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The sad story of wine communications in Russia

Let me be clear — we, Russians, are not great communicators. At least, we are not great wine communicators. I am not talking about the “blogger” thing. If you as a wine trading company have 1500 SKUs in your portfolio, what else are you left to do than to communicate the hell about it? But, in fact, there’s no such understanding in modern Russian wine importing and distributing companies. Ain’t that a shame?

The reasons behind this (as I see them) are a mix of tough wine market regulations, the historical nature of alcohol related business (trading alcohol has always been a kind of grey area, high-margin, easily manipulated by specific officials to squeeze out a bribe). Wine has a long way to go before it stops being considered just another type of “alcoholic drink”. Because everything that is an alcoholic drink has to be severely regulated, because, from the Russian official’s standpoint, it’s bad for your health.

Of course, there’s a fair share of hypocrisy here: most officials are drinking expensive wines, at the same time explaining the normal folk, how bad it is for their health. That’s because they don’t have to count the money they spend on it. Now think — if a common Moscow salary is around €1,300/month, how much wine will you be able to consume?

Yet, there’s maybe a 5-10% of people out there who actually can be interested in wine and knowing more about it. How come our wine trade treats them so poorly?

Let me explain: when I say “poorly” I mean these things:

1. Lack of attention to wine consumers. It’s everybody’s problem in this market. All these CEOs and marketing directors seem to be born in the XIX century. In many cases companies boil their communications down to publishing rating and event reports, interesting too nobody, of course. It’s done to state: marketing department is doing SOMETHING. “We have no idea why, and what on Earth for, but we are doing it”. Brand-oriented content? With 1-2 rare exceptions (in Moscow and Saint-Pete there are approx. 30-40 wine importers) it’s not happening. And even if it’s happening, it’s hard to read through this drivel.

2. Underestimation of wine complexity.

The wine world is so damn interesting in big part because the wines are so different, so complex and interesting. It’s rarely understood that wine is more than a number of specific technical characteristics that you can happily pour down your consumer. Attention to wines’ details is extremely rare in Russia.

3. Underestimating the power of proper communications in wine marketing.

There’re many people in the wine trade in Russia who have little understanding and use of modern media channels — be that social media, newsletters, live coverage, videos or anything else. These dinosaurs are coming from the past and you can see them when you’re facing them. They are slow, they are dull, they are boring, they wear you out with their lack of enthusiasm and with focus on prices, money and milking the EU funds for OCM. “Of course, we need your marketing budget!” Will this budget ever be spend on anything good? No way.

4. Being unoriginal in communication.

Even if companies try to speak to their clients, they normally fall into boring wine descriptions, uninspiring and obviously fake adoration, unoriginal social media posts and boring events. The goal is, again, to show that they are doing something. If only anyone cared.

5. Unwilling to invest into high-end specialists

It’s maybe a result of a lack of proper education and marketing traditions in this country where the wine importers’ owners often come from the Soviet past where wine was a part of the producers’ market. Today the market is a consumer market, but the owners are still back there, in the Soviet era. There’s probably a couple of examples of bright and forward-thinking communications amongst wine businesses in Russia. One or two, just consider that. When companies are lucky enough to have great specialists, not many of them care to keep them or promote them to higher positions. Many think it’s better to higher a stranger form the FMCG business, than look at their own staff. Well, that’s expected.

Is there hope for the better future of the communications in the Russian wine trade? I believe it’s a generational thing as well. As soon as current business owners pass their business down the younger generations or younger people become the owners, we should expect some changes. Until then — wineries should take their communications in Russia in their own hands.

There’s no app for that, but there’s an article 🙂

Looking for a wine importer in Russia: 2019-2020 outlook

Moscow wine scene (and St.Petersburg’s, for that matter) definitely feels different from what it used to be just 3 years ago.

There’s a new breed of younger people to start and they are now managing fashionable venues and funky wine lists. The lists have evolved themselves: there are much more unfamiliar names in there. Chances are that if you go to a newly opened hip place you won’t recognise 50% of wine producers on the list (at least!). Unless you’re a professional, of course, having all these biodynamic and natural wine producers’ names on the tips of your fingers. And it’s not just talking – the wines really sell. Take pet-nats (Pétillant Naturels) — these easy, low-alcohol wines sell like hot cakes today.

With this in mind it became both harder and easier to find a wine importer in Russia. Easier because there are more smaller importers. Easier because many retailers and even restaurants started importing wine themselves. Easier because people are more price sensitive rather than brand-driven today. It’s actually a kind of a mauvais ton to even ask for these commercial brands. Among specific audience, of course.

It also became harder — the consumer buying power is not going up en masse, so it’s mostly bad news for big producers who have to push volumes. Price sensitivity is hilarious — the importers will squeeze you till you bleed (many people are quite happy about been squeezed, I must say).

That said, for many wineries from different countries Russia has in the recent years become a major market. It really moves me to hear that kind of news.

Importers landscape

Historically wine importers in Russia are balancing between the bad and the worst: market regulations are not a piece of cake here. The alcohol-related laws inside the country are not very nice for business. Nevertheless companies with the right attitude tend to deal with these circumstances and take this market’s volatility well. If runner’s idioms are close to your heart, this is, like, endurance building. Iron Man of a kind.

There has been a significant shift in wine importers (distributors) game in 2019. Big brands have been changing hands a lot, especially due to larger vodka-related companies coming into the wine-importing and distributing game. Take a look at Beluga Group and Ladoga Group — they are two good examples. Offering a lot of shelf power, they are not the same in HoReCa presence, clearly there’s a different strategy. Beluga has swiped brands like Torres, Masi and (speculatively) could get Antinori, which has been stuck with MBG Impex for many years now. Others, like Roust, Inc (the Russian Standard division) has lost its wine power altogether.

