The hidden perils in the demon drink
You can buy a bottle of vodka for zł. 15 at Warsaw's Stadium market. And those who sell the stuff - many of them Ukrainians - are happy to let you have a litre of foreign whisky for zł. 25; happy, that is, as long as you don't ask too many questions about where it came from. You see, there's a good chance that what you're buying at the Stadium may not be entirely legitimate.
"The Stadium market is probably the principal outlet in Warsaw for smuggled vodka," says Donald Blair, a consultant for international importers of spirits. Put another way: "It's large-scale, it's blatant, and it should be condemned." So says Grzegorz Chojnacki, commercial director of the Koneser Vodka Factory in Warsaw. As a legitimate player in the alcohol game, he is understandably frustrated by the massive scale of the non-official alcohol market. His own estimate is that 30%-40% of all the spirits consumed in the country are either smuggled or counterfeit.
The essential secretiveness of the alcohol black market makes producing an accurate estimate of its scale impossible. However, the figure produced by Chojnacki does tally roughly with one quoted by Blair, who believes that alcohol consumption is around 30 million cases annually, of which roughly a third derives from sources that are non-official.
To a certain extent, the structure of the vodka industry lends itself to counterfeiting. There are estimated to be some 900 small factories scattered across the country, which supply the 20 or so major distilleries with the raw spirit they need to produce the popular vodka brands. However, there remains little doubt that some of these far-flung and often tiny producers fall prey to the temptation of bypassing the larger vodka-makers and selling their own sideline products directly to the consumer. There's no doubt also that there are unregistered enterprises or individuals who produce their own vodka; a favourite trick among those who do so for commercial gain is to obtain empty, used bottles of famous brands and fill them with the moonshine, ready to be passed off as the original.
By drinking liquor that has not been subjected to the normal rigorous supervision and inspection, people are risking their health, and even their lives. The country has problems enough with sickness and death caused by alcohol abuse - one startling figure is the 1,050 people who committed suicide last year in alcohol-related incidents. Drinking improperly produced moonshine is known to have killed several people so far this year. Many more have wound up in hospital.
Another victim of the bootlegging is the national budget. Clearly those who produce vodka illegally are unlikely to declare their earnings and pay tax, so the State Treasury loses out, just as it does when smugglers bring spirits into the country. The spirits industry estimates that 75% of all imports derive from non-official sources.
"'The real loser at the end of the day is always the government, because it's a complete 100% loss of fiscal revenue," Blair says.
The main route for illegally bringing vodka into the country is across the eastern border. The most popular route for whisky and other foreign spirits used to be across the border with the Czech Republic, where whisky, for example, is subject to a duty of just 5% compared to an effective import tariff of 98% in Poland. The lure of the potential profit was clear for the so-called "ants" who would make several crossings of the border a day, bringing in a bottle or two each time.
The financial rewards of alcohol smuggling become obvious if you compare prices in Poland with those in some of her neighbours. A bottle of whisky that retails for over a22 here would cost you less than half that in Germany. In the Czech Republic the shelf price would be a14.50. and in Hungary, a4. Even in Ukraine the retail price is, at a18.50, well below the asking price in Poland.
However, recent action by the administration, which includes imposing monthly quotas on the amount of alcohol an individual can bring into the country, has undermined this lucrative trade.
Far more damaging to business for both the smugglers and the bootleggers was the 30% reduction in excise tax on spirits, introduced on October 1.
"It's very early to tell," Blair says, "but it does look like there has been an increase in the legal trade in vodka of about 10% to 15%. There is no indication that consumption itself has increased to any extent. It seems that there has been a substitution effect, whereby legally sold products are now substituting for smuggled products."
It would appear, therefore, that any fears the government might have entertained about the cut in tax leading to a major fall in revenue, have proved to be unfounded. In the long term, the effects for the budget are expected to be quite healthy.
