Money to the Wind?

Made in Egypt and Mesopotamia thousands of years before the birth of Christ, beer is the oldest alcoholic drink. But its production in Russia dates back a mere 200 years, to the time of Catherine the Great. There are those who say beer has no roots in Russia’s soul. And yet, as Russian Life’s Anna Hoare found, both Russian and foreign companies are investing millions of dollars in modernizing equipment and expanding production. In the meantime, however, harsh government regulations could kill their efforts ...

At Moscow’s Luzhniki sports complex, thousands of beer lovers have gathered during the last days of August for what promises to be an interesting event – the first Moscow Beer Day. The festival – the first of two organized in Moscow in as many weeks – is a good indication of beer’s new-found popularity in Russia.

The sun beats down; the beer flows. Popular alternative bands like Time Out and Nogu Svelo (Cramp in the Leg) blast their music. Emcees praise the healing virtues of beer. A crowd gathers, expectant, around a stone circle, and eventually, the waiting pays off. Out of the ground springs a fountain, spraying forth not water but ton after ton of beer. Soon, festival-goers are splashing around in the foam. But among all the festivities, the huge, inflated Tuborg bottle, the giant banners for Amsterdam Navigator, something feels a little odd. In the crowd around the fountain, almost lost among the cheers and mayhem, a low voice mutters: “So, where’s our beer?”

The anonymous commentator had a point. Out of some 20 types of beer represented at the festival, only three – Baltika, Nevskoye and Petergof (all St. Petersburg beers, backed by foreign capital) – were Russian-made. Why? Organizers explained that, for security reasons, only canned and draft beer was allowed at Luzhniki, whereas most Russian beermakers sell their product in bottles.

So what? After all, we hardly think of Russia as a country of beer drinkers. As the stereotypes go, Germans drink beer, Russians vodka. Indeed, the average Russian drinks 12 to 13 liters of beer annually, a mere drop in the bucket compared to the 146 liters consumed by your typical German. Much of this can be explained by differences in drinking traditions in the two countries. In Russia, where the aim of drinking is, as often as not, to find the fastest and least expensive route under the table, alcohol content has traditionally been the deciding factor in choosing drinks. The cheapest legal vodka in Russia now costs about R16,000 ($2.75) for a half-liter, whereas the cheapest beer runs R3,500 ($0.60) for a one-third liter can – meaning that, ounce for ounce of pure alcohol, vodka still gives Russian consumers more “bang for their buck.”

But the times they are a changing. More than 150 types of beer are currently produced in Russia, many of world-class quality, and beer consumption is slowly on the rise. As is production. Some 220 million deciliters of beer were produced in Russia in 1996, versus 170 mn dcl in 1995. Variety is increasing as well. The Petersburg-based, Swedish-owned Baltika company produces seven types of beer, ranging from lager to porter. The Tver Beer Company offers its popular Afanasy brand (named after Afanasy Nikitin, the first Russian explorer to sail to India) in both light and dark varieties. And where else but in Russia could you have cast your ballot for the Beer Lovers’ Party in national elections?

In short, Russian beer may be set for a comeback, and vodka could be facing a challenge to its status as Russia’s national drink.

A “Healthy” Alternative

There is a saying from a popular Russian film that pivo bez vodki – dengi na veter (“Beer without vodka is money to the wind.”). For many, beer is still mostly seen as a “hair of the dog” (a hangover cure) or something to drink as a last resort when you run out of vodka. But attitudes are changing. After all, what could be more timely in Russia than encouraging the production of quality beer as an alternative to vodka? Beer is weaker, less subject to faking and, as Vladimir Shishin, general director of the Beer Industry Association, put it, “you can sit and drink beer quietly all night and be fine. But with vodka, you do the same and that’s it, you’re in for it the next morning!”

According to recent statistics, beer consumption in Russia has dropped since the beginning of the 1980s – down from 24 liters per capita in 1985 and 16 liters in 1990. Producers attribute this decline to the difficulties of the switch to a market economy, bringing increases in taxes and raw material prices. Yet vodka consumption has risen – with disastrous effects on public health. Today, the life expectancy of the average Russian male is only 57 – up from the past few years, but still pathetically low by Western standards.

Alcoholism – and the sheer quantity of vodka consumed in Russia – has a lot to do with this statistic, of course. But it is not the only factor. Russia is in the grip of a contraband epidemic – a steady flow of bootleg alcohol made from Turkish and North American spirits that pour across the Russian border from Georgia. Much of this “raw” alcohol is destined for North Ossetiya – a republic whose entire shadow economy is based on the production of bootleg vodka. Every day, the Russian press reports the confiscation of another shipment at the Georgian border of contraband spirits disguised as juice or vegetables or mineral water. Belarus also does a thriving business in exporting bootleg vodka to Russia. Much of this “underground” production – whether from Belarus or Ossetiya – is a lethal concoction of industrial spirits. In June of this year, 22 people died of alcohol poisoning in the Siberian city of Krasnoyarsk in what was the largest, single documented case of alcohol poisoning in Russian history. And similar, though less dramatic, cases occur every day. According to Murray Feshbach, a well-known demographer from Georgetown University, over 43,000 Russian citizens died from alcohol poisoning in 1995 alone – compared to an average of about 350 Americans a year.