On the other side of the spectre there’s a trend of emerging small-scale importers operating with small teams of 5-10 people. These companies are able to deal with niche brands but also — with quite established names like Gosset in Champagne or AdVini’s Maison Champy in Burgundy. There’s definitely a HoReCa trend of increased interest in Grower Champagne. We will see, how far it goes in 2020.

Restaurant market

Both Moscow and Saint-Petersburg are dominated by successful restaurant groups — but this is changing too. Some of them, like the Novikov Group, Dellos Group, Ginza Group, Alexander Rappoport’s restaurants and others, are quite old, while younger and trendier examples include White Rabbit Family, Perelman People, Twins Group and Probka Family. Most groups have a chef-sommelier overseeing the overall concept of the group; Ginza, Dellos, Perelman and Twins are managed this way. Others, like Novikov Group and Rappoport, give more autonomy to each individual restaurant.

Restaurants in general has become less pretentious. There’s more life in them. Wine bars are opening (and closing) every day. And the wine lists are way more interesting.

For wineries this situation means one thing: there are plenty of top brands in the market, that don’t have a good representative. Many wine brands are looking to find new importers. Wineries drop those importers who can’t pay anymore, they drop those who fail to deliver even the bare minimum of what they’d promised. As one major distributor told me in a private conversation: “You can’t imagine what kind of wineries I’m talking to. It’s all top wineries looking for a good distributor”.

The strategies

One thing for sure — one has to understand what they want and what kind of distributor they need. Cold-calling the landlines and sending e-mails are good old tricks that don’t really trick anybody anymore. You can’t spend time on that if you don’t know the players personally. Of course, I’m talking less known wineries. Or wineries that need, mostly, off-trade sales. HoReCa is getting really small and really busy with competition. On the positive side — HoReCa needs value wines more than ever. What’s value in Russia these days? Depends on the city greatly — Moscow prices being the highest, but Russian regional cities are poorer in every aspect.

If you’re a winery that doesn’t need to push millions of bottles, you’re in better position as of today. Moscow and Saint-Petersburg are two major cities to focus on with occasional visits to Ekaterinbug, Novosibirsk, Rostov and others. It’s all perfectly good.

Anywhere from 2,000 to 5,000 RUR (€26-€66, at the rate of 75 RUR/€) can be considered “value” in today’s restaurants, depending on their concept. I’m talking about the final price in the wine list. Consider your ex-cellar price multiplied by 3-5 times and then multiply this by 2 to get an idea of how much your wine will cost in Russia.

Strategical thinking is important in Russia — especially when the market is volatile and fragile like today. It can drive your sales if you pay proper attention to it. Visiting every two years? Forget about it, this market doesn’t tolerate that.

Is it worth taking part in wine exhibitions in Russia?

Yes — Vinitaly is out there for you getting better and better, not so much for Gambero Rosso, which is, honestly speaking, a mess. I’ve been there, I know. Still, you’re lucky if you’re an Italian winery. Yes, there’s more competition in some segments, but trust me, there’s a lot of soul-searching about even the basic things like Piedmont and Tuscany. Prosecco I’d call the hardest and most competitive category of all.

Portuguese wineries now have an annual Wines of Portugal event that takes place in April. German wineries have several events during the year now, with Wines of Germany back on the market. For French wineries not so much choice, unfortunately, but some French tasting do pop up here and there. Still, French haven’t been great promoters of their wines in Russia during the last several years.

Getting to participate in exhibitions doesn’t get you to your goal if you don’t work hard before and during the event. Promoting the winery before the event is vital — articles and buzz help to inform the trade, so they know what they are facing even before they arrive. From personal experience, it’s been doing magic: sometimes one publication is enough to get noticed.

Advertising and promotion options

Wineries have abilities to promote the wines via professional channels (tastings, trips to wineries), but, as one can imagine, those are limited by number of people that can be invited to such events and by the focus of wine importer, who has many brands to manage. What are the options then, to promote better and increase brand recognition?

  1. Creative independent content: articles, interviews, localised videos — all of this is possible with people like me. Honestly, not so many independent people share interesting and original content these days. Most people are stuck in their Facebooks and Instagrams, avoiding interesting thoughtful texts that conveys the image of wineries, their people and wines.
  2. Sommeliers in social via events. This normally works when importers bring you a group of their clients. But even here, the communication is normally limited to standard selfies with winemakers and bottle shots, fast decaying in the social media content roll.
  3. Opinion leaders in social media. It takes time to work out a program for such people: fist, you have to identify them. True, they can bring a lot of value to the brand, but the program has to be very carefully managed.
  4. Wine exhibitions. Arguably more important for those who are looking for importers than for those present in the market. There aren’t so many of them: Vinitaly, Gambero Rosso, SoloItaliano, Prodexpo, MetroExpo (only for Metro Cash and Carry clients), Guia Penin tasting, Spanish Wine Salon, Wines of Portugal and Wines of Germany yearly tastings (from 2018 and 2019 respectively). There are some smaller events too, for regional appellations.

Questions, collaboration inquiries? Reach out on LinkedIn or e-mail me here anton.on.wine (at) gmail.com

6 reasons for wineries to embrace Russian language communications

It is surprising — in the era of digital communications, social media and bloggers — to see how little attention wineries and wine promotional bodies actually pay to communicating in local languages. Sure, it’s not always easy to find resources to manage multi-lingual content and activities, but just thinking about the advantages it brings makes it clear: communicating locally and in local language is a must if you want to grow your business.

One would say: why would I invest my time and budgets into tasks that are perfectly (or, at least, fairly well) managed by my wine importer or distributor? Well, let me walk you through just 6 considerations.

1. Wider coverage: Russian is spoken all around in the Eastern countries

Sometimes exporters don’t get it: Russian language is the official state language of several countries with growing wine culture. Belarus, Kazakhstan, Ukraine, the Baltic countries, Tajikistan, even Georgia — all use Russian language — some, as official language, others as historical part of culture. Russian-language communications will go across border, especially, if managed correctly. Wineries that have enough muscle to manage different markets will certainly benefit from singular information flow.

