I am not afraid of furious remarks from well-known Russian wine writers. I admit I’m unwell myself. In my dreams I am an editor of Decanter and, sometimes, The World of Fine Wine – a pronounced psychical disability. But maybe I am not alone. There are a bunch of us, Russians, writing about wines. But this doesn’t make me happy at all, I am mostly not proud of my colleagues.Continue reading
The educated inhabitants of Russia’s second city have embraced wine. But anyone who wants to enter this market will have to accept lower margins, as well as stringent new advertising laws. Continue reading
MOSCOW, 6-7 Oct 2012. For a couple of days extremely rainy and windy Moscow weather was overrun by fine food and spirits intake. Major cognac brands are doing their best to reinvent themselves in Russia during the Taste of Moscow gastronomic festival that took place last weekend 6-7 of October in the Clumba restaurant situated in Moscow’s central location. Cognac has long been considered a “dead” category used mostly for New Year gifting for your dentist (VSOP, not higher) or an official-to-bribe (XO or higher, depending on the rank and the effect needed). With spirits market growing rapidly cognac producers realize they need to address the trend-setters and opinion leaders and bring the new taste of cognac to younger audiences.
Martell cognac was the central activator during this two-day competition of the star chefs from Moscow restaurants with 16 chefs taking part in the event plus the Chateau de Chanteloup’s (historic and beautiful Martell family Bretagne-style guesthouse) chef Pascal Nebou playing with the Martell Pure Gourmet platform in front of the fancy Moscow public. Pairing fine food and cognac was the leitmotif of the whole festival, no other alcohol was served during the competition. Even wine options were eliminated making cognac the only pairing choice.
Russians tend to perceive cognac in a very stereotypical way – fireplace, own house outside Moscow, bourgeois-style atmosphere, warming up the glass with your hand – all of these are bad companions for promoting the brand – demanding special surroundings and occasion to drink the French spirit. Digestive drink perception was the main obstacle Martell wanted to break during the event. While trendy public is already used to fine dining, cognac is still not a part of it. The leading Cognac houses are doing their best to include their drinks into the fine food concept, Hennessy pouring the most budgets on advertising. Considering the approaching advertising ban, this might be the first swift (meaning the “martinet” bird from Martell’s logo) in the new wave of gastronomic promotional activities connected with cognac.
After reaching record export levels in both value and quantity in 2006 and 2007, French wine exports to Russia fell in the wake of the financial crisis. But while demand has improved since then, Russian rules are still problematic, says Panos Kakaviatos.
The upscale Lotte Hotel in Moscow was packed with representatives from some 58 Bordeaux estates — all members of the Union des Grands Cru de Bordeaux (UGCB) — an elite organization representing some 120, mainly classified, growths. They were presenting the latest vintage, the popular 2009. Although only half of the UGCB’s members came to Moscow, the crowds present reflected Russia’s renewed interest in Bordeaux.
UGCB vice president Tristan Kressmann was optimistic. “To mobilize half our membership for a market that is not but the twentieth in terms of values of exports, is very promising,” he said. “Business is on an upswing and the fact that so many people are attending this tasting is an indication of Russian interest in our wines”. Normally, the UGCB travels to Russia once every two years, but the success of the 2009 tasting — and the high quality of the 2010 vintage — may result in the UGCB returning next year, Kressmann added.
Something that’s clear, said one Bordeaux chateau representative, is increasing seriousness from Russian tasters. “I remember a few years ago, many more Russians simply drank the wine and walked away, but now you have more serious sommeliers and merchants and journalists taking notes,” remarked Michel Perrot of the negociant Borie-Manoux, which sells Chateau Batailley, among other estates.
