Market Overview

Russia’s Newest Billionaire Made a Fortune From Cheap Booze

Russia’s very sober president, Vladimir Putin, has spent 18 years erecting barriers to selling alcohol to a population that’s still recovering from the decade-long bender that followed communism’s collapse. Crackdowns on kiosks and ads, electronic inventory tracking and higher taxes have all succeeded in suppressing consumption. They’ve also cleared the field for a Soviet-era bootlegger with a knack for navigating complex rules to make a fortune selling cheap booze.

Sergei Studennikov opened his first discount liquor store near the gritty industrial hub of Chelyabinsk on the Asian side of the Ural Mountains a dozen years ago. Today, his Krasnoe & Beloe chain is the fastest-growing major retailer in the country, with 6,700 outlets in 57 of 85 regions, a rollout that intensified during the longest economic slump of Putin’s rule.

A sales jump of about 50 percent to 215 billion rubles ($3.3 billion) last year and another 40 percent this year has turned the former wholesaler into Russia’s newest billionaire, according to the Bloomberg Billionaires Index. And with funding from state-run banks including Sberbank and VTB, Studennikov, who got a taste of profit selling illegal vodka amid an anti-alcohol campaign in the 1980s, said he has no intention of slowing down.

Russia has long been plagued by alcoholism in part because vodka has always been cheap. The government instituted a price floor for retail sales in 2009 only to cut it slightly during the depths of the recent recession to discourage the proliferation of often deadly moonshine. But at less than $3, the minimum price for a half-liter bottle is still less than a Burger King Whopper. Studennikov said he fully supports stricter oversight of the industry in part because it’s dealt a body blow to the black market. Tougher rules have also helped repair some of the catastrophic demographic damage the country suffered during the chaos of the 1990s, when economic and emotional depression drained six years off the average man’s life.

Russia’s Newest Billionaire Made a Fortune From Cheap Booze, Bloomberg, Oct 02
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