The State Property Fund has sold an alcohol factory from the state potable ethanol monopoly UkrSpyrt to LVN Limited, the owner of the Nemiroff vodka trademark, for over Hr 55 million, or about $1.9 million.
LVN Limited was the only participant in the auction on Oct. 15, but, since the company couldn’t know if there were other bidders, it offered a slightly higher price that the starting one, which was $1.7 million.
The sold factory is located in the city of Nemyriv in Vinnytsia Oblast, 250 kilometers west of Kyiv. Nemiroff vodka is manufactured and was founded in Nemyriv as well.
This is the first UkrSpyrt factory that has been privatized during the Property Fund’s attempts to sell UkrSpyrt assets and eventually break the monopoly on the Ukrainian alcohol market.
The Fund aims to sell 78 factories owned by UkrSpyrt, but as of Sept. 15, it has announced only 10 auctions.
In an attempt to reorganize the Ukrainian alcohol market, in 2019 the parliament passed and President Volodymyr Zelensky signed a law on liberalization of the market. Starting in 2020, the law abolished the state monopoly on the production of alcohol, making it also possible to start selling the property of UkrSpyrt, an enterprise criticized for being corrupt and inefficient.
The law also says that, starting in July 2021, private firms can now start building new alcohol factories.
Apart from that, in August 2020, the Cabinet of Ministers approved a roadmap to help reform and develop the industry throughout 2020–2023.
All these steps may demonopolize the alcohol market and bring money to Ukraine’s budget.
Ukraine’s Cabinet of Ministers expects the state budget to receive about $88 million after it sells 78 UkrSpyrt factories. Yuliya Kovaliv, deputy head of the President’s Office, meanwhile, claims that this privatization will bring the state much more — $176 million.
In any case, the current monopoly can’t last any longer, said deputy head of the Property Fund Kostiantyn Koshelenko. According to his estimates, obstacles to competition on the market have led to a large shadow market. As a result, “the state budget loses about $35 million a year,” he said.
