8/9/2006 - New laws introduced by the Russian government governing the regulation of alcohol could decimate the country’s fragrance industry and affect a number of other cosmetic products that use alcohol as a base ingredient.
The head of the trade Association Business Russia, Boris Titov, said that he believed the new rules could see Russian alcohol supplies reduced to nothing by September as manufacturers use up dwindling supplies.
The law took effect from July, and requires that alcohol importers and retailers operate through a centralized data and licensing system, which will regulate the manufacture and turnover of ethyl acohol, alcoholic and spirit-based products.
Although the drinks industry is the primary target for the new regulation, as part of the government’s move to crack down on the country’s high rates of alcohol abuse, the $7bn cosmetics industry is also being hard hit with manufacturers finding it increasingly difficult to source alcohol-based ingredients.
The regulation means that all manufacturing companies and distributors of alcohol-based products will have to register with the the data system as incorporated businesses.
As an estimated 90 per cent of manufacturers are not incorporated businesses, this presents a big problem.
Further more the central data system relies on a computer system that is complicated to set up and expensive. Many fragrance and cosmetic companies say they simply do not have the resources to invest in it.
The Association of Perfumery, Cosmetics and Household Chemistry Manufacturers, together with the Perfumery and Cosmetics Association of Russia believes that the new laws will probably reduce fragrance production by a minimum of 60 per cent and will increase the retail price of fragrances by around 40 per cent.
Likewise the move is also expected to hit fragrance manufacturing facilities, with around 7,500 jobs hanging in the balance.
All this means that right now many production facilities are said to be standing idle, as manufacturers wrangle with government officials over the new law.
The state committee for economic policy says that it will re-consider the legislation upon its return from the summer recess, which for many of the smaller fragrance players could prove to be too late.
