Russia vodka drinkers face price hike on cheap bottles

An employee looks at bottles of Damskaya Vodka or "Ladies" vodka in the office in St. Petersburg March 14, 2008. REUTERS/Alexander Demianchuk (RUSSIA)

MOSCOW (Reuters) - Russia’s minimum vodka prices are likely to be hiked by 10 percent in January next year, hurting low end producers at a time when Russians traditionally drink heavily during the New Year and Orthodox Christmas holidays.

The price of the cheapest half-liter vodka bottle will be set at a new minimum of 98 rubles ($3.13), up from the initial 89 rubles introduced from 1 January this year, Russia’s alcohol regulator said on its website .

Analysts at Citi said the increase was in line with expectations, although some higher end producers had wanted a more radical rise to help the battle against black market producers.

Discount producers could pay dearly for the measures -- part of President Dmitry Medvedev’s campaign to combat alcoholism.

Based on Nielsen Company data, 6 percent of volumes produced by Russia’s vodka maker Synergy from June to September 2010 were sold below 89 rubles -- the new minimum level set for a half-liter bottle.

At the same time Polish vodka producer Central European Distribution Corp could gain from the reform, Citi analysts said, as it has zero volumes in the segment but an estimated 9 percent volume market share in the next highest price category.

Russia’s lengthy January public holiday, which runs from January 1 to 10 in 2011, is a bumper time for alcohol consumption.

($1=31.35 Ruble)

Reporting by Yulia Kalachikhina; Editing by John Bowker and Jon Loades-Carter