A cautious case for optimism is warranted, according to an Ubifrance report. After reaching record export levels in both value and quantity in 2006 and 2007, French wine exports to Russia fell precipitously in the wake of the financial crisis in 2008. But sales jumped in value in 2010, with a continued upward trend in 2011, although wine volume has remained low, not even matching what it was 10 years ago. But Russian importers at the June tasting confirmed that an improving economy, coupled with increasing demand for mid- to higher- end wines, have led to better sales. According to Ubifrance in Moscow, an increasing number of wine bars and trendy upscale restaurants reflect greater demand for more expensive wines, a fact that could explain why sales figures have jumped while volumes have remained quite flat. Furthermore, one of the most negative factors for foreign wine sales in Russia should disappear.
After the Bordeaux tasting, fellow journalist Benoit Finck of Agence France Press and I joined Jean-Emmanuel Danjoy of Chateau Clerc Milon, Anne- Frangoise Quie of Chateau Rauzan-Gassies and Corinne Conroy of Chateau Brane-Cantenac for dinner at one such new and trendy Moscow restaurant, Carre Blanc. The food and service were fine, but we ordered no wine. Perhaps because we had just done a massive tasting, but also because high taxes and other costs raise bottle prices to absurd heights, in both restaurants and in shops. The potential for wine sales is limited to the very rich, Finck remarked. Indeed, shortly afterwards, he wanted to buy a bottle of Phelan Segur, a fine cru bourgeois that would sell for about €25.00-30.00 ($30.70-$36.85) in France. The Moscow boutique he visited was selling the bottle for over €100.00. But that should change within a couple of years. When Russia recently decided to join the WTO, a move that the Russia’s parliament is expected to ratify as of this writing, it also agreed to lower its value-added tax on wine from the current 20% rate to 12.5%, a significant decrease that can only help sales, Kressmann said.
Glass half full
In spite of all the good signs, some see the glass as merely half full. Even though the VAT should decrease, other costs and the rather random manner with which Russian authorities interpret and change import laws likely will remain.
In the introduction to its Moscow branch report, Ubifrance stressed that 2011 was wracked with problems relating to the renewal of import and distribution licenses, and that it took almost the entire year for many businesses to obtain the right to sell wine. It’s a phenomenon that continues to complicate the business of importing, the report said. Sergey Afanasiev of importer L’Amour du Vin said the decision-making process to give licenses borders on the absurd, or can be contradictory. He explained that his license had been delayed, in part, because his wine pallets were not 15cm off the ground. “But the standard in Europe is lower than 15cm,” he explained. Getting a license renewal is not just a pain in the ass, it is a pain everywhere, he added. “We have to receive state registration certificates for each and every wine we import. There are just too many formalities that cost time and money.”
The reduction of the VAT tax will help, but excise and customs taxes will remain, including certification and administrative costs. “We have to earn something, too,” Afanasiev said. Finally, Russian importers also pay restaurants to hold promotions for their wines and such costs are often factored into final bottle prices.
Importer Anton Moiseenko was very candid about the problems companies face when it comes to importing foreign wines.
“It’s not merely the requirements, but also how they are applied to wine importers,” he said. “Usually they are sudden, they are badly prepared by the government, and they are horribly managed. And, of course, they are designed to collect ‘fees’ — both official, and unofficial corruption and bribery.” In short: “Russian licensing laws combine stereotypical Russian stupidity with an intentional desire to make money out of nothing, without moving a finger,” Moiseenko said. “The system is intended to make life harder and thus push the importers to use illegal ways and bribe the officials.”
Bordeaux wine representatives agree that licensing and certification can cause headaches. “From one day to the next, administrative changes could be decreed that would prevent a company with which we would do business from being able to purchase wine,” said Borie-Manoux’s Michel Perrot. “I heard that one Russian company found itself unable to import any wines for three months – and was not even able to sell wines it had obtained already in stock, because it had to wait for the renewal of its license.”
The 58 Bordeaux producers at the Lotte Hotel represent “both a small and a large number,” Perrot said. “It depends on how you look at it.” There were notable ‘no shows’, from Chateau La Conseillante in Pomerol and Chateau Pichon Longueville Baron in Pauillac, to Chateau Angelus in St Emilion and Chateau Branaire Ducru of St Julien.
