OREANDA-NEWS. July 09, 2009. Event: The Federal Alcohol Regulation Service suspended the licenses of 6 vodka producers in the Russian Federation’s Kabardino Balkaria region (located in the Caucuses), Kommersant reported.  It is estimated that Kabardino Balkaria’s alcohol factories produce up to 40% of the illegal vodka in Russia. The black (and grey) vodka market in Russia is estimated to be c40% of the total market, reported the press-centre of OTKRITIE FC.

View: The news is positive for legal vodka producers such as CEDC and Synergy. Competition with illegally produced vodka has been a long-time problem for official producers. It appears that the Russian government is now serious about combatting bootlegging. Apart from its adverse fiscal impact on the government (eg lower tax revenues), illegal alcohol, which is often cheaper and hence more affordable, is widely recognized by officials as a serious health risk. President Medvedev recently pointed out that Russians consume far too much alcohol and that efforts should be taken to reduce consumption.

Action: While we do not cover Russian alcohol producers yet, the news should be positive for companies like CEDC and Synergy, which stand to gain market share in the wake of effective government measures against illegal producers.