In the face of this disaster, the Russian government is making a concerted effort to restore order in the form of a so-called “state monopoly on alcohol.” On July 1 of this year, President Yeltsin banned the sale of hard liquor in street kiosks and wholesale food markets – some of the most notorious bootleg outlets. Decrees have also been passed requiring the registration and licensing of alcohol manufacturers and traders.

Proponents of these measures maintain that Russia’s government is watching out for public health. Critics say that politicians only care about budgetary payments and that, in any case, their efforts are backfiring. Strict regulations and high excises penalize legal vodka distillers, causing them to cut back production. As a result, vodka production is being driven further and further underground, with frightening consequences for quality. According to recent information from Russia’s Tax Service, 70% of Russian vodka is produced illegally.

Beer can be faked too, of course. Just last year, a large lot of fake Afanasy was discovered. (The company has since introduced stricter control, including a special heat-sensitive stamp on the label that changes color when the bottle is refrigerated). And there are other underhanded tricks that criminals use, like removing the sell-by dates on old beer and replacing them with newer dates. But this kind of scam can happen with any product. More importantly, as opposed to fake vodka, “fake” beer is almost certain to be simply poor-quality beer poured into brand-name bottles. In other words, it’s annoying but it won’t kill you. Which means, by and large, beer is still a comparatively safe alternative to vodka in Russia.

Brewing up taxes

The problem is, no sooner had beer breweries begun reviving after the fall of the Soviet Union than the Russian government started to think of ways to get some of the revenues for itself, primarily through excise taxes. According to Vladimir Shishin of the Beer Industry Association, excise taxes are the “most painful question facing the Russian beer industry.”

In 1992, a 25% excise was set on beer – and this tax was soon raised to 40%. In consequence, beer prices increased and production fell. By 1995, beer production in Russia had fallen to half its previous levels. Realizing that the tax increase was more likely to drive beer producers out of business than to recoup more money from them, the state lowered the beer excise back down to 15%. And Russian brewers received another concession when, in January of this year, the Duma amended an unfavorable 1995 law on alcohol production and sales to exempt beer.

Then, at the end of last year, the State Duma passed a law setting beer excises at R500 per liter, instead of the former percentage tax. In practice, since this tax was added to the production price of beer, it amounted to a significant tax hike – the previous 15% excise levels taxed producers about R250-350 per liter. As if this were not enough, on May 17, 1997, the government decreed that beer – along with a wide range of other products – will have to be marked with special holographic stamps starting next year, to help stem fakes and false bottling. Beermakers have rallied, kicked and screamed, and generally lobbied the government to cut them some slack. The Duma has yet to make a final decision on the excise question [at press time, there were reports of a move to increase the excise to R700 per liter], and, in the meantime, the future of Russian beer hangs in the balance.

The Russian government’s indecisiveness over the excise question confounds beer producers and consumers alike. As Afanasy’s regional manager in Moscow, Aleksei Deryugin, complained, “We ourselves want to work, but how are we supposed to work when the government won’t let us?”

Taxes are not the only problem facing Russian beer producers. Starting in the mid 1980s, foreign breweries began importing their brands into Russia. This accelerated in the current decade with the loosening of import restrictions, such that foreign beer makers now can claim about 40% of the Russian market. Many Moscow bars do not even serve Russian beer, and it is still more fashionable to drink Corona and Heineken than Tverskoye and Nevskoye. On the other hand, there is the patriotism factor. Like the disgusted spectator at Luzhniki, many Russians are frankly suspicious of imported beer, maintaining that “ours is better.”

There are also problems with raw materials. Russia does not currently produce any malt of its own and finds itself in the absurd situation of growing barley which is exported, made into malt and then reimported at extravagant prices. The Baltika company plans to put an end to this situation. This year it created a joint venture with a French firm to produce its own malt and plans to seize up to 40% of the Russian malt market.

Beer – whether domestic or imported – is expensive in Russia. If you find Baltika for less than R5,500 (almost $1) for a half-liter bottle in Moscow, consider yourself lucky. Excises and regulations on special stamps and labels keep driving the price up. And yet, Russian beer is still cheaper than foreign brands (a half-liter of Holstein currently costs R6,500, Amsterdam Navigator costs R9,500 for a half-liter and one-third liter of Miller Genuine Draft costs R9,500). This points to a comeback for Russian beer, or even a boom. Experts maintain that the Russian beer market is far from saturated, and Baltika’s French partners in the malt business expect beer consumption to more than triple in Russia over the next 10 years.

A Little History

Although the history of home brewing in Russia dates back much further, beer production only officially began in 1796, when Catherine the Great signed a decree on the development of beer. In that same year, the Stepan Razin brewery [its current name, given it a decade after the 1917 revolution; before the revolution, it was known as the Kalinkinsky brewery. – Ed.] was founded in St. Petersburg, followed shortly afterward by the Bavaria brewery. Both still exist today.

