Mon, Sep 24, 2012 - Page 6 News List

Czech distillers hit hard amid bootleg deaths

BOOTLEG MARKET:Czech authorities have uncovered a network of underground distillers making up about 25 percent of the market, which means big tax losses

AFP, PRAGUE

Czech distillers are facing the first ever dry spell after Prague banned the sale of domestic liquor both at home and abroad after bootlegged spirits killed 23 Czechs.

Under pressure from the EU, Czech authorities banned exports of liquor with more than 20 percent alcohol content on Thursday last week on the heels of a sales ban at home imposed on Sept. 14.

“The export ban is terrible for my brand,” says Anthony Schofield, chief executive of Jan Becher — Karlovarska Becherovkathe, maker of the Czech Republic’s world--renowned traditional herbal liqueur.

“This prohibition only penalizes the reputable producers and importers,” said Schofield, whose high-profile Czech brand is owned by France’s Pernod Ricard, the world’s second-largest spirits maker.

Reputable Czech producers sell 15 million koruna (US$786,000) in liquor a day, or 5.5 billion koruna a year, according to the Czech association of spirits makers and importers.

Czech alcohol exports amounted to 1.093 billion koruna between August last year to July, up from 1.012 billion koruna a year earlier, according to the Czech Statistical Office.

Neighboring Slovakia bought the most, with purchases worth more than 600 million koruna over the 12 months. Bratislava banned Czech imports on Tuesday after at least four Slovaks ended up in hospital after drinking Czech plum brandy tainted with methanol.

Czech spirits makers have urged authorities to lift the ban and target only producers whose spirits have high methanol content. They warn of job losses if the ban lasts.

“The damage that has been done to Czech brands, to Czech exports is unquantifiable at this stage,” Schofield said.

Since early this month, the wave of methanol poisoning has killed 23 people and sent dozens to hospitals across the Czech Republic, some of them in serious condition and placed in artificial comas.

Although the police have not found the main culprit yet, they have uncovered a huge black market, estimated to account for about 25 percent of overall Czech liquor sales.

Besides tax losses because of bootlegged alcohol — estimated at 1.6 billion koruna a year — Czech state coffers are losing 130 million koruna in sales tax revenue per week under the sales ban.

With the Czech economy in recession, further losses in tax revenues threaten to wreak havoc with public spending in the country of 10.5 million that has the world’s second-highest adult alcohol consumption after Moldova.

“I am very certain that once this crisis is over, we will be approaching the government to look at how we can cover our losses,” Schofield said, adding to Prague’s woes.

With this all in mind, the Czech Cabinet said it wanted to lift all restrictions as soon as possible and introduce new excise stamps on spirits bottles to help distinguish good liquor from potential poison.

It also rushed to ban exports in fear the EU might slap a two-month ban on Czech liquor imports.

However, an association of 12 Czech producers and importers were skeptical, saying their bottles already had unique codes.

The association’s vice president, Vladimir Darebnik, has asked the government to lift the ban “on sales of traceable products” and to allow the sale of more than 20 million liters of liquor pulled off the market as the ban was imposed last week.

Ending the ban would also please Czech restaurants, now losing 200 million koruna a day, according to analysts from the MAG Consulting agency.

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