In a telephone interview, Patrick Maroteaux of Chateau Branaire Ducru, a former UGCB president, said the Russian market remains “secondary” for his interests.
The distribution system is overcomplicated and reduces the incentive to make too great an effort, he explained. Like others in the UGCB, Maroteaux chose to stay in China for other appointments, rather than follow the group to Moscow.
Advice for Bordeaux producers
Compared to the Chinese market, ultra high-end wines are not selling as well. Importers say that mid-range wines, and those estates that have established good relationships with distributors to the Russian Federation have the best outlook. Brands like Chateau Giscours, Chateau Loudenne and Chateau Talbot have done well, for example. According to Alexander Van Beek of Chateau Giscours, promotional tours were already occurring in the wake of Glasnost — long before other Bordeaux estates began to explore the Russian market. Any Russian importer will tell you that Giscours is a well-known brand in Russia. Some consider the name’s easy pronunciation is also a factor.
Regular visits and promotional dinners prove useful, too, said Perrot. More time should be devoted to St. Petersburg, he added, because it is Russia’s second-largest city and is officially a twin of Bordeaux. “Even though all the top distributors and retailers are in Moscow, they all have offices and stores in St. Petersburg, and we should go be there more often.” After many years of travel to the Russian Federation, Perrot believes that vodka and beer still dominate the drinks market, but wine is gaining in interest following certain criteria: Bordeaux is becoming a synonym for high quality red wine (white wine lags behind) and that appeal dovetails with an increasing taste for luxury goods from affluent young professionals in Moscow.
Importers urge Bordeaux producers to increase their marketing efforts, noting the greater success of Italian wines. “Italian wines have earned a reputation for being more understandable and they do not require as much ageing,” Afanasiev explained. “I see more Italian producers holding promotional events, too.”
In an e-mail, Moiseenko criticized Bordeaux for its lack of promotion sense: “The communication from Bordelais producers is non-existing. They don’t have good Russian sources of correct and official information, their web-sites are ridiculous and seem like an excuse to waste EU promotion budgets. In my opinion, there is no global strategy for the Russian market. So, this strategy and a clever media campaign must be developed by and with local professionals and not with foreign-based agencies and people who have no real sense of the market. They should come here and study the market carefully. Talk to the potential customers. Use modern technologies and language. And stop throwing money away.”
Published in Meininger’s Wine Business International, September 2012 || Read original
Russian authorities have done it again: new restrictions are now applied to the alcohol advertising both in the Internet and in hard media. An already overregulated market has become even more overregulated. The 4th of July will become another “black day” for the Russian alcohol market and this time it makes no difference if you are a vodka producer, wine importer or anybody else.
Summarizing the new law “On advertising”
The official reason for this extremely strict legislation is (of course!) public health. Russia has a long history of alcohol (read — vodka) abuse and seems like State Duma naively believes that these measures will magically affect the desire of Russians lower classes to drink cheap poison. It is not only my opinion that the real motivation for that kind of legislation is far more prosaic and down-to-earth. Moreover, all the major amendments to the law were developed by the Duma in a suspicious rush – it took less than a week – with no public or even professional businesses discussion. State Duma didn’t even think of taking a moment of debate before passing the law. As was clearly stated in the letter from the magazines publishers and alcohol market professionals – “there’s a huge risk that the new legislation will leave consumers with no information on alcoholic beverages at all, which will result in an advantage for cheap and low-quality spirits». The industry experts and businessmen also pointed out that no prohibition ever have done any good to the public health (quoting the World Health Organization research). “It’s the society circumstances and cultural and social norms that should rather work”.
- It is now prohibited to advertise alcohol in ANY online resource even if this resource is your personal blog (i.e., it is not officially registered as media). If you do it, you’re guilty anyway.