2. Russians speakers don’t really engage with English

Talking to Russian sommeliers and trade might give you an impression that everybody can speak English here. For example, the winery is already running a global communication hub for international consumers, probably, in English. Will that be enough for Russian speakers? Let me break it out to you: even big cities’ professionals prefer mother tongue — to share, comment and engage. You are not going to get any substantial engagement from non-Russian communications, period.

3. Being INsider, not OUTsider

It’s not only about speaking Russian, it’s also communicating from within the Russian realities. Being outside and trying to be sociable won’t work here — creating content, that is local to local people, is essential for any wine brand. Despite the borders between Russian-speaking countries, we more or less feel the brotherhood and the same continuity to our cultures. Seeing a Kazakhstan sommelier talking about a wine bottle generates much more response than about any “western” national. Maybe it’s a matter of cultural closeness, language unity or something else.

4. More loyalty

You can’t really engage with wine drinkers unless you’re visiting your markets. It’s a kind of respect to people who drink your product. Gone are the days when winemakers could sit calmly at home and hope to sell the wines 5,000 km away. Same goes to communications. Talking in the language of your consumer is a part of basic respect and positive attitude. People who try to speak Russian get more sympathy than those who live here without taking any notice of the surrounding culture. In other words — Russian language generates more loyalty and trust to the brand before you even start producing the whole sentences. Professionals, too, might perceive your brand as big and faceless — unless they have a chance to meet you in person.

5. Better understanding of local markets with better feedback

Last but not least: will it surprise anyone if you start understanding the market better when you communicate in the local language? Your feedbacks will be realistic, your sales will consequently grow at another pace, your experience with the Russian-speaking markets will eventually go level up. What do these people want? What do they feel when they drink your wines? How should you adapt your international strategy to Russian-related markers? Those will be the questions you will probably get the answers to — and pretty quickly.

6. Using promotional materials across different markets

Of course, it’s when the economy of scale kicks in. Once translated all your information into Russian you can freely use it for a dozen of different markets — be it wines’ technical sheers, historic overview, news and presentations. Does this mean you have to constantly manage the Russian language information flow? Yes. Does it require substantial amount of work? Well, it depends on your managerial skills. In my humble opinion pushing the same international content to 50 different markets is a waste of time.

And money.

Creating engaging wine content for Russia

If you think that wine communications in Russia are a hard thing to do, you’re probably not right. There are some obstacles, but understanding them means better work in this volatile, but attractive market.

Oh yes, there’s a language barrier. When I start thinking of it, it turns out to be a huge problem. Wineries have no idea what their importers write about them, nevermind the auto-generated translations by Facebook and Google, they really work poorly with Russian language.

There’s another problem with communications in Russian: generally our companies don’t invest in professional writers and copy. Marketing communications is so poor, that reposting international scores is the most common way of communications. Other things include: boring Facebook posts, web-site publications that lack style and proper grammar (obviously good Russian gets harder and harder for people to learn), terrible connotations and attitude to consumers as to stupid kids. Forget depth, forget interesting questions in the interviews. The search for quality writing is nonexistent.

Importer’s web-sites in general are full of useless information put in boring Wikipedia writing with fake emotions of a 19 year old TV-star. Besides, you will discover that many importers don’t even run decent web-sites, stuck in development for years, not able to convince the business owners that it’s something of a necessity. 95% of wine import owners think that communications is simply not important. Exceptions are 1-2 companies of 40-60.

Wineries are left with little choice: you work in Russia, you leave this to the importer. You can’t even advertise your winery with proper journalists — since 2013 alcohol advertising ban, most magazines became too scared to write about wine and, especially, brands.

So, what is left for wineries who need better exposure in the market? Let me lay out your options

  1. Bigger wineries. It makes perfect sense to create their own content and communications in Russian language, connected to wine importer, but independent in its management and content generation. Some might see it as micro-managing things, but if you consider for a moment that Russian language is spoken in much wider territories than Russia itself – Ukraine, Baltics, Kazakhstan, etc – you will rethink. It’s not a bad idea at all to have your web-site’s Russian version to be the first thing seen by Russian consumers looking for your wines on the Internet. Search engines (like Yandex.ru) crawl international web-sites and are the major source of search traffic here. For importers it’s also nice to have an independent source of official information in Russian language. Controlled by the winery, this content is easily adjustable, updatable and can be shared across the world. I’m not even mentioning work like wines’ techsheets translation, ready to roll to importer and everybody who might be interested in them. Social media is another crucial thing for bigger wineries — importers are too busy and (as mentioned earlier) don’t have professional people to commit to such projects.
  2. Medium-size wineries. Of course, it all depends on the importer and the focus you want to have on the Russian market. Experience clearly shows: wineries who work in Russia, have extensive communications and come to visit the market often, 2-3 times a year. For these wineries it’s important to do things like promotional articles, winemaker/owner interviews, etc.
  3. Small and boutique wineries. Crucial to tell interesting stories and mostly do the same as medium-sized wineries. It will probably not increase the sales due to already limited quotas for Russia, but will generate important interest from the target audience.

Advertising and promotion options for everybody:

Wine importers have abilities to promote the wines via professional channels (tastings, trips to wineries), but, as one can imagine, those are limited by number of people that can be invited to such events and by the focus of wine importer, who has many brands to manage. What are the options then, to promote better and increase brand recognition?

