Rejoice. After three months of new and excruciating excise regulations on imported alcohol, the blockade has been lifted. Good booze has finally begun to trickle back onto your local supermarket shelves. But the news ain't all that good. The booze might be back, but store shelves aren't any better stocked for it. And, as predicted (see Kompromat Korner, eXile #244), prices on imported alcohol have jumped at least by 30% all across the board. A .75 liter bottle of Jack or Johnny Walker Red Label now runs $60, provided that you're lucky enough to find one at your local store.
At the current supermarket rate, one shot of middle-shelf whiskey like Jack costs about 105 rubles, or almost $4. It's pricy for store-bought alcohol, but there is a bright side. It seems that the excise law has brought Russia to a point where going out drinking is no more expensive than holing up at home with a bottle of booze. And that's not bad, is it? The "it's too expensive to go out" excuse no longer applies.
A recent visit to the grunge dungeons of Project OGI revealed that a shot of whiskey costs less than 150 rubles. That's including service and entertainment. Talk about value! And OGI's not alone. By our calculations, most midlevel Moscow bars charge only a dollar or two more, per shot, than what you'd be paying if you bought the booze from a store.
The question is how do bars and restaurants manage to pass on such incredible savings? The obvious answer is that restaurants aren't buying at the new rates at all, but are dipping into old -- and now illegal -- stock that they had to return to wholesalers by July 1. It's an open secret that synagogues all over Moscow have been selling their stocks of Moldovan kosher wine on the DL ever since it was banned in March. If the Jews are doing it, why can't everyone else?
Well, they are, according to what the eXile's entertainment stringer told me in a drunken 1am call two weeks ago.
"Hey! I got a story for you, man. I'm here getting wasted at Garage and I was just talking to the bartender... I asked him how they manage to stock a full selection of alcohol when you can't get it anywhere else in the city... and it turns out that all their booze is purchased illegally. It's awesome, dude!" he slurred.
If what he was saying is true, they're breaking the law and aren't even afraid to flaunt it. It's not like our man is cool with the Garage's management. He just posed a drunken question to one of the bartenders. Supposedly, Garage takes out their illegal stock at night when they know there isn't going to be a check and tuck it away when the sun begins to rise.
I went to Garage to see for myself. But I didn't drink enough to earn their confidence. "All the alcohol we have has new excise labels," my bartender told me, even offering to show me the label.
"But how do you manage to maintain the old prices?"
It was simple, he said. They're taking the brunt of the cost themselves. Oh, right! I didn't account for the altruistic side of Moscow night clubs! But his story was suspect. When I first got there at around 10pm, the bartenders were hastily switching half-empty bottles grabbed from under the counter with the ones on the display. I used to tend bar, and this didn't look like an ordinary restocking. There are other theories as to what was happening, though.
"The shuffling that you say was probably the employees stealing from the owner," the legendary Doug Steele said when I asked him to try to explain what I saw at Garage. He didn't think it was likely that the place served old booze.
"Restaurants and bars have a choice. They can either eat the increased cost, or risk losing business," Doug explained. Apparently, beer and vodka sales help offset the loss and a bar's profit margins are high enough for the price hike not to matter. Doug, who's never had an issue with subsidizing his patrons' alcohol problems, says that his restaurants are taking a 16% cut to their bottom line because he refuses to raise prices.
The reason operating a bar has become so expensive is nothing other than the 'ol supply and demand. Before the new excise law took effect, there were about 250 alcohol distributors working in Russia. Today, only 30 distributors remain. Most went belly up, and the remaining ones jacked up their prices because they could.
Even though alcohol is still getting imported, the huge drop in supply volume has created a scarcity of virtually every kind of booze. As a result, distributors can't meet the demand of establishments with a high turnover. To make up for the deficit, bars are forced to send workers to forage for the booze they need in common supermarkets. That's why store shelves are almost devoid of imported alcohol even now that customs has cleared up the technical glitches. Thing is, not only is this practice expensive, it's also illegal. Establishments with liquor licenses are theoretically only allowed to buy alcohol from alcohol distributors. But even these petty booze buyout crimes don't solve all their problems and answer all my questions.
The problem is that alcohol distributors, in an attempt to meet a wide demand, are only importing the most popular brands and labels, leaving the stuff that won't sell as well for later. Specialty alcohols like Cointreau or Knob Creek can't be found on the market, yet bars still manage to keep them stocked.
So where do they get it? No one on the inside told me as much, but with warehouses chock full of illegal, virtually untraceable, and economically inert alcohol stocks, it's not difficult to make an educated guess. Given that government regulators have their hands full keeping the new excise system afloat, surprise inspections are the least of their worries. Not only does buying illegal booze make economic sense, but there's virtually no chance of getting caught.
And we may only be seeing the tip of the iceberg. Rumors are floating around that the government's bent on installing a similar excise scheme for domestic liquor producers, which means that a vodka deficit might be just around the corner. And I'd advise the government to be careful. Russians may be willing to put up with their rights getting trampled on, but the last time there were vodka shortages -- think back to Gorbachev's plan to dry out Russia -- a regime change was right around the corner.