Bear market for Russian wine imports
Sanctions and the declining price of oil have slowed Russia’s economy, which is forecast to fall into recession next year. (A real bear market–rimshot.) And, in a nasty triple whammy, the ruble has declined precipitously as well, which is forcing up the price of imports. Consider the case of Apple, which just boosted the price of iPhones for sale in Russia by 25%. (But, apparently, even some, erm, domestic industries have also been compelled raise prices).
So what about wine? President Vladimir Putin has banned some food imports in retaliation for Western sanctions imposed over the Ukraine crisis. Notably, foreign wine and spirits weren’t on the banned list as they are (were?) popular with middle class Russians despite high taxes and markups. But Putin has wielded wine tariffs as a cudgel before against Moldova and Georgia so it may just be a matter of time until wine tariffs arrive too. In any event, the slowdown and inflation have put many imported wines out of reach.
In 2012, according to OIV, the International Wine office, Russia was the ninth largest importer in the world by value bringing in 911 million euros of wine. And they were growing at 11% reaching 7.9 liters per person (compare that with 9.1 liters per person in the US, using the OIV data for 2011). But with the current malaise, those numbers are likely to fall off a cliff. Which is too bad because in the Jeffersonian ideal, wine is a drink of moderation and the antidote to spirits and, perhaps in this case, an attractive alternative to bare-chested vodka drinking.
Which countries have the most at stake in the Russian wine market? Thanks to this handy graphic from the folks at RBTH.com, we know that French wines dominated Russian wine imports in 2012 with 20% market share but Italian wines are catching up as moscato has gained in popularity. Spain is third. The US had a 1.37% market share.
On December 7th, 2014 at 11:16 pm ,Mikhail Babinskiy wrote:
On your website as a graph was shown in Russian imports of wine from different countries. These data were for the year 2012. I have long held various statistics relating to the alcohol market in Russia and abroad. For 2012 my data is not very different from those that you have. But I have more recent statistics for 2013 and the first nine months (January-September ) in 2014. All data collected in the attached table. The table can be viewed at this location: http://mikbab.com/?p=182
On December 9th, 2014 at 11:19 pm ,Mikhail Babinskiy wrote:
Rising prices for alcohol in Russia
The sharp drop in the current year of the Russian ruble against the dollar and the euro will undoubtedly be reflected in the price of alcohol on the shelves. And this applies to both imported alcohol and local. Prices of imported alcohol will rise even before the New Year by about 10%, after the holidays – again by 10% ; by February, growth will exceed 20 %, believe market participants. First of all, the rise in price touches of sparkling wine and champagne. Following the import alcohol will increase cost of local, Russian, as many components for packaging wine imported from abroad. Imported sparkling wine and champagne for the New Year to rise by 15-20%, because the payments under the contracts will have make the current exchange rate of the dollar and the euro. In the year in Russia is consumed more than 300 million bottles of champagne and sparkling wines, of which imports accounted not more than 40 million bottles. Of the remaining 260 million bottles of Russian production 95% done with the use of imported raw materials . Approximately 40% of the annual amount of sparkling wine sold in November and December. The head of the Union of Russian sommelier Artur Sarkisyan believes that before the New Year prices will not change. Now is the minimum cost of French Champagne in stores about 2.5 thousand rubles (about US $50). In restaurants – twice as high. “Champagne was never cheap, especially with regard to restaurants, but this does not mean that consumers will switch to production of the Russianâ€, – believes Sarkisyan. “But after the New Year champagne cost could jump by 30%. These changes will occur due to the rise of the euro, so even a cheap Prosecco, the well-known Italian sparkling wine, also go up.†Some Russian wine trading companies raised their prices even before the New Year. “Increase ranged from 10 to 20%â€, – says CEO “Simple†(one of the largest wine trading company in Russia) Maxim Kashirin. “Those who have raised prices by 10-15 %, now increases again. The total increase, I think, until the end of the year will be somewhere in the 25-30 %.†Simple itself Dec.1 raised prices of its products by 15%, the remaining products will rise in price on December 15. “Of course, we think about the consumer, which already has a shock, but we need to pay suppliersâ€, – says Kashirin. “Following the import will go prices and the Russian wine upâ€, – said the president of the Union Russian growers and winemakers Leonid Popovich. According to him, next year the price of Russian production will grow by about 15-20% (the lower bound if the Russian raw materials, top – if imported). “The prices of local wine will inevitably rise because rising prices for parts. For example, natural cork we buy in Europe. Many use a bottle, imported from abroad, imported labels.†Similarly expressed deputy director of Russian champagne house “Abrau- Durso†Pavel Titov : “Next year we will have to renegotiate the price, because the import content (labels, corks from Portugal) has not been canceled . While there are some stocks, but to the extent that they will be spent, will rise price of local wine production.†Price of imported wine will go up more and faster, and the price gap between Russian and imported wines will increase. In this regard, Russian producers can take advantage of this situation and take the shelves, from which a certain amount of imports will go away.
At low alcohol imported products (beer, beer drinks) vendors in the fourth quarter raised prices by an average of 15%. Companies Diageo and Heineken yet refused to say how to increase prices for their products in Russia .
According to the Centre for Federal and Regional Alcohol Markets, the volume of the alcohol market in Russia in 2013 amounted to 1.8 trillion rubles (average annual rate of the ruble in 2013 was 33 rubles for one dollar and it means $54.5 billion). In 2014 it will grow up to 2 trillion rubles (this forecast was made when the exchange rate of the ruble was 36 for $1. It is equal to $55.5 billion). But at the end of this year the ruble fell sharply by 35% and now still difficult estimate in dollars volume of the alcohol market in Russia in 2014.
Vadim Drobiz, director of the Centre for Federal and Regional Alcohol Markets; Moscow, Russia ALKO-PR@YANDEX.RU