  1. Creative independent content: articles, interviews, localised videos — all of this is possible with people like me. Honestly, not so many independent people share interesting and original content these days. Most people are stuck in their Facebooks and Instagrams, avoiding interesting thoughtful texts that conveys the image of wineries, their people and wines.
  2. Sommeliers in social via events. This normally works when importers bring you a group of their clients. But even here, the communication is normally limited to standard selfies with winemakers and bottle shots, fast decaying in the social media content roll.
  3. Opinion leaders in social media. It takes time to work out a program for such people: fist, you have to identify them. True, they can bring a lot of value to the brand, but the program has to be very carefully managed.
  4. Wine exhibitions. Arguably more important for those who are looking for importers than for those present in the market. There aren’t so many of them: Vinitaly, Gambero Rosso, SoloItaliano, Prodexpo, MetroExpo (only for Metro Cash and Carry clients), Guia Penin tasting, Spanish Wine Salon, Wines of Portugal and Wines of Germany yearly tastings (from 2018 and 2019 respectively). There are some smaller events too, for regional appelations.

The wine writing landscape is quite limited with some reference web-sites and wine magazines including:

  1. ByTheGlass (Independent). My web-site that I have been running for the past several years. Targeted at pros and trade across Russia and CIS, but also at people who likes entertaining wine texts and videos.
  2. ItsMyWine. Belongs to an important wine trader MBG Impex and used mostly as its marketing and PR arm. Still, has some reach.
  3. Simple Wine News. Probably the oldest wine magazine in Russia. Has a lot of limitations and interest conflicts due to the ownership by a wine importer. Has a print magazine.
  4. Invisible. A very interesting project targeted at selling wine, but with some quite engaging articles, design and a strong social media following.
  5. SpazioVino and VinoItaliano (Independent). Both focus on Italian wines, a lot of information, but the overall quality is quite poor in terms of journalism. Both share terrible outdated designs as a feature.
  6. Wine Report Russia. This is my web-site where I put up only my English language articles.

So how is it possible to set up a communications plan?

  1. Do it yourself. Study the market. Get to know the key people, meet and discuss even before you start working here.
  2. Work closely with your importer. Demand very certain things in terms of communications. Demand an annual plan. Work to propose some activities to gather more following in Russia.
  3. Outsource. The importer is busy? Unresponsive? Not focused on your brand? Outsource your communications work. Work with local people. Do your own tastings and social media. Work with journalists directly.

There are endless possibilities to control the winery’s communications and reaching out to winder audiences — they require a good knowledge of the market to

Read and comment in Linkedin

Ninja wine distributor search in the falling Russian market

Earlier this year I was writing about the perspectives of those willing to find an importer and distributor for their wines in Russia. There’s an important update to that information.

It so happens that the political games Russian government plays to control its population and support their wellness and status quo require the economy to be… well… in deep shit, to put it mildly. This is why we are not going to see Russia as a truly emerging wine market in the nearest future. We are not going to compete with leaders of wine consumption. We are going to continue to drink cheap vodka and cheap wine.

So, you might ask, why all that writing of yours about the “new Russian wine consumer”, importers and all that? Why even look for a distributor in that market? And this is tricky: you will be surprised to hear that in the falling market many wineries manage to sell a lot. And even grow. I have facts to substantiate that. Wine promotional bodies from different countries see the falling volumes but growing average bottle price for the wines sold in Russia.

As an export manager (whom I mostly have in mind when I write my market reports and articles) you might find yourself in an impossible situation — high market volatility, a lot of cultural confusion (“those Russians never reply my emails!”). Well, guess what, I don’t think they’re intrinsic features of this wine market. Not really. It’s a system feature imposed, not developed. Wine importers operate balancing between the bad and the worst. Market regulations are not a piece of cake, you can trust me on that. The alcohol-related regulations inside the country are terrible for business. This is not to say everybody is good, everybody’s having good business ethics, but that’s merely a result, not a desire. Try to understand what’s happening here. In the end of 2018 the sales of everything are not looking bright. It’s not even 2017 in comparison.

A bright side is that wine drinking cannot be stopped. Many finest wine drinkers fled the country in years after 2014 and the ongoing Crimea situation. They are not drinking wine here anymore. Those who remained are drinking cheaper wines, no more oligarch sales at large. Forget it.

For wine exporters it means another thing: there are plenty of top brands on the market, that don’t have a good representative. Many wine brands are looking to find new importers. They drop those who can’t pay anymore, they drop those who fail to deliver even the bare minimum of what they’d promised. As one major distributor told me in a private conversation: “Anton, you can’t imagine what kind of wineries I’m talking to today. It’s all top wineries looking for a good distributor”.

This got me to thinking: what would be a good strategy for this market?

To quit? Not to try? To focus on other markets that are in better shape? There’s no universal answer, you imagine. It all depends on how big you are, how famous you are and what you want. And on the fact if the wines are actually good and… worth the price you ask.

So what’s the right strategy in such a complex environment? One thing for sure — understand what you want and what kind of distributor you need. Cold-calling the landlines and sending e-mails are good old tricks that don’t really trick anybody. You can’t spend time on that if you don’t know the players personally. Of course, I’m talking less known wineries. Or wineries that need, mostly, off-trade sales. HoReCa is getting really small and really busy with competition. But — on the positive side —HoReCa needs value wines more than ever. What’s value in Russia these days? Depends on the city greatly — Moscow prices being the highest, but regions are poorer in every aspect. Anywhere from 2,000 to 5,000 RUR can be considered “value” in today’s restaurants, depending on their concept. Remember, I’m talking about the final price in the wine list. Consider your ex-cellar price multiplied by 3-5 times and then multiply this by 2 to get an idea of how much your wine will cost in Russia.

Back to distributors: mind you, there are new distributors too, that are most probably not on your radar until you start digging your self or with someone’s help. From personal experience I can say that a good deal (which means, finding an importer) can be as a gust of wind. Here it was, your chance, and now it’s gone, they made a contract with another one.

Is it worth taking part in wine exhibitions?

Yes — Vinitaly is out there for you getting better and better, not so much for Gambero Rosso, which is, honestly speaking, a mess. I’ve been there, I know. You’re lucky if you’re an Italian winery. Yes, there’s more competition in some segments, but trust me. there’s a lot of soul-searching about even the basis things like Piedmont and Tuscany. Prosecco I’d call the hardest and most competitive category of all.