"Initial figures show that what the drinks industry has been saying for many years is in fact happening," Blair says. "If excise duties drop to lower levels, then total government revenue does, in fact, increase." Another anticipated benefit is a reduction in the number of people suffering the injurious effects of drinking unsafe alcohol.
However, the international spirits industry insists that tariffs are still far too high, and that counterfeiting and smuggling will continue to flourish as long as there is no significant reduction in shelf prices. Despite the October 1 excise tax cut, the effective import tariff on Scotch whisky remains very high at 98%. Figures from Eurostat indicate that officially documented imports of spirits from the EU were 5,400 tonnes in 2001. With illegal imports included, the true figure is believed to be nearer 20,000 tonnes.
On October 16, EU negotiators signed a deal providing for a further 30% reduction in import tariffs for EU spirits. However, the agreement specifies a quota of 3,000 tonnes - little more than 50% of current legitimate imports - and there is no clear indication of what tariff level will apply when the 3,000 tonne limit is exceeded. Spirits producers are very unhappy about the deal. In a statement Hugh Morison, president of the European Confederation of Spirits Producers, said, "Poland is due to join the EU in 2004. The European Commission has already made it clear that no tariffs or quotas will be permitted from accession. It is therefore astonishing that Poland has introduced a quota at this time; this will do nothing to address the problems from the already rampant black market."
An area of the alcohol business, the legality - or otherwise - of which is less easy to define than smuggling and counterfeiting, is the production and distribution of imitation, or look-alike, brands. It's a problem that is commonly faced by the producers of a whole range of branded goods, although alcohol and cosmetics are favourites of the "forgers" on account of the relative simplicity of the production process and the high level of the potential profits. In the case of alcohol, unscrupulous manufacturers produce bottles that, in their designs and colourings, are very similar to a recognised brand. The name is also very similar; Bulls, for example, apes a highly respected vodka.
The packaging may be very attractive, but there is no guarantee of the quality of what's inside the bottle. Certainly it's not up to the standard of the brand it imitates.
"The product may have other qualities from what you expect," says Aleksander Krzyżowski, managing director of the Polish Association of Branded Goods Manufacturers. Pro-Marka, as it is known, is preparing a campaign to be launched in the new year, against these look-alike goods, with alcohol a principal focus.
However, the association finds itself in a legal grey area, since the courts here, unlike in western Europe, have little experience in such cases; and so Pro-Marka would find itself venturing into the unknown if it were to take to court a case involving the production of imitation alcohol.
"Is it illegal?" asks Krzyżowski rhetorically. "The law in this matter is not very specific." What the association often prefers to do, instead of pursuing a case through the courts, is inform the producers of the original brand, who can then apply whatever pressure they see fit to deal with the production of the look-alike.
The choice between buying either the original alcohol or the look-alike presents the consumer with a dilemma only in so far as cost - and commercial ethics - is concerned. The distinction between the two products is relatively clear; it's just a question of whether to buy the cheaper, imitation product or pay a little extra for the assured quality of the recognised brand and the sense of self-righteousness that comes with the purchase.
In the case of spirits that are counterfeit or smuggled, however, it is not always easy to distinguish between the illicit and the genuine article. As we approach the festive season, the experts have some advice for those of us who have doubts about how the alcohol we are buying might have reached the point of sale.
"Look carefully at the bottle," says Chojnacki from the Koneser factory. There are two key things to watch out for, he says; the top, which may not fit properly - bootleggers don't tend to have the technology to take care of such niceties - and the date of production, which may be obscured or non-existent. Another thing is, if the bottle is not in pristine condition, it may well be one that has been filled by a bootlegger with illicit vodka.
As for spotting smuggled alcohol, Blair, the consultant to the foreign importers, has this advice: "It's important to emphasise that by far the most secure way of ensuring that you're getting both value for money and a legitimate product is to make sure that you only purchase through the normal commercial channels - supermarkets, liquor stores of long standing, and certainly not from street markets or from individuals selling you a product which is much cheaper than is normally commercially available."
