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The legal market of alcoholic beverages keeps shrinking as the shadow market flourishes
January 30th, 2013
Total consumption of legal absolute alcohol in Lithuania decreased by more than 20 percent during the last few years. This indicator dropped by 2.1 percent more last year as the results presented by the State Tax Inspectorate (STI) show. According to the data of the research performed by the Lithuanian Free Market Institute (LFMI), the market of illegal spirituous beverages continues to flourish and amounted to 36 percent last year.
According to Romas Apulskis, the President of ABBI cluster which unites the beverage industry, most large factories of alcohol beverages of Lithuania are currently having a rough time. Legal trade in alcoholic beverages is burdened by prevailing shadow market and increasing prices of raw materials used for production.
According to the data of the State Tax Inspectorate total consumption of legal absolute alcohol dropped by 2.1 percent last year – from 37.5 to 36.7 million litres compared to 2011. Approx. 67.6 million litres of wines and ciders and 32.5 million litres of spirituous beverages were consumed last year. The highest decrease was observed in the consumption of beer – it plummeted by 6.2 percent. Approx. 288 million litres of beer were consumed in 2012, whereas 305 million litres were consumed in 2011.
The President of ABBI fears that the amendment of the Law on Control of Alcohol prohibiting the trade in beer stronger than 7.5 percent which came into force as of 1 January 2013 may stimulate the development of the shadow market even more.
“Prohibition to trade in strong beer may influence the increase of the scope of consumption of spirit-based cosmetics and moonshine. According to the data of the market research performed by “Norstat”, strong beer and cosmetic spirit are the closest substitutes for intoxication for the layer of residents with low income. It is very likely that a large portion of strong beer which disappeared from the shelves of the shops will be replaced by cosmetic spirit or pseudo “mouthwash liquid” which can be easily bought in kiosks for two Litas,” R. Apulskis says.
The representatives of the beverage industry are also worried by the increasing prices of the raw materials used for the production of alcoholic beverages. The prices of buying grain reached record heights in the beginning of this year. Extra class wheat is bought 810-880 Litas per ton, the purchase price of the first class when varies from 800 to 875 Litas. The purchase price of a ton of rye amounts to 700 Litas. According to the data of the Department of Statistics, the price of triticale went up by 39.1 percent, wheat – 27.6 percent, rye – 11.9 percent in December 2012 compared to the same period of time in 2011. Wine and raw materials of wine are becoming more expensive as well, e.g. their prices went up by 30-50 percent in Italy last year.