Portuguese wineries now have an annual Wines of Portugal event that takes place in April. This year it was oddly coincident with Vinitaly in Verona, not a good choice of date, but we keep fingers crossed for them to be smarter 2019. For French wineries not so much choice, unfortunately. There’s nothing out there to be a part of.

Getting to participate in exhibitions doesn’t yet get you to your goal — if you don’t work hard before and during the event. Promoting your winery before the event IS vital — articles help to inform the public (and I’m talking professionals), so they know what they are facing even before they arrive. From personal experience, it’s been doing magic: sometimes one publication is enough to get noted.

Life doesn’t end with exhibitions, though

Ninja search starts with contacting the locals, the aborigines, in other words, the Russians. Finding ways to send samples and deal with importers on individual basis. Until recently I considered sending samples to Russia impossible. Luckily there are ways to deliver to Moscow. So: send 3-4 cases of wine to your agent and.. get to work.

Systemic and rigorous approach is the one yielding real results.
Anton Moiseenko, December 2018

Photo credit: © Anton Moiseenko

Questions? Reach out: anton.on.wine /at/ gmail.com

Also, read this on LinkedIn

Russian wine tastes are changing

Talk to a Moscow-based hip sommelier or a high-end wine trader and they will use words like “pét-nat”, “orange”, “Spätburgunder”, “Pinot Blanc” and so on. Soldera and Gravner sound like they’re the go-to names for the whole of Italy. Then, take a look at what people are actually drinking – and it can be quite different.

With the Russian economy in crisis, belt-tightening can be felt across the country. Surprisingly, that doesn’t mean wine sales are down: in some instances, things have become even better. Professionals across the market indicate that wine knowledge remains poor among the general public. But the ruble’s reduced buying power, and retailers’ desire to make better margins, have combined to expose Russians to more new wines than in the past. Russians are experimenting, whether it’s with wine from Spain’s La Mancha or Portugal’s Vinho Verde, New Zealand’s Sauvignon Blanc, Spanish Cava and Prosecco or affordable German Rieslings.

Dramatic changes in taste

It’s not easy to obtain hard statistics from Russian retailers, and commercial information is rarely offered to media voluntarily. What is certain is that Russian import statistics have shown dramatic changes in the past three or four years. Among the losers are Old World leaders Italy, France and Germany, which have all lost a significant share of the market compared to runners-up Spain, Portugal and Georgia. The New World is stagnating, with Australia, South Africa and Chile losing market share; the US and Argentina have been particularly hard hit. On the other hand, wine-producing countries of the former USSR, which share a cultural tie with Russia, have seen impressive growth.

Although Russia as a whole remains a consumer of sweetness-driven wines, market players sense a slight drift to drier wines. Although the effect isn’t big, it’s there, probably because there is such a great variety of dry wines, some of which can readily compete with off-dry and semi-sweet wines. The developing gastronomy scene has been another factor in the move towards dry and brut styles. While the trend is largely limited to wealthier consumers, it influences other groups too.

Russians buy their wines from several categories of retailers. The biggest combine food and wine offerings, such as X5 Retail Group’s chain of Pyaterochka supermarkets, which has more than 12,000 shops across the country and which is, by far, the biggest mover of volume wine in Russia. On the cheaper side is the Diksy chain, while Auchan is a big volume mover as well. Metro Cash & Carry, on the other hand, is a far more sophisticated wine trader dealing both with volume and quality producers. With its combined wine shops/on-trade concept, Otdokhni (“Take a Break” in Russian) is another fast-growing retailer combining food, wine and HoReCa under one roof and defining what the future of affordable wine sales might look like. Mid-level supermarket chains like Lenta and Perekryostok are showing fewer signs of a creative approach while upscale supermarkets like Tvoy Dom (“Your House”), which have an impeccable wine portfolio, don’t seem to be making it an important part of their business. The top-end Azbuka Vkusa (“The ABC of Taste”) retail chain, which has its own wine portfolio, is a powerful player catering for higher-income consumers.

The development of affordable chains shows that the general consumer likes shopping close to home at Krasnoye & Beloye (“Red & White”, about 5,000 retail outlets); Bristol (2500 outlets); Aromatny Mir (“Aromatic World”, 500 outlets) and the abovementioned Otdokhni (200 outlets). Such chains, some of which have thousands of outlets situated in uptown Russian cities, are capable of moving serious volumes. Spirits producers are also involved in the distribution of wines. Beluga Group, the producer of the eponymous Russian vodka, has importing wine for several years now, having already added about 300 specialised shops in Moscow under the brand WineLab.

Another reason for wine producers to be optimistic about Russia is the recent trend towards retailers importing on their own behalf. While the rich and stable 2000s were about the development of fine wines, and importers and distributors were able to maintain a healthy margin and still be successful, from 2010 prices were pushed downwards and they had to fight for every cent. Now, observers on three sides – retailers, importers and journalists – agree on the diminishing role of classic wine importers, as retailers invest in their own importing departments. Several national wine promotional bodies have reported an increase in value per bottle sold in Russia, despite volumes being down. Wines of Portugal have returned and German wines are expected to follow suit.

What’s hot, what’s not

Production of local wines has grown since 2010 as more wineries in the south of Russia develop a clear vision for better quality. Thirst for the national product increased dramatically after the population was cut away from the EU by sanctions and trade wars. After US-Russia relations deteriorated, the impact on US wines was felt immediately although some high-end wines remain in Russia. Interest in local wine can also be explained by the fact that many wine specialists and PR people, having lost their EU projects and employers in Russia, have been forced to work for Russian wineries or winery associations. With the addition of Crimea, the country’s areas under vine have dramatically increased. While the quality remains debatable, there are positive examples of better wines appearing, both at the high end and mass market levels.