In this vein, there is one piece of advice we should all bear in mind. As Blair puts it: "In the world of spirit alcohol in Poland, there is no such thing as a bargain."
"The Stadium market is probably the principal outlet in Warsaw for smuggled vodka," says Donald Blair, a consultant for international importers of spirits. Put another way: "It's large-scale, it's blatant, and it should be condemned." So says Grzegorz Chojnacki, commercial director of the Koneser Vodka Factory in Warsaw. As a legitimate player in the alcohol game, he is understandably frustrated by the massive scale of the non-official alcohol market. His own estimate is that 30%-40% of all the spirits consumed in the country are either smuggled or counterfeit.
The essential secretiveness of the alcohol black market makes producing an accurate estimate of its scale impossible. However, the figure produced by Chojnacki does tally roughly with one quoted by Blair, who believes that alcohol consumption is around 30 million cases annually, of which roughly a third derives from sources that are non-official.
To a certain extent, the structure of the vodka industry lends itself to counterfeiting. There are estimated to be some 900 small factories scattered across the country, which supply the 20 or so major distilleries with the raw spirit they need to produce the popular vodka brands. However, there remains little doubt that some of these far-flung and often tiny producers fall prey to the temptation of bypassing the larger vodka-makers and selling their own sideline products directly to the consumer. There's no doubt also that there are unregistered enterprises or individuals who produce their own vodka; a favourite trick among those who do so for commercial gain is to obtain empty, used bottles of famous brands and fill them with the moonshine, ready to be passed off as the original.
By drinking liquor that has not been subjected to the normal rigorous supervision and inspection, people are risking their health, and even their lives. The country has problems enough with sickness and death caused by alcohol abuse - one startling figure is the 1,050 people who committed suicide last year in alcohol-related incidents. Drinking improperly produced moonshine is known to have killed several people so far this year. Many more have wound up in hospital.
Another victim of the bootlegging is the national budget. Clearly those who produce vodka illegally are unlikely to declare their earnings and pay tax, so the State Treasury loses out, just as it does when smugglers bring spirits into the country. The spirits industry estimates that 75% of all imports derive from non-official sources.
"'The real loser at the end of the day is always the government, because it's a complete 100% loss of fiscal revenue," Blair says.
The main route for illegally bringing vodka into the country is across the eastern border. The most popular route for whisky and other foreign spirits used to be across the border with the Czech Republic, where whisky, for example, is subject to a duty of just 5% compared to an effective import tariff of 98% in Poland. The lure of the potential profit was clear for the so-called "ants" who would make several crossings of the border a day, bringing in a bottle or two each time.
The financial rewards of alcohol smuggling become obvious if you compare prices in Poland with those in some of her neighbours. A bottle of whisky that retails for over a22 here would cost you less than half that in Germany. In the Czech Republic the shelf price would be a14.50. and in Hungary, a4. Even in Ukraine the retail price is, at a18.50, well below the asking price in Poland.
However, recent action by the administration, which includes imposing monthly quotas on the amount of alcohol an individual can bring into the country, has undermined this lucrative trade.
Far more damaging to business for both the smugglers and the bootleggers was the 30% reduction in excise tax on spirits, introduced on October 1.
"It's very early to tell," Blair says, "but it does look like there has been an increase in the legal trade in vodka of about 10% to 15%. There is no indication that consumption itself has increased to any extent. It seems that there has been a substitution effect, whereby legally sold products are now substituting for smuggled products."
It would appear, therefore, that any fears the government might have entertained about the cut in tax leading to a major fall in revenue, have proved to be unfounded. In the long term, the effects for the budget are expected to be quite healthy.
"Initial figures show that what the drinks industry has been saying for many years is in fact happening," Blair says. "If excise duties drop to lower levels, then total government revenue does, in fact, increase." Another anticipated benefit is a reduction in the number of people suffering the injurious effects of drinking unsafe alcohol.