- It is now prohibited to place adverts of alcohol on first and last pages of the magazines, including light alcohol
- It is now prohibited to place outdoor advertising at virtually any place including airports and railway stations
- Until the 31st of December 2012 it is still possible to advertise inside hard media. After this date it will also be prohibited
- It is now prohibited to use any reference or images of human beings or animals in the alcohol advertising
The rationale behind new alcohol legislation
After the crisis year of 2008 Russian government started seeking easy and fast ways to re-fill the federal budgets and turned its attention to the alcohol market. By saying “Russian government” I also refer to the Russian government-related immune-to-the-law oligarchs. The alcohol market reform introduced in 2009-2011 led to bankruptcy for many smaller players on the market leaving space only for the bigger ones able to finance expensive renewals of the warehouses and able to get new licenses in reasonable time (although even some medium-to-big businesses were about to die – this happened to Simple Wine and MBG Impex, a couple of old-time wine market operators (and leaders)). Finally the strongest players managed to survive while those depending on short-term loans had to disappear. Experts say that the number of distributors and wine importers shrank twice during that period. Results? Less choice of interesting wines, few independent small businesses survived, more big brands. Government needs to justify their stupid business-damaging decisions of the past.
The other reason is justifying the fiscal policy of duties increase for alcoholic beverages. Russia is already the country with the most expensive alcohol. The beer excise tax rose 3 times in 2010, resulting in 3 times higher revenues of the “government”. We await the same for the imported spirits.
The third reason is the populist rationale of various anti-alcoholism programs that are based on prohibition rather than on introduction of new cultural norms and Mediterranean diet with wine as a base instead of vodka and other spirits. Beer alcoholism is now the most damaging factor for the younger generation. “Ban everything, don’t make difference between wine and vodka”, — this must be the simplest way to keep the nation healthy, but is it really? The soviet short-minded thinking is still here and it doesn’t seem to disappear. News bans will lead to decreased information on quality alcohol (including wines).
Let the weakest die
Some Russian experts believe and I do agree that all new measures will lead to even more consolidation on the market and less opportunities for growing small and medium-sized companies. The old saying reads “Advertising is the progress’ engine”. Entrepreneurship has long been out of attention and out of fiscal interest of the “government” – I assume, because there are less bribery possibilities in these cases. The big players with established brands and huge promotion and BTL budgets (like Diageo or Pernod Ricard) will not suffer much. All the others, including wine importers and small independent companies will have much more “official” reasons to disappear forever. Western companies are more protected in every sense – starting from mostly official legal status and finishing with strong legal departments with the corresponding effect on business. I once heard the leading international spirits company CEO saying that it is not possible to operate an alcohol business in Russia without strong spendings on legal department.
First victims: Russian search engines and… Google & Facebook
On the day the new law was brought into force the major question in the offices of the biggest players on the market such as Bacardi-Martini, Pernod Ricard, Diageo was – what should we do with our online activities and presence? Suspend the Facebook fan pages? What are the possible actions against us that could be taken by Federal authorities if we continue? The main problem which I will also describe below is the wide interpretation and blurry laws that can lead to any consequences depending on the judge interpretation and, let’s say, “mood”. Look at any public court trial in Russia and see for yourself.
As a matter of fact and oddly enough the first possible victims of the new anti-Internet law are the search engines and Facebook. Russian Anti-monopole Service Bureau has already issued some warnings to Google, Facebook and the major search engine Mail.ru to stop showing context advertising of alcohol near their search results. Possible penalties for such “violation” of new laws – from 100 000 up to 500 000 rubles (2500-12000 EUR). Mail.ru already commented that the alcohol advertising didn’t reach the level of 5% of all the advertising shown. Google and Facebook are silent but obviously will obey new legislation sooner than later.
Media market to shrink even more
It was May 2009 when I wrote a note about wine magazines seizing. After that I was thinking to write an even bigger research on the wine press in Russia. But then I suddenly realized that by the end of my writing I have pretty much chances that there will be no wine media left. It was partially true. Most wine media in Russia today exists in the form of personal blogs, important wine columns in online newspapers and a couple of glossy magazines and newspapers survived, one of them being quite a quality edition belonging to a wine importing company. With no advertising these editions are 120% doomed or have to stay a PR-instrument below any profits for wine importers. The new legislation makes even thinking about starting a wine magazine an idiotic idea. No Wine Spectator is going to appear in Russia, although there had been some rumors a couple of years ago. Again, all this is resulting in lack of quality info on fine wines and spirits, simplification of the market, no-choice, big brands domination, etc.
