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Putin Wages War on Vodka as Lifestyle Death Toll Mounts

October 31, 2012

Putin Wages War on Vodka as Lifestyle Death Toll Nears Million

Men drink vodka in a cafe in Moscow. Smoking and drinking kill 900,000 people a year in Russia, the world’s second-largest market for cigarettes and alcohol, according to official estimates. Photographer: Dmitry Beliakov/Bloomberg

Vladimir Putin is waging the biggest public health drive since former Soviet leader Mikhail Gorbachev failed to wean his country off alcohol abuse with a crackdown on tobacco and drink.

An anti-tobacco law submitted to parliament yesterday will ban smoking in public places, advertising and kiosk sales. That follows measures to curb the world’s fourth-highest alcohol consumption per capita with tax increases and by limiting trade.

Smoking and drinking kill 900,000 people a year in Russia, the world’s second-largest market for cigarettes and alcohol, according to official estimates. The country’s population of 143 million is about 5 million less than in 1991, when the Soviet Union collapsed. Alcohol and tobacco abuse costs the Russian economy at least $104 billion a year, or 5 percent of gross domestic product, the government estimates.

“Putin has set himself the goal of reversing the population decline through encouraging a more healthy lifestyle,” said Sergei Markov, a former lawmaker in the ruling United Russia party and vice-rector of the Plekhanov Russian University of Economics in Moscow. “But if you look at our history, Gorbachev wasn’t successful in that.”

$1 Vodka

The crackdown risks encouraging Russians to seek counterfeit cigarettes and drinks, according to tobacco companies and alcohol industry analysts. Illegal sales of vodka -- which is priced as little as $1 for a half-liter (0.13 gallon) -- will rise to 60 percent from 35 percent of the market by 2014, according to the Center for Federal and Regional Alcohol Market Studies. Illicit tobacco trade may expand to 40 percent of the market from 1 percent, the lobby group Tabakprom estimates.

Prime Minister Dmitry Medvedev on Oct. 16 railed at Philip Morris International Inc. (PM:US), British American Tobacco Plc (BATS), Japan Tobacco Inc. (2914) and Imperial Tobacco Group (IMT), blaming them for addicting millions of children and women to cigarettes since the early 1990s. The four companies control 93 percent of the $19.5- billion Russian tobacco market. Thirty-nine percent of Russians smoke regularly, according to the World Health Organization.

Five foreign-owned companies hold more than 80 percent of the beer market in Russia -- Baltika Breweries, part of Carlsberg A/S (CARLA), Anheuser-Busch InBev NV (ABI), Heineken NV (HEIA), Andalou Efes Biracilik & Malt Sanayii AS and SABMiller Plc. (SAB) The alcohol market in Russia, which is 24 percent vodka and 51 percent beer, is worth $34.4 billion according to Euromonitor, a consumer research company.

Slumping Shares

Imperial, the maker of Davidoff cigarettes, retreated 0.9 percent to 2,349 pence at 12:07 p.m. in London. Japan Tobacco shares fell 1.5 percent to 2,206 yen at the close in Tokyo trading. AB InBev, the maker of Budweiser and Stella Artois, slid as much as 1.5 percent in Brussels while Carlsberg fell the most in three months in Copenhagen trading, dropping as much as 3.8 percent.

The Russian government will insist that the anti-smoking draft bill submitted yesterday be approved in its current form, said Alexei Levchenko, an aide to Deputy Prime Minister Olga Golodets, who’s responsible for health and social affairs.

‘Serious’ Increase

The Finance Ministry is also due to respond at the start of November to the government’s proposal for a “serious” increase in tobacco excise taxes, Levchenko said by phone from Moscow today.

Russian vodka sales will decline 4 percent by 2016 and beer sales will remain stagnant over the period, Euromonitor predicts. Russia this year increased the minimum price of a half-liter of vodka to 125 rubles ($4) and plans to raise it to 200 rubles by 2015, according to the government daily, Rossiiskaya Gazeta. Beer duties were increased threefold in 2010 and will be six times higher in 2015 than in 2009.

The Health Ministry says smoking levels may be cut in half as a result of the anti-tobacco law and planned tax increases for cigarettes in Russia, where a pack of Marlboros sells for about $2. The aim is to bring prices to European levels by 2015.

Russia cut alcohol consumption to 15 liters (4 gallons) from 18 liters per capita in the last two years, Deputy Prime Minister Viktor Zubkov said in December. The government wants to reduce it to at least 8 liters by 2020, the WHO’s accepted consumption level.

‘Hooks People’

“We aren’t banning people from smoking or drinking,” Deputy Health Minister Sergei Velmyaikin said in an interview. “We’re just implementing a package of measures to stop extremely aggressive marketing which hooks people on very harmful products.”

Gorbachev, who came to power in 1985, started an anti- alcohol campaign that cut the production of vodka and other spirits by as much as 40 percent within a year, uprooted vineyards, restricted sales and increased prices. Russians compensated by producing “samogon” or moonshine at home, according to a study last year by Stanford University.

The campaign ended in 1988 after eroding Gorbachev’s popularity and spawning a series of jokes about him. Yeltsin, who was known for appearing drunk in public, stepped down in 1999, nominating Putin, a non-smoking judo black belt, as his successor.

The government last year banned alcohol sales between 11 p.m. and 8 a.m., as well as drinking alcohol in public places. In July, it outlawed beer advertising on television, radio, billboards and Internet and from January 1, kiosks won’t be able to sell beer.

The average Russian, including women and youths, drank 77 liters (20.3 gallons) of beer, 9 liters of spirit and 7 liters of wine in 2011, Euromonitor data shows. One in five Russian men die from harmful use of alcohol, the Geneva-based WHO says.

“We are used to smoking, drinking, eating a poor diet and doing little sport and then falling ill, and expect to be operated on or take pills to get better,” Nikolai Gerasimenko, deputy head of the lower house of parliament’s health committee, said in an interview. “That’s got to stop.”

To contact the reporters on this story: Henry Meyer in Moscow at hmeyer4@bloomberg.net; Stepan Kravchenko in Moscow at skravchenko@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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