Under Soviet times, Russian beer got a bad reputation. During the “stagnation period,” piva nyet (“no beer”) was one of the most common signs to be seen in store windows. In fact, everyone assumed that there would be no beer, and asked the question piva nyet? (“there isn’t any beer, is there?”) hopefully, but always in the negative. Shopkeepers turned this beer deficit, and customers’ desperation, to their advantage. If you were lucky enough to find beer in the Brezhnev era, it was almost certain to be watered down with god-knows-what (horse urine, went the joke). Vending machines would sell this dubious brew to brave souls for 20 kopecks a mug. According to Oleg Starukhin of the Russian Beer Lovers’ Association, there were even instances in which “they watered down the beer, added vodka for strength, and for foam, laundry detergent.”

During those difficult times, Russians commonly stood in line for hours with large glass jars to buy beer, as they dreamed of imported bannochnoye pivo (canned beer). The fact that the Russian word banka can refer to both a glass jar or a can led to many an ironic joke (“hey, let’s go get some bannochnoye pivo!”). In Yevgeny Yevtushenko’s poem, Northern Allowance, about a man who receives compensation pay to work in the Far North (where food supplies were even worse than in Moscow), the characters spend their time imagining the wonders of canned beer.

A pravda, tovarisch nachalnik,

v Amerike – pivo v

zheleznykh bankakh?

Eto dlya tekh,

u kovo est valyuta v bankakh ...

A budet u nas zhigulyovskoe

kotoroe ne razbivayetsya?

Ne vsyo, tovarischi, srazu ...

Promyshlennost razvivaetsya ...

And is it true, comrade boss,

that in America the beer comes

in iron cans?

That’s for those

who have money in the bank ...

And will we have zhigulyovskoe

[a light lager beer]

that doesn’t break?

Comrades, not everything happens at once ...

Industry is still developing ...

Thankfully, the situation today has improved greatly so that, nowadays, Russian beer is made according to international standards and is virtually impossible to single out from any other beer in appearance or quality. As Afanasy’s Aleksei Deryugin explained, it is all a matter of taste: “English beer, German beer – everyone drinks what he likes. In terms of quality, it’s all the same. The heart of the matter is that foreign beer is more expensive and ours is cheaper.” Russian beers also contain fewer preservatives than their imported counterparts – if they contain any at all. Many are also unpasteurized, making for a more “alive” taste, along with a much shorter shelf life. Even pasteurized Russian beer is typically only fresh for about a month.

Whereas vodka is traditionally eaten with pickles, beer is accompanied by vobla (dried, unbelievably salty fish) and baranki (rings of salty bread, in the shape of a bagel but tasting more like a pretzel). Vobla – the whole fish complete with the head – can be a daunting sight for the uninitiated, but it goes down great with a few liters of cold beer.

Beer Lovers of

the World Unite!

No story on Russian beer would be complete without a look at the Beer Lovers’ Association – an odd mixture of philosophy, politics and socializing founded in 1995 by members of the Beer Lovers’ political party. According to the Association’s vice president, Oleg Starukhin, the main aim of the Beer Lovers is “to transform Russia from a country of poor-quality vodka to a beer superpower.” The Association’s main activity is an awards ceremony “equivalent to the Oscars or Grammys” in which it awards prizes for the year’s best imported and domestic beers (last year the domestic honor went to Baltika’s Parnass, #5, Lowenbrau was named best foreign brew and the best imported “strong beer” was Miller Magnum). The Association also seeks to popularize beer through conferences, tournaments, and most recently, the “Beer against Drug Addiction” campaign – a group of theatrical skits depicting beer executing drugs (in the form of pills and needles). It has also organized a “Beer Against Alcoholism” CD, featuring popular Russian musicians.

While the concept of “beer against alcoholism” may seem absurd to many Americans, in Russia there is no contradiction. For, as Starukhin went on to explain, Russians do not really consider beer an alcoholic drink. “Analogues to beer have existed for a long time,” he said. “Light drinks like kvas and myedovukha – these are the ancestors of beer.”

When asked about the former Beer Lovers’ Party, Starukhin’s tone turned to one of disgust. He said that, at present, the party hardly exists, that it is completely inactive. “Before the last elections, people who didn’t even drink beer joined. The party turned into a pre-election bloc with a great name. In the end, it had no more relation to beer than, say, the Women’s Party.”

Just as this issue was going to press, some new statistics on alcohol sales appeared in the Russian daily newspaper Sevodnya. Over the first seven months of this year, sales of all types of alcohol – excepting beer – decreased in Russia compared to the same time period last year. Beer sales were up by 6.2%, or 242 mn dcl. This could be the beginning of something big, a true fountain of Russian beer, with repercussions well beyond this year’s rash of festivals. But there are some big ifs. The government will have to keep excise fees reasonable. The pendulum of popular taste will have to swing solidly toward Russian beer and away from the more trendy foreign beers (to say nothing of Russia’s beloved vodka). But, all in all, the future looks bright. In the words of Oleg Starukhin, “elections, politics, they come and go, but beer is eternal.” Russia’s beermakers are counting on this...  RL

Anna Hoare is Russian Life’s resident copy editor, translator and beer connoisseur. (Photos not otherwise credited were provided by Piva! Magazine.)