“What effect did the war have on alcohol consumption in Ukraine and the preferences of Ukrainians. Main industry trends”, — write: epravda.com.ua
The alcohol industry is an important part of the food industry and the country’s economy in general. However, recent years have become a period of large-scale changes for this market. Economic instability, legislative changes, growing demand for alcohol-free alternatives, and the impact of martial law — all of these factors have significantly reshaped both consumer behavior and manufacturers’ business strategies. Did the restrictions due to the legal regime of martial law affect the market of alcoholic beverages in Ukraine? How did the alcoholic preferences of Ukrainians change during this difficult period? Have people started to drink less alcohol, or, on the contrary, have they started to look for a way to unwind in alcohol? What trends have emerged in the consumption of beer, wine or non-alcoholic alternatives? Changes in the structure of alcohol consumption Let’s first look at Pro-Consulting’s statistics on the percentage of sales of various alcoholic beverages in 2021. The sales leaders were liquor and vodka products (35%), wine and beer (19%). However, in 2022, the numbers dropped, with sales of spirits down 53%, wine down 58%, and beer down 34%. Advertisement: In 2023, the WHO conducted a survey to find out if consumption habits had changed. 77.4% of respondents stated that they drank alcohol in 2023, of which 5.5% of respondents answered that they started drinking more alcohol, 21.5% of respondents reduced the amount of alcohol, and 6.8% stopped drinking altogether. Advertisement: It is interesting that the average frequency of alcohol consumption, according to the survey, was 41 days a year, men drank on average 58 times, and women drank 27 times during this time, according to this, the average daily consumption of 8.5 g of alcohol (14.7 – men and 3.1 – women). The majority of respondents (71.3%) drank at home last year, 47.2% while visiting, and only 14.1% in bars or restaurants. Also, 9.5% noted that they consumed alcohol on the street. Some of the respondents noted that during the year they consumed unregistered alcohol, namely 42.9% – domestic alcohol, 11.4% – imported and 0.7% alcohol substitutes. At the same time, 55.7% of rural residents used alcohol at home, compared to 36.7% of city residents. The figures show that alcohol consumption is becoming more moderate and the proportion of people who have reduced their consumption exceeds those who have increased. Factors of influence and restrictions The legislation of Ukraine allows the ban on the sale of alcoholic beverages during the period of martial law. So, from March 15, 2022, it was forbidden to import alcohol for sale into the territory of the Donetsk region. In 2024, the state of Ukraine began to introduce changes in the regulation of alcoholic beverages. The law on state regulation of the production and circulation of ethyl alcohol, alcohol distillates, bioethanol, alcoholic beverages, tobacco products, tobacco raw materials, liquids used in electronic cigarettes and fuel was adopted. Also, in the near future, the eExcise system will be launched, which will fully control the circulation of alcoholic beverages and tobacco products. In July, the Verkhovna Rada adopted a law on increasing the excise tax rate by UAH 3.81 – from UAH 8.42 to UAH 12.23 per 1 liter for intermediate products (to the level of the rate for sparkling wines and carbonated wines, fermented beverages, flavored sparkling wines). Most of the regulatory legal acts are European integration and aimed at bringing Ukraine’s legislation closer to EU legislation. During the full-scale military invasion, a significant number of alcoholic beverage factories were destroyed and were forced to relocate their production and adapt to new realities. Thus, in 2023, the Enterprise “Artemivsky Champagne Wine Factory” in Bakhmut was occupied and partially destroyed. Recently, it became known that the company is restoring its facilities in Cherkasy region. Read also: Expensive Ukrainian drink conquers the market. How a veteran of the Armed Forces makes elite alcohol from currant buds Also, the war also affected small craft breweries, which are becoming more and more popular among Ukrainians every year. “Ten Men” is a brewery, the production of which was located in the city of Vovchansk, Kharkiv region. After the occupation of the city in 2022 and the destruction of production facilities, the brewery moved to Lviv and adapted to contract production. It is also important to consider the changes in the restaurant business as a result of the war. For example, in Kyiv, a temporary regulation of the sale of alcohol has been established both in supermarkets and in restaurants and cafes. However, the time of sale of alcohol in restaurants and cafes is longer, which creates a demand for visiting such establishments. Although the restaurant market shrank from 