The estimated loss of the general glossy magazines advertising revenues is from 5 to 30% depending on the edition.
Lost in interpretation
What is happening now with the Russian alcohol legislation should be considered as a small part of the rotten Putin / Medvedev system where “the actual law” doesn’t exist and the only thing that matters is the law interpretation by the courts who hardly can tell their right from their left. Look at the Pussy Riot case, look at the new slander law, look at the new gatherings law — all of them violate the most basic principles of the Constitution – the right to express opinions, the right to gather freely to express these opinions, the right for the fair court, the presumption of innocence, the antimonopole laws, consumer rights, etc, etc.
The last stroke for this ugly painting: when the western companies that have strong presence and usage of Facebook promotional fan pages inquired the Feds on what they should do with these fan pages (these pages usually bear the names of the corresponding brands like Hennesy or Johnnie Walker), the precise answer was (I am quoting): “Yes, we also paid attention to this advertising and we would think if we should interpret the invitation to join such a page on Facebook as the violation of law. We are also not sure how we should treat the advertising banners on these Facebook pages. It is my opinion there’s no violation in this case”. Lovely, isn’t it?
McKisney’s Moscow office has just released its report on the dynamics of the luxury goods’ sales in Russia. This news could pass unnoticed for the alcohol media if the results weren’t so stunning and… giving hope for some exclusive beverages producers. As it turns out, nearly 45% of all luxury goods sold in Russia are alcoholic beverages. This means that the structure of luxury goods’ sales in Russia is quite different from those in other countries. Another 36% correspond to expensive clothes which leads us to an interesting point: Russians like to look great and to get wasted in an extremely luxury manner. Continue reading
In 2010 Russia imported about 400 million bottles of wine – a huge number. Oddly enough it’s not too much for a 142-million nation that has no real experience and culture of drinking fine wines. During Soviet times Russia was producing lots of domestic cheap wine made in the south of the country, not far from the Black Sea. Wine consumption once was peaking 20 liters per person a year. Currently Russians drink no more than 3-4 liters of wine a year.
Last week I visited one of the nicest Moscow restaurants – centrally placed Argentinean “El Gaucho” – and I couldn’t help but noticing that almost every table had glasses full of wine and wine bottles on them. I was double amazed when I reluctantly opened the wine list. You could notice Argentinean Luigi Bosca Finca Los Nobles for 11 000 RUR (it’s 300 USD). This is about 4 times higher than you can normally buy directly from the wine importer in Moscow. All other wine prices were similar and the 300 USD threshold was stepped over many times.
I’d also advise you to read the recent article on the Russian market in Wine Business International. In the article Dmitry Pinsky, the head of DP-Trade wine importer, blames astronomic wine prices in restaurants on greedy sommeliers. “We blame it on sommeliers – in most restaurants they are fully dependent upon commercial listings and demonstrate no opinion of their own. Moreover, commercial suppliers pay them cash for recommending their wines. Thus sommeliers of certain restaurants can simply lie that wines sourced elsewhere are currently not available”, – he says. Honestly I’d strongly disagree. There’s nothing sommelier could do if he had no OK from the restaurant owners. This means that the whole restaurant system is intentionally building up margins never mind the sommeliers who have no their own voice and no courage to stand up against the margin tactics and the people who pay them salaries. Obviously sommeliers are rarely considered to be an asset of any restaurant in Russia. Big restaurant holdings like Novikov Group are driven by pure brand business that doesn’t care much about the diversity and affordability of their wine lists.
