Brewers evaluate beer labeling: “beyond common sense”

Interview
Brewers evaluate beer labeling: “beyond common sense”
Brewers evaluate beer labeling: “beyond common sense”
13 July, 12:23
The Chairman of the Council of the Union of Russian Brewers Daniil Briman, referring to the opinion of the brewers, officially published an open letter addressed to President Vladimir Putin. Producers are asking to abandon the mandatory labeling of brewing products from 2023.

Ekaterina Maksimova

Market participants warn that "the output of beer in the Russian Federation will decrease by 20‒30% with a proportional reduction in excise duties, the cost of brewing products will increase by more than 10%." There is also a loud statement in the letter: the work of the brewing industry will be paralyzed. Daniil Briman explained his position to Novye Izvestiya with examples, compared beer "with a pill" and announced the costs of brewers due to the introduction of labeling.

-Why exactly an open letter and immediately addressed to the President?

-Because, unfortunately, market participants seem to have exhausted the possibility of a constructive dialogue with authorities at all levels. We have long tried to explain the inexpediency of this system.

In my opinion, any decision related to the introduction of new systems should take into account all the circumstances of the ongoing events around. All risks are controllable and uncontrollable. There must be calculation, logic, common sense. And the proposal for labeling brewing products is generally beyond common sense.

Brewers brought a lot of arguments against. One is that labeling systems cost a lot of money. Highly. And it is obvious that the business will not be able to take and assume all these costs without broadcasting them further down the chain to the end consumer. This system, of course, will be expensive for consumers, because directly or indirectly, but all these costs fall into the cost of production.

-How expensive? In an open letter to the president, it is only reported that the cost of brewing products will increase by more than 10% due to labeling.

- In general, for the entire industry it will cost tens of billions of rubles. This is only with a one-time implementation of the system. And then it must be constantly supported.

Depending on the size of the enterprise, it will take from a few people to several dozen people in large companies just to maintain this system. So even multiply the payroll of these specialists, components, consumables ...

You see, it does not matter here whether the final cost will increase by 5-10-20% or 50%, provided that this decision really leads to an improvement in product quality. In this case, a brewery. If the goal is such, then any expenses are justified.

But there is simply no market for counterfeit beer. These are not drugs where it is impossible to understand what the white tablet is made of: starch or is it really a drug.

What is counterfeit beer? It has to be produced anyway, and it's a complex technological process. And there is not a single recorded case when a fake beer would bring some kind of threat to the health of consumers. There are no such medical cases. There are some things, you understand, that do not even require proof. They are at the level of common sense are simply obvious.

In addition, the EGAIS system works. It develops, it expands. Rosalkogolregulirovanie, as a specialized agency, is actively working to improve this system. The question is, if we introduce labeling, then EGAIS is ineffective? I haven't heard about it. Nobody recognizes this. Everyone confirms that it is effective. Why then introduce more labeling? We have online counters at factories. Well, what is it for? Unclear.

-In your letter, you emphasize that the key units and components of the marking system are produced in the USA, Germany, Italy, and Japan. And our brewers "will actually enrich Western technology corporations." Has the possibility of import substitution been studied?

- Most of all components of this system are imported components. Even if they say that there are some domestic developments, they are still based on foreign components. Consumables that are used for these brands are also imported components.

Accordingly, by implementing the labeling system, we are making the entire industry and all its counterparties even more dependent on the will of foreign states, which today or tomorrow can, as we have already seen, include any product on the sanctions list. We are already under that pressure.

-So everything in brewing, starting with hops, is imported?

- Hops, production lines, various filter materials, components, chemicals - everything is overwhelmingly imported. Domestic - only malt.

Why do we need to increase borrowing now in addition to this? The predicted risks can be managed by the business. But there are also unpredictable ones. When we talk about sanctions, we have no idea what fantasies will be born tomorrow or the day after tomorrow in the countries under sanctions pressure.

For example, all these components, including components for marking, will be at risk, and we will simply be paralyzed. Yes, they will start looking for analogues, some substitutes, but what should we do at this time?

- Using the example of the production of drinking water, which is already being labeled, you have calculated that the production of beer in Russia will be reduced by 20-30%. Can you justify this?

-Slowing down the speed of the lines. These crafters can manually stick stamps on their mini-batches. For large manufacturers, and these are the main market participants, everything is automated. And imagine slowing down the speed of lines in large-scale production.

No one, excuse me, keeps one extra line in his pocket in reserve, just in case. I'm not even talking about the fact that now the import of complete lines into Russia is prohibited. The main equipment manufacturers are Germany, Italy and other Eurozone countries.

Even before the sanctions, this task was made more difficult by the pandemic. The entire automation system, programmers, sensors, optics, and so on - they have dramatically increased production time. And even if, for example, tomorrow the bottling line can be imported into Russia again, it will take a lot of time. Before the pandemic, delivery took from 6 to 8 months, now it takes from 12 to 18 months. And because of the sanctions, I repeat, it is simply impossible.

Plus, let's consider the economy. Any high-speed line, each separately, is a budget of several million euros. Objectively, not every company can afford such expenses, even a successful company. Especially now, when consumer demand is not growing.

Therefore, we say that the introduction of this labeling can lead to paralysis of the entire industry. This can be loudly said, and everyone will say that this is an exaggeration. But believe me - we are already on the verge of paralysis.

Brewers can’t even get spare parts for the main equipment on time… All breweries create additional stocks of labels, crown caps, chemical components, filter elements, and hops. This diverts working capital, but producers do not know whether it will be tomorrow or not. How many months will it take then to organize alternative delivery routes? How much more expensive they will be - no one understands this.

- Have you started importing hops that did not fall under sanctions through new logistics routes?

- We started, but only now it costs twice as much. And it takes twice as long to import, that's all.

- How much has the cost of a bottle of beer increased after the sanctions?

- For small producers by 40% - 60%, for medium and large ones - by 15-30%. This is only in the last few months. And objectively we understand that this is not the limit. The dynamics of prices in the market continues. And then, no one knows what the price of a new malt crop will be. No one knows what the price of a new hop crop will be. It's still ahead. No one understands how supply chains can change after the boycott of the Kaliningrad region announced, for example, to the Baltic states, and what our response will be.

The number of risks in general for the economy is now too high. And to create some additional risks on the scale of the entire industry by introducing labeling right now ... Well, this is simply not the right time, at least. As a maximum - it is senseless and impractical.

Reference: Daniil Briman - Chairman of the Council of the Union of Russian Brewers since February 2020. Over the years, he has held senior positions at Pikra, Baltika Brewing Company, Khlebny Dom Fazer Group, Bork, Siberia Holding Company.

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