However, the international spirits industry insists that tariffs are still far too high, and that counterfeiting and smuggling will continue to flourish as long as there is no significant reduction in shelf prices. Despite the October 1 excise tax cut, the effective import tariff on Scotch whisky remains very high at 98%. Figures from Eurostat indicate that officially documented imports of spirits from the EU were 5,400 tonnes in 2001. With illegal imports included, the true figure is believed to be nearer 20,000 tonnes.
On October 16, EU negotiators signed a deal providing for a further 30% reduction in import tariffs for EU spirits. However, the agreement specifies a quota of 3,000 tonnes - little more than 50% of current legitimate imports - and there is no clear indication of what tariff level will apply when the 3,000 tonne limit is exceeded. Spirits producers are very unhappy about the deal. In a statement Hugh Morison, president of the European Confederation of Spirits Producers, said, "Poland is due to join the EU in 2004. The European Commission has already made it clear that no tariffs or quotas will be permitted from accession. It is therefore astonishing that Poland has introduced a quota at this time; this will do nothing to address the problems from the already rampant black market."
An area of the alcohol business, the legality - or otherwise - of which is less easy to define than smuggling and counterfeiting, is the production and distribution of imitation, or look-alike, brands. It's a problem that is commonly faced by the producers of a whole range of branded goods, although alcohol and cosmetics are favourites of the "forgers" on account of the relative simplicity of the production process and the high level of the potential profits. In the case of alcohol, unscrupulous manufacturers produce bottles that, in their designs and colourings, are very similar to a recognised brand. The name is also very similar; Bulls, for example, apes a highly respected vodka.
The packaging may be very attractive, but there is no guarantee of the quality of what's inside the bottle. Certainly it's not up to the standard of the brand it imitates.
"The product may have other qualities from what you expect," says Aleksander Krzyżowski, managing director of the Polish Association of Branded Goods Manufacturers. Pro-Marka, as it is known, is preparing a campaign to be launched in the new year, against these look-alike goods, with alcohol a principal focus.
However, the association finds itself in a legal grey area, since the courts here, unlike in western Europe, have little experience in such cases; and so Pro-Marka would find itself venturing into the unknown if it were to take to court a case involving the production of imitation alcohol.
"Is it illegal?" asks Krzyżowski rhetorically. "The law in this matter is not very specific." What the association often prefers to do, instead of pursuing a case through the courts, is inform the producers of the original brand, who can then apply whatever pressure they see fit to deal with the production of the look-alike.
The choice between buying either the original alcohol or the look-alike presents the consumer with a dilemma only in so far as cost - and commercial ethics - is concerned. The distinction between the two products is relatively clear; it's just a question of whether to buy the cheaper, imitation product or pay a little extra for the assured quality of the recognised brand and the sense of self-righteousness that comes with the purchase.
In the case of spirits that are counterfeit or smuggled, however, it is not always easy to distinguish between the illicit and the genuine article. As we approach the festive season, the experts have some advice for those of us who have doubts about how the alcohol we are buying might have reached the point of sale.
"Look carefully at the bottle," says Chojnacki from the Koneser factory. There are two key things to watch out for, he says; the top, which may not fit properly - bootleggers don't tend to have the technology to take care of such niceties - and the date of production, which may be obscured or non-existent. Another thing is, if the bottle is not in pristine condition, it may well be one that has been filled by a bootlegger with illicit vodka.
As for spotting smuggled alcohol, Blair, the consultant to the foreign importers, has this advice: "It's important to emphasise that by far the most secure way of ensuring that you're getting both value for money and a legitimate product is to make sure that you only purchase through the normal commercial channels - supermarkets, liquor stores of long standing, and certainly not from street markets or from individuals selling you a product which is much cheaper than is normally commercially available."
In this vein, there is one piece of advice we should all bear in mind. As Blair puts it: "In the world of spirit alcohol in Poland, there is no such thing as a bargain."
