Ukraine begins sale of its state-owned distilleries following de-monopolization of the sector

The first auctions for the sale of Ukraine’s state-owned distilleries are planned for mid-September 2020, according to a recent Facebook post by Serhiy Bleskun, acting director of the Ukrspyrt State Enterprise. Before July 2020, the state held a monopoly over the ethyl alcohol distilling industry in Ukraine through Ukrspyrt, a fully state-owned company.

According to Mr Bleskun, SE Ukrspyrt has already prepared sale proposals for 25 distilleries.

Earlier in 2020, the Head of the State Property Fund of Ukraine (SPFU) Dmytro Sennychenko stated that the SPFU expects to receive around UAH 2 bn (EUR 60 mln) from the privatization of state-owned distilleries. There are 78 distilleries in total, 41 of which would comprise the first wave of privatization.

Earlier in August, the Cabinet of Ministers approved the Program for Reform and Development of the Spirits Industry for 2020-2023, providing a framework for secondary legislation in the sector, which was de-monopolized on 1 June 2020.

As reported in our earlier update, the main changes introduced in 2020 are the following:

1) Cancellation of the state monopoly on ethyl alcohol production and privatization of state distilleries

Before, only state-owned factories had the right to produce almost every type of ethyl alcohol (ethanol (including as medicines), ethyl alcohol rectified from grape, ethyl alcohol rectified from fruit and ethyl alcohol rectified from grain).

2) Legalization of ethyl alcohol production by business entities regardless of their form of ownership

Since 1 July 2020, a private business may engage in the production of ethyl alcohol. However, the state maintains close control over the industry as private producers will have to obtain a special license issued by the State Fiscal Service of Ukraine.

3) Export, import, and wholesale trade of some ethyl alcohol products

The law allows private businesses to engage in the wholesale trade and export of ethanol, ethyl alcohol rectified from grape and ethyl alcohol rectified from fruit. At the same time, the import of these products can only be done after 1 January 2024. Until this date, the import of ethanol, ethyl alcohol rectified from grape and ethyl alcohol rectified from fruit will be performed by state-owned entities, specially authorized by the Cabinet of Ministers of Ukraine.

4) Necessity to obtain a license for import and export of alcoholic beverages

Previously, the import and export trade of alcoholic beverages did not require a license. Since 1 July 2020, business entities have to obtain a license:

  • for import – a license for the wholesale trade of alcoholic beverages;
  • for export – a license for the production of alcoholic beverages or a license for the wholesale trade of alcoholic beverages.

Should you have any queries about opportunities or compliance requirements arising with regard to upcoming privatization, and/or latest legislation changes in the distillery industry, please contact Taras Tertychnyi, Associate Partner, by email or by phone +380 044 277 2447