The math is pretty basic. With unstable economy fully dependent on natural resources like oil and gas any Russian business is ready to disappear at any given moment. The risks of running business in Russia are enormous, restaurant business is no exclusion. The most dangerous factor is the government control and desire to make money on the business owners. As a result these people are always ready to flee to safe London and take all the money they could earn here together with them. Would you bother about any long-term restaurant business in a situation like that? And yes, you’d better have all the possible risks and margins built into your wine cost. By the way the food prices in “El Gaucho” were quite acceptable and on the European level. This is also a small trick – most of us judge restaurant prices by its food prices, not by wine. By the way, that day we were drinking nice Czech beer and never got to taste wine.
10 December 2011, Moscow
From 15 to 85 thousand Russians has been claiming they don’t want to live under the Putin-Medvedev regime today during the organized manifestation of opposition forces at Bolotnaya square. Maybe these events will have even bigger impact on the wine market than Russia’s entering the WTO in 2012.
The overregulation of wine market in Russia is a common knowledge and the domination of vodka producers is so ridiculously obvious. For example, we still remember how the Kristal vodka producer Souyzplodimport has stopped Louis Roederer from selling its top Cuvee Prestige, Cristal, in the market. The official court ruling was that Cristal and Kristal brands were so close in the consumers’ minds that they could confuse consumers and ruin the Kristal’s brand identity.
It seems that only big political changes, including fair courts not dominated by big money, might modernize the market and bring quality wines closer to consumers. It also seems that the main hope of any wine importer is the retirement of the Chief Sanitary Inspector Mr. Gennady Onischenko, who was in charge of many wine import-damaging decisions, including the political ban of Moldovian and Georgian wines, new regulations and certifications of the wine market in 2006 and 2010, new licensing in 2010-11 when lots of wine importers were severely hit and many suffered big losses. Aside from him Mr. Igor Chuyan, the head of the alcohol regulating body RosAlcogolRegulirovanie, is in charge of many regulating decisions that influenced the business of many wine importers. With the understandable background in Rosspirtprom and Kristall, the major producers of many famous vodka brands, he and his deputies are the dark force behind the wine market regulations and the protégée of Dmitry Medvedev who put him in power on the 1st of January 2009.
Formally after entering the WTO alliance Russia is obliged to lower its wine import duties from the current 20% to 12.5% during the period of three years. It is unlikely that final consumers will feel any price reduction — wine pricing is still absolutely volatile and voluntary — russian restaurants tend to double, triple (at least) the prices for wines making even a cheap Chianti a luxury drink if one wants to consume it in the restaurant.
I assume that being a freelancer is just as different from working for the most respected wine magazine in the world as playing in Bolshoi Theatre is different from street performance. At the same time I am very sure that doing things on his own — as James Suckling does nowadays — makes him a lot happier. For his recent (and short) visit to Moscow he came invited by one of the leading wine importing companies.
Only two short posts on his web-site covered this trip to the Russia’s capital. It was great to meet James at Grand Cru wine bar in the city center and watch him talking en vivo. Though I am a bit surprised by what he wrote in his blog.
First of all, he says that the estimated number of fine wine drinkers in Moscow is 2 million. This is an obvious and heavy exaggeration — one can expect there are about 2 m occasional cheap plonk wine drinkers in Moscow who don’t tell their red from white and prefer 200 rubles wines (about $5) from Tertapaks. This I can imagine. But would anyone go that far to call this category of people ‘fine wine drinkers’? Note that the estimated population of Moscow is almost 12 m people which means that in James’s point of view (well, that’s the way he was informed) exactly 1/6 of all the Moscow population drinks fine wines. This is of course far from reality or Moscow would have become a new Hong Kong a long time ago.
In 2005 I asked for the estimation like that a well-known person in the restaurant business Alexander Smelaynskiy and his reply was that about 300 000 people in Moscow could be called fine wine drinkers. Which takes us to 1/40 or 2,5% of the city population. Ok, almost seven years passed and many more people know much more about wine and do go traveling but still not so much more earn enough to buy fine stuff, especially if we take into account that wines tend to cost 2-3 times higher after being brought to Russia. The 2008 recession had a dramatic impact on finer wines consumption. Optimistically speaking I believe no more than 3-5 percent of Moscow population could be called fine wine drinkers and potential drinkers. We are talking about 600 000 tops, but this figure seems exaggerated too.
