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Russian perfume producers warn of price hikes

MOSCOW, June 21 (RIA Novosti) - Russian producers of perfumes and cosmetics that contain alcohol are expecting a rise in prices in view of a new alcohol law coming into effect July 1, the head of a Russian perfumes association said Thursday.

The new law introduces automated alcohol meters (EGAIS) and has been declared as a measure to curb dangerous alcohol consumption.

"Certainly, there will be a price hike after July 1," which could be as much as 20% by the end of 2007, Tatiana Puchkova said. "In addition, there is an apprehension that leading market players... will leave the market altogether."

A senior official from the perfumes association, Sergei Bolshakov, said only about 650 of 3,500 producers on the Russian perfumes market, which has annual sales of $7 billion, had obtained the necessary licenses.

Puchkova said small and medium producers could start selling products of dubious quality over lack of funds to obtain the licenses or equipment.

However, the producers hope the government will exclude them from the law and thereby prevent a crisis similar to last year's. The perfumes association said the crisis in July-August 2006 saw annual sales plummet 75% from 85 billion rubles ($3.3 billion) in 2005 to 54 billion rubles last year.

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