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Wednesday, March 14, 2018

Russian vodka is knocking at closed doors

A significant increase in the production of vodka in the reduction of its consumption in Russia should indicate the growth of exports. But alas, the Russian national drink still not in demand abroad, and the painful loss of the Ukrainian market has so far failed to compensate. Slightly better are the prospects of wine, but scarce they are. What is missing in Russian alcohol to conquer the world?

Vodka production became one of the most dynamic segments of the Russian economy in 2016, showing an increase by 16.1% to 73,2 million decaliters (dal). In parallel, the bodies of statistics recorded a decrease in alcohol consumption: in General, the Russians for 10 years began to drink almost twice less, specifically about spirits and for the past year, over three quarters of its sales decreased by 0.4%.

“The largest Russian manufacturer of sparkling wines for the first time was able to enter the Germany market”

This paradox is explained by the fact that the Russian market has become more “legal” vodka. The increase of production, reported by Rosstat, was achieved mainly due to the measures taken by the government on the whitewash of the market, stressed the head of the Center of researches Federal and regional alcohol markets (tsifrra) Vadim Drobiz. Since July 1 last year, almost all points of retail sales of alcohol (with rare exceptions such as remote locations) was equipped with a system of USAIS, allowing you to track every sold bottle and actually removed from the market of illegal vodka. “The system yegais effective, 100% secure, it can not be avoided if you buy alcohol over the counter, not under the counter,” says Drobiz.

This hypothesis is indirectly confirmed by the volume of export of Russian vodka in 2016 has not changed. According to the Federal customs service (FCS), for 11 months of last year, vodka from Russia exported $ 106,1 million dollars, or 1.8 million decaliters in terms of pure alcohol. This is only slightly higher than a year earlier, while the indicators of January – November totaled $ 104.3 million and 1.64 million dal.

By the way, the year 2015 was for the Russian vodka export most difficult in the current decade: in cash and in real terms it has decreased by at least 40%. The main reason for this was the conflict with Ukraine, which for long time was for domestic manufacturers main external market. If in 2013, Ukraine imported Russian vodka 38.6 million dollars, then a year later the value of its imports decreased to 12.2 million dollars, and in 2015 – up to 4 million

The level of alcohol consumption in European countries (click to enlarge)it is Noteworthy that over the past year in Ukraine is rapidly falling and a private vodka production. Coupled with the precipitous reduction in the export from Russia this clearly indicates the growth of the shadow segment – perhaps the people of Ukraine in such a short time began to lead a sober lifestyle. On the contrary, they moved on to a surrogate alcohol, which often ended tragically for them.

According to statistics from the Federal customs service, in the first three quarters of last year, the main exporter of Russian vodka among foreign countries were the United Kingdom, in second place was Germany, the third – Latvia. In CIS, the first three countries as follows: Armenia, Kazakhstan, Ukraine, Russia (including the territory of the DNI and LC).

According to Drobeta, despite the fact that Russia considers itself the birthplace of vodka, the high demand in the domestic beverage in the global market. “Since the 1980s years, this market is very actively developed, and we didn’t get there. Sent, of course, “Capital” and other brands, but it was tiny amounts on the world market they are not visible. The only Russian export-oriented beverage company is “Russian standard”, which is 60% of vodka is exported. But the special global perspectives in exports there,” – says the expert.

The main reasons for this are two. First, in many countries where it is theoretically possible to put Russian vodka, has long produced, and at a very low final price, about 4 us dollars or euros for a bottle. Second, in order to take a significant niche in export markets, requires huge long-term investments in the marketing of such funds from Russian producers simply do not have, believes Drobiz. With this combination of negative factors, the devaluation of the ruble, which spurred many areas of Russian exports, in fact, did not bring the vodka no advantages.

The latest evidence of the difficult situation with the export of Russian vodka was the petition about the technical bankruptcy of the company Roust Corporation (the brand “Russian standard”, “Zelenaya Marka”, “Parliament”), sent in early January in Manhattan court. With the bankruptcy of the company is Russian businessman Rustam Tariko intends to restructure the debts in the amount of 1.14 billion dollars, calling the main their problems, the loss of the Ukrainian market. Leadership Roust had to admit that the development of the company affected by the macroeconomic conditions which it had no control.

Considerable difficulties can arise at the Russian vodka on the market of Kazakhstan, where it accounts for about 90% of imports in this sector. Faced with falling local production of alcohol (capacity of some of Kazakhstan’s enterprises are loaded only on 25-30%, a significant part of factories were forced to close), Astana decided to oppose the import of the excise tax increase. At the end of this year, the minimum cost of a bottle of vodka in Kazakhstan will reach 850 tenge (about 155 rubles) and will continue to grow until 2020, when the rate of the Kazakhstan excise tax will equalize with the Russian. In parallel, Kazakhstan intends to actively develop its own export of vodka, including in Russia.

Another “weak” nearby market for Russian vodka is Azerbaijan, where a double devaluation of the local currency, the manat, has significantly increased the cost of imported goods, whereas the local alcohol industry is able to satisfy even discriminating tastes. If three quarter of 2015, Azerbaijan exported Russian vodka by 1.05 million dollars, a year later, exports fell to 660 thousand dollars.

Somewhat better prospects, and paradoxically, the Russian winemakers who last year faced with a significant decline in demand for its products associated with falling incomes. In particular, the production of sparkling wine by 2016 decreased by 8% (to EUR 14.7 million has given), and the segment still wine reduction in the production for the first nine months was 9.7% (28 million has given), although a year earlier he showed growth by about a quarter.

On this negative background, the largest Russian producer of sparkling wines “Abrau-Durso” for the first time was able to enter the German market. The first delivery was in the amount of 30 thousand bottles, but before the end of this year the company plans to bring it to 500 thousand bottles. “We made attempts to enter this market for several years, but to find a good importer has only in the past year. Calculated first of all on the Germans as consumers, but also the interest of the Russian Diaspora are not excluded”, – said the Director of public relations of CJSC “Abrau-Durso” Daria Domostroi.

However, according to her, most of the products of the company – 97% of the 27 million bottles of sparkling wine and 1 million bottles of wines sold in Russia, and if in the next year or two will be able to increase the volume of exports to 5.7%, it will be a serious result. Besides Germany, the company supplies its wines to the Baltic States, the USA, China, UK, but in the last importer has terminated the contract because of the “sanctions wars”, had to start all over again. At the same time, there are countries, where Russian wines ordered way, for example, France, Italy, Spain and Portugal, where, according to Domostroi, circulated the “wine of patriotism”: the consumption of local wines is over 90%.

Elena Denisova, chief financial officer of the company “Aurora”, Russian producing premium wines under the brand of Chateau le Grand Vostock, says that the potential for interesting Russian wines such markets as China, Singapore and other countries in South-East Asia, but while the conversations here more than the case. “Asia is ready to accept us at bargain prices. But it does not imply that there will be a “conditional” wine”, – said Denisov.

“We have supplies to China, but they are small, and this market is difficult, – agrees Third. Is absolutely beer country on the specifics of consumption, and of wine they prefer mostly sweet. Classic wine consumption in China is a sign of prestige. The Chinese thus demonstrate their involvement in the European way of life, and don’t drink wine just because they like it”.


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