Chile remains the leading New World supplier in Russia, but consumers are losing interest in wines from across the Andes. They are simply not trendy anymore and do not fit the price to quality ratio Russians like to see. Important brands of the past have been washed out of the stores with the likes of Luis Felipe Edwards and Concha y Toro being virtually all that have survived. With no marketing presence in Russia, Argentina and its Malbec have been unable to take root on the shelves.

New Zealand’s Sauvignon Blancs, on the contrary, have doubled their exports to Russia in the past few years. Although imports in general remain relatively small in comparison to Chile’s, intense, crispy Sauvignons sell faster than pancakes on a sunny Easter day.
With regards to French wine, something has gone terribly wrong so that they no longer compete on a par with Italy. Oxana Batarshina, export manager for the Gérard Bertrand Group, believes several factors are to blame: bad consecutive harvests in Bordeaux leading to a surge in prices, the ruble devaluation, and strong competition from other countries in the price level previously occupied by cheaper Bordeaux. “People are also simply fed up drinking wines of the same regions,” she adds.

Italy, on the other hand, faces equally negative developments. Expensive classic bottlings from Tuscany and Piedmont are much less attractive while booming sales of Prosecco have not helped much on the value side. Affordable Italian reds from Puglia and Sicily perform better with distributors reporting increased interest.

Russia used to be one of the fastest growing markets for sparklings. The good news for Italy is that Prosecco remains big, although DOC/DOCG distinction is mostly disregarded. Another interesting market mover has been Spanish Cava, which attracts ever more people. This interest is driven by democratic offerings that have appeared in supermarkets. Chains like Krasnoye & Beloye sell Cavas at $9.00 to $10.00.

Russians love wines with high alcohol. While professionals are calling for Pinot Noir-ish elegance and lower alcohol levels, ordinary consumers vote with their rubles for intense, powerful wines. The alternatives to $20.00 Amarones sold through Krasnoye & Beloye are Puglia’s lush reds and Georgian Kindzmarauli, a semi-sweet wine made from Saperavi grape.

Georgian wine, banned from the Russian market in 2006, is now back on the shelves and stronger than ever since the ban was lifted in 2013, although it’s more mass-market options than quality-driven wines that are available. The thirst for Georgian wines is explained by the demand from consumers who remember Soviet times and Georgia’s position as the winemaking Mecca of the Soviet Republics. The popularity of Georgian cuisine and tourism are also contributing to growing demand; Georgia is clearly becoming an important travel destination.

While the political status of Abkhazia remains an issue, it has become, alongside Georgia, one of the fastest-growing suppliers of wine to Russia, dominating the cheap wines segment; the wines are probably made from Moldovan bulk. Brands like Lykhny, Apsny and Psou cost virtually nothing at just $5.75 and are semi-sweet. There are positive trends for countries such as Azerbaijan and Armenia too. Winemaking in the latter is moving at speed and geographical names like Areni are becoming familiar, thanks to Arthur Sarkisyan’s efforts to bring these wines to Russia.

Mysteriously, Portugal, whose grapes most Russians can’t even pronounce, is making a strong comeback, with sales doubling in value in 2017 compared to 2013. The secret is, of course, attractive pricing, great quality, drinkability and Vinho Verde. The “zelenoye vino”, as Russians call it (green wine), is probably the most emblematic Portuguese wine in Russia. The Wines of Portugal 2018 marketing campaign has also helped.

Sales of Spanish wines, not including the imported bulk used to produce “Russian wine”, are also on the rise. Democratic offerings from La Mancha and Jumilla are driving the segment with distributors increasing the presence of smaller wineries from Spain’s non-classic regions.

Grower Champagne, although a niche offering for HoReCa and Moscow’s private clients, has become interesting in places where sommeliers play an important role. Instead of carrying one or two well-known brands of Champagne as they did several years ago, Russian distributors are looking for niche terroir wines of limited production, which generate all-important cash flow.

With people still figuring out which wines taste better, organic concepts are not yet attracting strong interest. While both retailers and media have made great efforts to explain the difference between organic and biodynamic farming, the population at large still remains uneducated on the matter and, in any case, it looks like organic ideals don’t really speak to the Russian soul.

Pét-nat wines, on the other hand, have attracted interest thanks to favourable reviews from hip somms and traders. While companies are still bringing such wines into Russia, it looks like the saturation point is not far away.

Overall, while times are tight, they’re also good for ordinary consumers, who have more and better wines on offer than ever before.

This article first appeared in Meininger’s Wine Business International, 22 Nov, 2018

Meet the new Russian wine consumer

Surprising as it seems, the urban wine consumer in Russia has evolved more over the past couple of years than during the so-called ‘oil boom’. This is explained by two factors: the arrival of a new generation, and a total market shakeup due to the political and financial crisis of 2014. These effects are shaping consumption trends among the people the top wine producers would like to see sipping their wines in Russia.

One important group of wine importers and distributors in Russia caught the wave early and seriously set out to service private clients and corporations by establishing dedicated sales departments that proved to be much-needed additions to the companies’ existing sales channels. While far less significant in financial terms than the HoReCa and off-trade, they offered features that are lacking in those sectors. Among these, says Ilya Veinberg, head of private and corporate sales for wine importer and distributor Classica, is rapid cash flow which “makes the department extremely important”. So, too, is image-building among a very valuable target audience.

The leaders

The major players with established private and corporate departments are importers whose history stretches back to the 1990s: Simple, MBG, Eurowine, FORT Wine & Spirits, DP-Trade and a number of smaller players. Of these, one company has shaped the face of today’s private and corporate sales in Russia. With a department employing more than 50 people and a good grip on the most important corporate wine consumers in Russia, Simple has raised the bar for its competitors, outweighing them by salesforce, PR, market aggressiveness, and the scale of its ambitions. As Russia’s economic situation stabilises and rules covering online sales are expected to be relaxed, that competition is likely to become fierce.

