The effects of Russia’s war on Ukraine are already being felt by producers of strong alcohol and spirits in Estonia. Raw material shortages caused by the war are expected to lead to major price increases by fall at the latest. Spirits companies are also preparing for some of their products to disappear from supermarket shelves.
Producers of spirits are currently in the midst of a crisis, due to rising energy prices and the reduced availability of raw materials and supplies.
As the situation worsens, Estonian distillery Liviko, which is one of the largest alcohol companies in the Baltic States, foresees the need for a reduction in its product range.
“We are aware that if we don’t have enough spirit or cork, we will have to make clear choices about what products we produce. We have a crisis plan in place for this, but fortunately, so far, we have not yet had to put it into action,” said Liviko’s sales director Ragnar Kits.
However, some problems are already beginning to take effect.
“Well, for example, one of our best-known brands, Viin Hobe (vodka), is simply out of bottles today. Despite the fact that we have bottle suppliers both in Estonia and in Europe, we will not be able to solve this problem in the next few months. We will probably be without one of our best-known brands for a couple of months,” said Kits.
Unlike Liviko, which buys its spirits from elsewhere, Moe Fine Spirits makes its own, meaning it has no such shortages when it comes to the raw materials required for production.
“With the disappearance of Russian and Belarusian spirits from the market, our sales have improved,” said Sven Sulga, the distillery’s sales manager. “Of course, in terms of production, we have had a more difficult time, because energy prices have risen and logistics costs are such that they are very, very expensive at the moment,” added Sulga.
Moe’s logistics costs have risen by 16% this year. The price of rye, which Moe uses to produce its vodka, has also increased by more than half. Liviko’s biggest material cost, spirit, has grown by more than 100% in a year, with prices continuing to rise every month since Russia’s war on Ukraine began in February.
Despite the increasing costs for spirits producers, shops have so far not been hit hard by price rises or shortages.
While today spirit prices have already risen by 10-20% due to the war, they are expected to grow even higher in the fall, according to CEO of Rimi Estonia, Vaido Padumae.
“The signs we are getting today are that it’s hard with bottles, it’s hard with labels. We know that grain shortages may be on the way. It is very difficult to say today how much this could affect the final prices,” said Padumae. (ERR/Business World Magazine)
