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Monday 25.06.2018 | Name days: Maiga, Milija

Latvijas balzams: one-third of alcohol consumed in Latvia is of unknown origin

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUOne-third of strong alcoholic drinks consumed in Latvia contain contents of unknown origin – mixtures of water and spirit. This situation exists because of the still remaining and still problematic matter of limiting illegal alcohol market, which became apparent for the first time in Latvia in 2009, as Chairman of Latvijas Balzams Guntis Aboltins mentioned in his interview to BNN.

What are some of the most notable recent developments in your sector?

The geopolitical situation is rapidly changing. Recent events have become a major development-impacting factor. It affects priorities and changes our views on risks. The geopolitical environment and its processes can bring unexpected development opportunities and put business development several years in the past. It is normal to perform risk assessment – our country’s economy is very sensitive to current events and the result – good or bad – always has an impact.

The matter regarding limitation of illegal alcohol remains notable in the alcoholic drinks sector. It has been since the crisis in 2009. Even though law enforcement authorities and representatives of the sector have been trying to change the situation for the better on a legislative level, combating the illegal market on a practical scale seems like a long road for us. It is not normal when one-third of strong alcoholic drinks consumed in the country are basically mixtures of water and spirit of unknown origin. What is worse is that contents of these mixtures are not controlled and are very dangerous. According to laboratory test results of some of these drinks, the concentration of methanol in counterfeit alcoholic drinks sometimes exceeds the norm dozens of times. This can result in death, blindness or heavy poisoning.

Measures aimed at combating the illegal alcohol market should go hand in hand with education about reasonable consumption of alcoholic drinks. Even though the matter regarding so-called legal drugs and free availability of them for youths has become more problematic recently, the matter of consumption of illegal alcohol of unknown origin is just as important. I believe solutions to society’s health problems can be solved through matters of combating illegal alcohol and legal drugs.

The policy regarding the circulation of alcoholic drinks affects the sector’s development in a direct way. I believe decision that were made in 2013 were a step in the wrong direction for combating the main problem – reducing alcohol consumption among young people. Last year’s amendments to the Handling of Alcoholic Beverages Law provide significant restrictions only in regard to specific types of alcohol. Amendments sort alcoholic drinks based on their origin and contents. Now we see the consequences of this policy – discussions have been launched about whether or not the law applies to everyone, who should comply with it and whether or not it can bring the desired effect.

This approach is absurd, because it does not comply with the initially defined goal – reduce availability of alcohol for minors. I would say the government ‘fooled around’ with such decisions instead of approving laws that would have otherwise had a positive impact on business and solved problematic issues.

Can you say there are improvements to economic conditions and business growth on the market?

There is some degree of growing optimism in the business. It is due to the growing purchasing power and consumption dynamics. We have not yet reached our pre-crisis figures, but positive development is felt nonetheless. However, the current geopolitical events have left an impact and reduced previous growth outlooks in Latvia. I believe it is a signal to every entrepreneur. The geopolitical factor can be very strong, especially when it comes to our neighbours.

How would you describe the government’s economic policy aimed at improving the country’s economy?

The economic policy lacks decisiveness, a strong backbone and certainty about achieving priorities. I have a feeling that the shadow of political caution often only increases the number of lost opportunities. Several years ago, I was among those who believed in the National Development Plan. Unfortunately, now I feel more sceptical about it. It is all because of this uncertainty. Even the government’s Re-emigration Plan is something that is part of the general economic policy. I do not see the transition from words to actions.

I would like to emphasize – the country should respect all businessmen, especially those who are at the beginning of their roads. Short-sighted and fluctuating legislation and unfriendly tax policy could become the final straw for some businessmen to lose everything and end up unemployed. Of course, businessmen should also respect their country and fulfil their promises.

How is your business affected by Latvia’s politics? What changes to legislation would you like to see? What helps you? What makes things difficult for you?

The ‘three whales’ provide development and growth. Firstly – predictable legislation; secondly – constructive dialogue between entrepreneurs and politicians; thirdly – fewer obstacles in every process.

Any initiative, even the best, will fade if there are unexpected legislative obstacles in the way. Bureaucracy steals our time and resources.

How would you describe the sector’s position in the Baltic States? What about competition with Estonia and Lithuania?

Development of Latvia’s economy cannot be performed without new investments and creation of new jobs. This is why an important competitiveness criterion is labour tax. Last year, the government made an important step by reducing PIT by 1% (down to 24%). It is also planned to reduce it further to 20% this year. Even though Latvia’s tax burden in relatively low, the low income level makes up a large proportion. On top of that, the tax burden in regard to small wages remains high.

Latvijas Balzams remains a leader in the Baltic States. It should be said that all leading companies in the Baltics focus primarily on export development and construction of their logistical networks. In the largest export markets (Russia, Lithuania, Ukraine), LB cooperates with the largest companies, which guarantees sales for us. Even though our home market – Baltics – retains an important role for LB’s export, our potential continues to grow in other European countries. We have set ourselves a rather ambitions goal – increase turnover by 14%.

What is your ‘trump card’ and what is your Achilles’ heel?

The alcoholic drinks sector brings the state plenty of money to the state. Additional benefits include increased employment and exports. As the largest company in Latvia’s sector, we brought the state nearly EUR 59 million in taxes last year, including EUR 43.4 million in excise tax revenue. The alcoholic drinks sector is one of the largest exporters in the country. What I’m trying to say is that our ‘trump card’ is its value and benefits for state development. It should not be taken for granted. We represent ancient production traditions, because Black Balsam is one of the oldest brands of alcohol in Europe.

In regard to our ’Achilles’ heel’ I would say we are in a sector where businessmen have to be very responsible in their communication and actions, because the alcohol sector is one of the so-called factories of sin. Our weakness is definitely the domestic market’s tax policy. Even now Latvia’s control measures over the country’s alcoholic drinks sector are some of the strictest in Europe, and the industry is very sensitive to any new additional control initiative introduced by the state. And there are numerous new types of regulations introduced regularly, because the proportion of the illegal market is 30% in Latvia.

Do you feel a lack of skilled labour force in the country?

Our company has been maintaining a constant number of employees for some time – around 600 employees. We are proud to say these people have been with us during the crisis, and we do not replace employees often.

At the same time, we do feel a lack of skilled specialists on our production lines. We have to train potential workers ourselves.

Why is it so? I believe there is a gap between demand and supply in terms of education. It is apparent in many sectors, not just manufacturing.

What can you expect in the next five years? Will the situation in the sector improve, worsen or stay the same?

The situation in the sector is affected by two factors: the direction of the alcoholic drinks policy and the government’s ability to control and reduce shadow economy.

Reasonable legislative initiatives and their introduction is Latvia’s biggest long-term problem. Often the influence of political lobby allows the adoption of incomplete laws, surface solutions that are open to interpretation.


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  1. Linda says:

    is that the yellow liqueur – drink of the 1970s – lemony taste then now more chemically?

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