Mid-sized companies like Classica, Grape, and Vinoterra are paving the way to further growth. Another new phenomena of recent years has been efforts by vodka producers and distributors to tap into the wine market. The St Petersburg-based Ladoga Group, for example, has sought to build a serious wine portfolio, attracting names like M. Chapoutier and expanding its operations to Moscow.

At the other end of the scale, smaller companies like Wine & Only manage a compact portfolio of French wines and are dealing directly with private and HoReCa clients. “We generate new clients mostly via word of mouth,” says Natalia Zubova. “Our wines are mostly recognised thanks to the specific winemakers who produced them.”

In attracting private clients, some companies rely heavily on famous brands, communications, PR, and educating both private clients and sommeliers. Others focus on building stronger personal relations, offering niche wines and more flexible payment terms. Pricing is another crucially important factor for wine importers seeking to succeed in the private and corporate channels. One way to get this right has been by managing currency exchange rates in a period of severe fluctuations. As of mid-April 2017, several wine importers declared considerable price reductions due to exchange rate stabilisation and a steadily strengthening ruble.

Where did all the oligarchs go?

Back in the 1990s and 2000s, it was sommeliers who were pouncing on the new wealth. For better or worse, the anecdotal days when oligarchs bathed in Pétrus and Château Margaux and barbecued with grand crus are over. Those businessmen have virtually disappeared from the modern wine scene. “Private clients have evolved. They travel, they speak foreign languages, they know the wines,” says Vladislav Volkov of Vinoterra. “People who drank Super Tuscans and grand crus had no choice but to switch to less-expensive bottles,” observes Liudmila Mamontova, head of the private and corporate clients department at MBG, a key fine wine player in Russia.

With the political crisis of 2014 and subsequent collapse in the value of the ruble, many clients with thick wallets fled the country and now only visit to check their remaining assets. “Even for those rich people who are still here, it’s not good to consume the way they used to. It’s not only about the money, it’s about the evolving culture,” says Alexander Lipilin, the CEO of FORT Wine & Spirits.

The reasons to drink wine are also changing. Private consumers are moving away from drinking for status to drinking for pleasure. “They now realise that it’s not necessary to drink expensive wines. Wine is not Rolex anymore,” says Elena Kuznetsova, head of the private and corporate department at Eurowine.

As for the corporate side of the wine market, that normally stays hidden from prying eyes and ears – a secret carefully kept within their companies. But there is no doubt that if anyone is spending heavily on wine in Russia, it is the corporate clients, who are satisfying the wine needs of holiday gifting for their employees and business partners.

The oil, gas, construction, financial, and mining sectors and top consulting companies are all desirable targets for wine distributors seeking to secure important seasonal sales during the New Year period. Hardly surprising, some players estimate about 30% to 50% of fine wine is sold during this time of year, but national holidays such as Defender of the Fatherland Day on February 23rd and International Women’s Day on March 8th also offer lucrative opportunities. “It’s an important part of the sales,” says Volkov. “With these clients it’s quite simple: the major thing is to have the right price.”

Many corporate clients buy and spend enough to create fierce competition for their business. Tenders are a common way to select wines for corporate gifting, especially since harder economic times drove corporations to tighten their budgets significantly. “They want 50% to 60% less than before the crisis of 2014,” estimates Mamontova. Nevertheless, according to most market players, wine remains an important option for corporate gifting. “Everything counts in the corporate game: wine prices, and brands, and relations with the person who makes purchasing decisions,” says Alexander Lipilin of FORT. Eurowine is watching the regional corporate market closely. “With the crisis, many Russian companies are moving their headquarters outside Moscow. We have to pay attention,” says Kuznetsova.

The wine distributors’ representatives agree that Russian clients of every income level are counting their rubles carefully before spending them. “Nobody takes prices for granted anymore,” says Olga Taipova, who is responsible for private and corporate sales at AST International Environment. What this also means is that the desire to experiment with new wines is growing.

The exchange rate fall that slowed wine sales in the end of 2014 also ignited interest in Russian wines produced in the south of the country, and especially in the annexed region of Crimea. Most wine distributors who initially resisted adding Russian wine to their portfolios now carry at least one brand. “High-quality Russian wines are rare and they are in demand, especially as gifts for foreign friends or partners,” Lipilin says. The overall interest in Russian wine and its share in wine sales across all channels has certainly grown significantly, and Lipilin attributes this to the value for money they offer rather than patriotism. “As the ruble gets stronger, demand for Russian wine goes down,” he observes.

Bordeaux grand crus, by contrast, have suffered because of the ruble exchange rate. “We carry nice second- and third-growth Bordeaux grands crus – wines offering better value for money. Top chateaux are too expensive; it’s hard to guess the best vintage,” says Ilya Veinberg of Clasisca.

The new generation

Step inside one of the Moscow’s many wine bars and you will be surprised by the number of young women chatting and having a good time. There are definite gender shifts among modern urban wine drinkers. The Russian wine market created in the ’90s by and for men is changing rapidly. While serious wine buyers still tend to be male, women are now making many more wine purchasing decisions. “Ladies are often leading wine buying, especially in restaurants. It’s also easier for them in terms of image since wine has been traditionally thought of as a drink of choice for women,” comments Veinberg.

Even so, the buying power of Russian males still lies largely in their business activities: men are more exposed to sophisticated gifting situations and negotiations that require a quality dining experience with business partners.
“Among older consumers, men are still dominating, while 35- to 45-year-old urban men and women are more evenly matched when it comes to selecting and buying wines. They are having fun and advising each other,” says Sergey Podporin, owner of LEO Wine & Kitchen restaurant in the southern Russian city of Rostov-on-Don. According to him, female customers’ interest to wine is also connected to the end of their maternity leave. “Women who start thinking about themselves again are literally hungry for wine,” he notes. Lipilin also refers to the way decisions tend to be made within younger Russian households: “The person with more time and knowledge normally leads.”