In his blog James also noted that the wine prices in Moscow restaurants are a big problem specifying 3-4 times markups. But at the same time he says that the same problem he saw in the US. I believe that we should stop whining about high markups and prices for wine in Russia. Remember — everything costs much more in Russia than in Europe or anywhere else if it’s an imported product. Cars, clothes are good examples. That’s why people who earn enough prefer to buy clothes at rebajas and soldis. Yes, restaurant prices could be a little lower if the margins were not so big, but restaurant are the same businesses as any other.
On the contrary James speaks romantically about Russian sommeliers who «are looking for interesting wines full of character from honest and determined wine producers». I’d love this sweet picture to be true, but if you talk to any restaurant department of any wine importing company you will hear the stories of sold wine lists and sommeliers’ and restaurants managers’ greed and passion for… money. Wine is still not a passion but a money-making instrument and there is a long way to go and great deal of work to be done by everybody for that to change. There are exceptions, of course.
I cannot blame James for being optimistic about the Moscow wine scene. At last, two days are far from enough to understand anything that is taking place here neither he had a chance to speak to more people apart from journalists whose understanding of the scale of his figure was mostly far from bene. He is a freelancer and he is taking his great risks of doing business in emerging markets and I hope he is taking great margins too.
In 2006 the importers and producers of alcohol products estimated their losses as a result of implementing the new regulations system called EGAIS as much as $1 bn. In the beginning of 2010 the imports almost stopped once again.
Summer 2011. Despite all the efforts of wine importers trying to do their business and provide wine culture as opposed to the beer / vodka culture, Russian officials represented by organizations with hardly pronounced names Rosalcogolregulirovanie and Rospotrebnadzor are making the life of importers even more miserable.
I am told that wineries’ representative can hardly believe it when they hear what’s happening on the Russian market. They just fail to understand why would the government officials invent so many rules that have no other explanation of existence than those of stupidity. Or, let’s keep it more clear, existence of greed, money-to-pocket flows and corruption.
This summer isn’t a relaxing time for virtually all wine importers in Russia, oh, no. The new game invented by the above mentioned regulations bodies is called «Get a new trading license». This is a striking addition to the recently adopted and UPGRADED certification system for each and every alcohol containing product that you bring to Russia. Well, you might not have heard of it if you are not dealing with Russia yet. But if you do, you might already have received a number of screaming emails and phone calls from your importer in Russia asking you to send your appellation rules, thorough description of the production process and of each wine as well. And, forgot to mention, have all of those docs legalized and apostiled.
Now it seems all of those were just minor problems in comparison to the danger of losing the trading license. I mean, why would you bring all this wine to Russia if you cannot trade? The process of getting new licenses is hard and connected with bureaucracy, bribes (obviously), long queues (you can image how many would like to renew their licenses at a time) and waiting for the final official confirmation letter. Which is sent to your company by ordinary mail, by the way, and can travel a week or two and still not reach your mailbox.
From my personal talks with wine importers I have a feeling that not all of them might survive this process and have their new licenses approved. This especially refers to the smaller companies with less buying power (in all the meanings of the word «buying»). Lucky are those big players who were big enough to create another trading company and get another license for it. At this hard time they are still capable to trade running all the business through another company, whose trade license hasn’t expired yet. All the rest just have to stop all the sales. Which means losses, losses and more losses threatening their businesses.
My personal advice to the wineries — be patient to your Russian fellows. This is not their fault their own government prefer money in their pockets, not in the Russian economy. Or are they just being stupid? Well, both factors might collaborate to this situation.
