Future of the Brewing Industry in Russia: 80:20 or 50:50? (2012-12-05)

Due to numerous inquiries of participants of the market “malting barley-beer” about the legal regulation of production and turnover of beer products regarding the use of malting and unmalted grain and sugar-containing components we report the following:

– On 01.01.2013 the Provision of the Federal Law No. 218 dated 18.07.2011 (you can find the Law on the Union website in the category “Laws”) is coming into effect; it states:

beer is alcoholic beverage containing ethyl alcohol produced during the fermentation of beer wort, and it is made from brewing malt, hops and (or) products obtained from processing of hop (hop products) and water with the use of brewing yeast, no added ethyl alcohol, flavor and food agents. Allowed: partial replacement of malt by grain and (or) by products of processed  grain (grain products) and (or) sugar-containing products, on condition that the total weight does not exceed 20 percent of the weight of the replaceable malt, and the weight of sugar-containing products does not exceed 2 percent of the weight of the replaceable malt.

We remind you that from July 1, 2012 till January 1, 2013 the following Provision has been remaining in effect: combined weight of grain and (or) its products (grain products) in the wort for beer and beer drinks production cannot exceed 50 percent of the weight of the replaceable malt.
Thus, from 01.01.2013 beer will have to be made from 80% of malt and no more than 20% of unmalted grain products with no more than 2% of sugar-containing products among them.

What does this change mean for the industry from the point of view of the Barley, Malt and Beer Union:
– for barley producers: higher demand of the industry for high quality malting barley and the increased consumption of barley. However, there is concern that the lack of quality of barley in Russia will be compensated by means of the increase of imports;
– for malt producers: higher workload of production and increased demand for malt; according to our Union, the demand for malt will grow by about 20%;
– for beer producers: need for re-equipment / use of new technologies, doing away with a number of beer varieties, high costs for purchase of additional volumes of raw materials.

However, there is one point of additional concern: the Technical Regulations of the Customs Union “On security of alcohol products” (the project of the Technical Regulations is available on the website of our Union, category “Laws”) that in case of its approval and entry into force will replace the national Technical regulations and laws of the countries – members of the Customs Union.

Till 07.11.2012 in accordance with the draft Technical regulations:
beer is alcoholic beverage containing over 1,5 percent of ethyl alcohol produced during the fermentation of beer wort, and it is made from brewing malt, hops and (or) products obtained from processing of hop (hop products) and water with the use of brewing yeast, no added ethyl alcohol, flavor and food agents. Allowed: partial replacement of malt by grain and (or) by products of processed  grain (grain products) and (or) sugar-containing products, on condition that the total weight does not exceed 20 percent of the weight of the replaceable malt, and the weight of sugar-containing products does not exceed 2 percent of the weight of the replaceable malt.

Recently the draft Technical regulations were amended:
beer is alcoholic beverage containing ethyl alcohol produced during the fermentation of beer wort, and it is made from brewing malt, special brewing malt, hops and (or) products obtained from processing of hop (hop products) and water with the use of brewing yeast, no added ethyl alcohol, flavor and food agents. Allowed: partial replacement of malt by grain and (or) by products of processed  grain (grain products) and (or) sugar-containing products, on condition that the total weight does not exceed 50 percent of the weight of the replaceable malt, and the weight of sugar-containing products does not exceed 2 percent of the weight of malt, grain and grain products.

According to the information available to the Union, approval of the Technical Regulations of the Customs Union will happen no sooner than the summer of 2013, and the entry into force no earlier than January 2014. It looks like return to the previous version of the Technical Regulations that provides tougher restrictions on the use unmalted grain material and sugar-containing products.

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