), which is already becoming out of date (as in, relevant until January 1, 2017):
- 50 rubles – a social product for the 20 million poor Russians, which still implies factory and homemade surrogate alcohol;
- 100 rubles – a price for illegal partially homemade vodka in illegal retail (since over the 5 years deputies eliminated almost 90 thousand legal retail outlets – almost 30% – from the legal retail market, I do not see any reason not to sell the product illegally);
- 130 rubles – proposed by the Ministry of Economic Development and the Ministry of Industry and Trade, which is proper and reasonable, but unreal for the time being, as for this price it would be necessary to decrease the excise duty rate by 2.5 times;
- 190 rubles – the official state minimum retail price, although even “Tatspirtprom” sells its vodka at over 200 rubles per bottle;
- 220 rubles – a more or less real minimum price.
At the moment a new MRP is being proposed for the summer and on – 219 rubles, and therefore the new scale starting with next year will look like 50-100-130-219-235 rubles instead.
As one can see, the first three figures are either completely illegal or simply unrealistic, and therefore they are currently beyond the scope of our research.
Legal vodka is supposed to solve three problems:
Let us put the fiscal issue on the first spot. With the new MRP of 219 rubles, the revenue defined for distilleries is 8 rubles per bottle, whereas the state would get 132 rubles (excise duty + VAT).
The second problem is that vodka should be affordable for all social groups, so that people do not consume surrogate alcohol – just like in any civilized country. Even vodka priced at the fantastic 130 rubles will, sadly, not eliminate the problem of alcohol based liquid consumption and surrogate alcohol poisonings.
The third important issue is to ensure normal, profitable and legal operation to business, wholesale trade and distribution, and retail. It would seem that the EGAIS is now in charge of this. However, since a tool such as MRP was retained, it should be applied more reasonably, since it is no longer the symbol of legality, but is exclusively a symbol of preferences for certain legal companies against other legal companies in the segment of the cheapest vodka.
Traditionally, we would like to recalculate the state calculations.
The state defined the minimum factory price at 177 rubles, the excise duty and VAT in it amounting to 131.7 rubles (as stated in the official table). This implies that distilleries have 45.3 rubles per cheapest bottle for production, the margin and network bonuses. This is only 25.6% of the selling price, and 74.4% – three quarters! – would be taken from consumers by the state.
The delta between the minimum factory price of 177 rubles and the MRP of 219 rubles is 42 rubles, which is +23.7% to the factory price. 219 rubles are not really enough, but still better than 205 rubles that were originally to be implemented; this amount may be insufficient for networks.
However, the state provides yet another table, which demonstrates how the minimum price for distilleries (with excise duties and VAT) is formed.
There is another interesting detail here: the table states 37.45+8.3=45.75 rubles instead of the 45.3 rubles listed as the price from distilleries without taxes. The rounding resulted in a 40-kopek difference, which the state sneaked from distilleries for every bottle – why though? With 1.8 billion bottles of vodka and spirits this results in a considerable loss per year, namely 720 million rubles. Minfin, give us back the 40 kopeks!
In fact, the new MRP only partly reflects the new realities (new excise duties, inflation etc.). It will not reduce sales, drag the consumer into the illegal surrogate field, or make one drink more or less than before, which various expects have been so concerned about.
P.S. When the article had already been prepared, it was reported that the figure of 219 rubles had been withdrawn from the agenda and a new MRP had not yet been determined. However, this does not change the overall picture described in the article.
Director of the Center
for Investigations of Federal and Regional Alcohol Markets