December. It’s a magic word for every wine importer and distributor in Russia. You can see why – they say about 40% of all yearly wine sales take place during the New Year time. Yes, Russia doesn’t have a traditional European Christmas time from 24th of December, but people relax during the long holidays that usually last from the 1st of January and finish in the middle of the second week (10th, 11th). Usually Russians buy a lot of alcohol in advance to sit comfortably at homes for several days and to eat their favourite “Olivier” salad (called Russian abroad).
I can confirm that the usual sales per month usually multiply during December, especially before the 15th when it’s the right time to buy for all the major corporations – they will have their corporate parties somewhere in between the 10th and 25th and thus have to plan in advance. Aside the corporate parties the second major source of cash flow during this period is wine gifts for corporate clients, partners and staff. It’s typical for oil & gas companies, banks, consulting companies, advertising and PR agencies, actually almost all of them do this. Except those where alcohol is prohibited as gifts by the corporate policies. Huge amounts of cheap plonk is sold during this time – as well as huge amount of fine wines. The latter go as gifts to the major partners and clients. Wine package is crucial at this time of the year.
I never could’ve imagined what may restricted Champagne supply do to a Russian wine importing company and its business. Let me assure you – the company may be shaken starting from the lower managerial level (clients are raged with Champagne absence!) and finishing with the owners who lose their major profits. Especially during this 2010, when new stupid regulations of the Russian licensing bodies seriously complicated the process of documents preparation on the side of a wine producer (not mentioning wine importers, who are used to those «nice» presents of the Government). We already heard stories of Baroness Philipinne de Rothschild having to run herself to the notary company in Bordeaux to make sure all the documents are certified as they have to. I do hope they are not anecdotes! The same concerns to the Champagne producers who are not fast enough to realize that any delay in certification during this extremely hot period may lead to import collapse and, thus, to zero sales.
This is also the time to buy for all the private clients. Lots of them will flee the country for this period to ski in Austria or Italy or to go diving in the Maldives. Anyway they tend to open their bottle of Cristal or Veuve Clicquot here, in Russia.
Moscow is a fascinating view at the New Year’s eve. If you have ever travelled here – you know that Moscow traffic is as horrible as that of Mexico D.F. Now imagine what happens when all the people from around Moscow and Muscovites rush to the city center to buy their presents! And now – imagine that the delivery service of a wine company has to work during this time twice, three times harder. Our warehouse switches to almost 24/7 work schedule, cars are loaded early in the morning and till the 22.00 in the evening. And because most of the Russian wine importers still have little desire (and funds) to invest in modern warehouse facilities, they turn into bee hives with once important difference – these bee hives are far from being in order.
Orders, orders, orders, urgent orders, no Champagne, no packaging, take what we have – this is how it works this year. You can have 600 bottles of top EUR400 champagne sold out in seconds if you are not fast enough to reserve some of it for your client. It’s a competitive world, a world of fighting for orders and clients.
The good news is we are still able to satisfy the majority of the clients – especially those who think and plan in advance. Merry Christmas and a Happy New Year!
If you are a foreign winery exporting wine into Russia, then you do remember 2006 – the EGAIS scandal with new licensing and stamps that delivered Russia from most of fine wine for some 2-3 months when we were astonishingly observing empty shelves where the imported wine used to proudly stand. Since then the market has almost recovered.
But the Russian government and the Ministry of Mr. Onischenko do not sleep. All this time their minds were actively working on new barriers to make wine imports even harder. And a new Customs Union between Russia, Belarus and Kazakhstan gave a really nice opportunity to create some new sophisticated bureaucratic tools to benefit well on wine business. New licensing was the first bird in winter 2010 – all of a sudden the importers were put in front of the fact that they have to re-certificate most of their bottles. If you remember that EGAIS (the electronic system controlling the turnover of the alcoholic products) was set up to cancel some stupid paper licenses. But in 2010 the licenses came back – and amazingly EGAIS was not cancelled. The new rules also made almost impossible to send wine samples to Russia via ordinary transport companies like DHL or TNT. But this is a minor problem compared to the others stupid rules we have now. Continue reading