Photo from UNIAN
Prices of vodka are expected to grow by 4% with the minimum price of a 0.5-liter bottle set at UAH 74, or $2.8, after the Ukrainian largest alcohol producer, state-owned Ukrspyrt, has announced it will increase prices of ethyl alcohol by 19% from April 1, according to Nemiroff Company's press service.
"The minimum price of a bottle [of vodka] on supermarket shelves now is UAH 70.82 [$2.7 at the central bank's official forex rate as of March 25]. Taking into account an increase in prices of ethyl alcohol in April, it will cost at least UAH 74 [$2.8]," the press service quoted Nemiroff Director General Yuriy Sorochinsky as saying.
The company notes that the growth in prices of vodka to the current level is attributed to the higher tax burden on alcohol producers due to an increase in excise duty from March 1, 2016. According to the report, the wholesale price of a 0.5-liter bottle of vodka currently averages UAH 46.92, or $1.79. The price covers production costs (UAH 17.94), excise duty payment (UAH 21.16), and value-added tax (UAH 7.82). The minimum retail price then goes to UAH 70.82 with 15% costs on distribution, 25% retail mark-ups and a 5% excise tax rate.
Sorochinsky noted that the increase in tax and production costs would affect the competitiveness of law-abiding manufacturers as compared to the producers working in the shadows.
"If in 2015 the legal vodka market was estimated at about 19-20 million decaliters [a decaliter is a metric unit of volume that equals to 10 liters], according to pessimistic forecasts, it will shrink to 15 million decaliters by the end of this year," the press service quoted Sorochinsky as saying.
According to the Ukrvodka association, higher production costs of legally produced alcohol will contribute to the growth of the shadow market from today's 30-40% to 60%.
As UNIAN reported earlier, Ukrspyrt will increase sale prices of premium ethyl alcohol by 18.75% from April 1 to UAH 285 per decaliter (VAT included). The state enterprise attributes the increase in the prices to a rise in production costs, adding that the move had been agreed with Ukrvodka.
The Ukrainian Tax Code provides for the increase in excise tax on ethyl alcohol by 50% (to 105.80 UAH / liter) since March this year. Ukrspyrt boosted ethyl alcohol production in the first two months of 2016, by 3.3 times year-over-year, to 1.85 million decaliters.