Vladimir Putin Reportedly Disrupting Russia’s Spirits Industry With His ‘Grey Market’ Tactics
Russian President Vladimir Putin chairs an expanded format meeting of the Supreme Eurasian Economic Council at the Kremlin in Moscow, Russia. (Photo: Ilya Pitalev / Sputnik via AP)
Earlier this month, Russian police busted a counterfeit booze operation near Moscow that had been producing cases of counterfeit rum, cognac and whisky, including Johnnie Walker Black Label.
According to The Drinks Business, the main reason Russia is so concerned about counterfeit booze production isn’t public health or even the erosion of excise taxes.
“Well-informed sources in the spirits industry believe that the real reason for the Russian concern was that close friends of President Vladimir Putin were being hurt by the fakers,” The Drinks Business reported Thursday. “Nobody is willing to speak out openly but a picture is becoming clear.”
The Drinks Business claims that spirits distribution in Russia “has been turned on its head.” Despite international embargoes against exports to Russia, which were put in place following the nation’s attack on Ukraine, major liquor brands have become widely available in Russia, thanks to Russian President Vladimir Putin’s “grey market” tactics.
In October, Putin approved a “secret deal” to smuggle booze into Russia via a process called parallel imports, aka the grey market, which enables Russia to receive goods without the consent of manufacturers, owners or license-holders.
According to The Drinks Business, producers say they can’t do much about this grey market issue outside of “applying moral persuasion on traders around the world.”
Before the consequences of Russia’s invasion of Ukraine, spirits distribution in Russia was controlled by about 40 licensed companies. Now, that’s changed drastically, and according to The Drinks Business, “a new distribution network has developed with great speed.”
According to The Drinks Business, up to 50% of imported spirits in Russia are now arriving via the grey market, including about 60% of scotch whiskies. Thanks to this parallel imports system, liquor supply in Russia has returned to about the same status it was at prior to the invasion.
At this point, per these reports, the halt of liquor exports are hurting the distributors much more than who they were intended to hurt: Putin and Russia.
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