36,500 to 32,000 establishments during the full-scale war, in 2023 the number of registrations of FOPs and LLCs with restaurant KVEDs increased sharply. It is also worth considering the outflow of the population as a factor in changes in the consumption of alcoholic beverages. According to the UNHCR, as of November 18, 2024, 6,785,000 Ukrainians received refugee status outside of Ukraine. At the same time, according to IOM data, as of November 2024, the total number of IDPs is 3,669,000. How the restrictions affected the budget The temporary ban on the sale of alcohol at the beginning of the full-scale invasion cost the Ukrainian economy dearly: it led to a drop in production, circulation, as well as a decrease in revenues from excise tax to the budget. According to the calculations of the auditors of the Chamber of Accounts, during the period of the most severe restrictions in March-April 2022, only UAH 700 million of excise tax on alcoholic beverages came to the state budget. This is 73% less than for the same period in 2021. In general, in 2022, revenues of AP from liquor and vodka products decreased by 6.9% compared to the previous year and amounted to UAH 8.4 billion. Sales volumes in 2022 fell by 15.9%, while production volumes decreased by 11%, and imports – by 34.4%. Restrictions were also imposed on alcohol producers. Falling sales in March-April 2022 led to an 11% drop in production. For many producers, this became a significant challenge, as they not only lost a significant part of their income, but were also forced to reduce their expenses, in particular for the maintenance of personnel. It is important to note that alcohol production is the final link in a long chain that includes farmers, bottle and label makers, logistics workers, certification companies, and more. This chain is completed by retail outlets and restaurants. Accordingly, the reduction in the production of alcoholic beverages affected the earnings of a large number of workers involved in related fields in particular. “Dry law” in Donetsk region The situation for Donetsk region, where the “dry law” has not been canceled to this day, turned out to be critical. The local authorities do not plan to lift the restrictions until the end of the martial law and explain their decision by the fact that the longest conflict line passes in the region and alcohol consumption is dangerous, especially for the military, who are constantly under stressful conditions. As a result of this decision, during the entire time of the full-scale invasion of the local budgets of the region, there were no revenues from the excise tax on alcohol, and alcohol consumption in the region did not stop, but went into the shadows. From the beginning of the full-scale invasion until the first half of 2024, the Donetsk police registered and confiscated more than one million liters of illegal alcohol worth more than UAH 100 million and recorded 480 cases of alcohol sales at retail outlets. And these are only officially registered cases. The consumption and production of moonshine drinks, which are also subject to the ban, have also increased significantly. This year alone, the police of Donetsk region discovered 931 cases of moonshine production or storage. Shadow business Speaking of the illegal circulation of alcohol throughout the country as a whole, in 2022 the level of shadow consumption of alcoholic beverages reached its peak growth and amounted to 47%. Currently, the illegal alcohol market, according to WHO estimates, makes up more than a third of the total market, with strong alcohol accounting for more than 50%. Russia’s full-scale invasion of Ukraine was a turning point that affected all aspects of Ukrainian life, including alcohol consumption habits. On the one hand, economic difficulties, sales restrictions and curfews reduced the availability and frequency of consumption of alcoholic beverages. On the other hand, the increased level of stress prompted a part of the population to seek relief through the use of alcohol. Significant trends have become an increase in demand for local and more affordable products, as well as a growing interest in alcohol-free alternatives. The market has adapted to the new conditions, offering consumers more craft drinks, convenient packaging formats and new delivery methods. These changes demonstrate the resilience and flexibility of both producers and consumers. In the future, we can expect further development of local brands, emphasis on a healthy lifestyle and strengthening of the culture of moderate and responsible consumption. The text was prepared as part of the research of master’s students of the Kyiv School of Economics of the educational and scientific program “Public Policy and Governance” Authors: Anna Baranova, IT specialist Daria Dukacheva, specialist in community development Anastasia Kalinina, lawyer-advocate Serhiy Rusakov, culturologist, head of the Association of Culturologists of Ukraine Infographics: Olga Karpenko