Ageing with grace: the generational change

The new generation of young people in their 30s is already defining the future shape of the Russian wine market. They don’t yet have the means of the wealthier over-45-year-olds who were raised on labels like Sassicaia and Tignanello, but their habits and openness to new tastes and new wines are already very apparent. And it is not only Moscow and St Petersburg that are experiencing this trend. Sergey Podporin says his clients are no longer satisfied with discussing a single red or white. “They want to sit down with five to six glasses of different wines.”

Keeping younger generations in mind, some forward-thinking Russian companies have decided to be more open-minded and friendly to this group of consumers than others. While traditional wine marketing includes traditional ways of doing things: discounts, wine dinners, direct calls, and even various forms of financial inducements, companies like Invisible and WineStyle are putting their efforts into aggressive forms of online strategy. Invisible, in particular, is noted for using youth-oriented internet slang and hipster-style graphics, while WineStyle has built a reputation for its extensive online wine catalogue that incorporates wines from many different wine importers. Both firms’ sales are rising.

 

Being in the game

Wine distributors understand that their private and corporate departments are not just about making sales. Today they act as private sommelier services that guide clients through the world of fine wine, sometimes on a 24/7 basis. In order to tap into the private and corporate wine market, Russian professionals recommend a proactive approach: first, visit the market often and talk to the potential consumers face-to-face. “It’s important how charismatic the winemaker or the owner is. People tend not to remember the names of wineries, but they do remember the other people,” says Lipilin.

Private and corporate client departments are not just meeting needs – they are creating them. Being a direct connection to wine producers and the whole world of wine ratings and critics, they can influence and educate, shift preferences and tastes. “The vicious circle is that where there’s no supply, there’s no demand,” says Kuznetsova. With the improvement of the economic situation, and especially the gradual improvement of the value of the ruble, these parts of the business will become even more important.
Anton Moiseenko

This article first appeared in Issue 2, 2017 of Meininger’s Wine Business International.

Why Moscow is not Hong-Kong

There are things we miss in Russia. Some of them are wine-related. Fair wine prices and a broad selection are just two of them. Looking at the astonishing rise of Hong-Kong as a world wine hub and culture, I say: folks, Moscow could become the wine center of the country and the whole CIS region, driving wine culture into the vast areas where wine has never been heard of. “Bring vodka down onto its knees” sort of thing.

Looking at what has become of Hong-Kong I can assure everyone – Moscow could become the second HK.

There are several big “ifs”, though. Some are as big as  elephant, others are smaller, but all are equally important and interconnected. So what are those ifs and buts? There are seven big ones.

 1. Get rid of the import taxes and duties on wines and spirits

Nowadays Russian importers pay: excise duties depending on the alcohol content, then 20% duty then 18% VAT. We could easily lose 50% of the wine price and a huge amount of time-consuming bureaucratic paperwork at the same time.

2. Dispose of EGAIS, the alcohol turnover control system

Its purpose is to control every bottle of alcohol in Russia. What it really does is kill smaller-scale businesses and adding to the final price shelf. Each importer has to bear additional costs, such as hiring special people to manage EGAIS and also buy expensive equipment. Moreover, fake vodka is still being produced, despite all the control. EGAIS is another business-restraining thing nobody needs in this country.

3. Promote wine culture

One of the worst things about Russian wine regulations is that the government still makes no distinction between vodka and wine – they are both just alcohol products to be heavily regulated, no matter what. There are no healthy diet recommendations, there’s no desire to make people reduce the alcohol strength of what they are drinking daily, or move from cheaper spirits to wine.

It’s often said that Russians are genetically programmed to be alcoholics. But they had this same problem in Scandinavian countries, where binge drinking did real damage to public health. It’s time to realize that wine could make a great contribution to the Russian diet, instead of spirits, and, especially, low-priced junk. Once declared a priority, health protection in Russia could be the next big thing we see. Of course, it will take drastic action to rebuild the system of Soviet doctors advising religious pilgrimage as the best way to cure anything.

4. Stop using government health agencies as sheep dogs

Government agencies should start doing their job – their real one. I mean such simple things as: protecting the nation’s health, giving professional advice on health benefits and risks, and fighting the problem of overeating and the inactive lifestyle of many Russians. Imagine: during recent years we’ve been stopping randomly imports of Moldovan and Georgian wines, mineral water, vegetables from the EU, cheeses, dairy products from a number of countries, and even Spanish jamon.

5. Let wine advertising back

Advertising is all about information flow. Remember the funny early commercials of Paul Masson wines? We are deprived even of these.

This is why even the major wine exhibitions have been held under pressure – they could easily be treated as wine advertising. Allowing wine advertising could mean a healthy income for wine magazines and independent wine bloggers, both online and offline. It’s weird that leading food magazines had to remove all the wine content they had, because they were afraid of the possible punishment and mass-media license withdrawal threats. And known business newspapers like Kommersant and Vedomosti have not only closed down their wine columns, but have to monitor ever brand mention that could be treated as advertising. Big publishing companies’ lawyers prefer not to play games with Russian officials.

6. Make wine import licenses cost less

Importing wines to Russia is an uneasy venture. And an expensive one. Wine importing license can cost tens of thousands euros, preventing smaller-scale businesses from entering the market. The official explanation is that ‘clearing’ the wine scene somehow prevents illegal alcohol imports and makes it easier for the government to control the whole thing. But clearing the way for smaller business would mean more fine and better wine.

7. Make further changes to the current legislation letting small business and importers grow

This means significantly lowering the minimum warehouse area requirements (1000 m2 minimum now) and warehouse requirements and approval procedures. You can imagine how the warehouse checks are conducted in Russia – the officials come to the warehouse and do the check, but do not say a word to the company. In two to three months you get a note that your warehouse doesn’t meet the requirements and you need to redo the whole procedure – with no guarantee of success. Most often Russians official regulators are corruption centers. And this corruption is caused by the rules that let the corruption thrive on.

8. Allow freedom of wines delivery via ordinary mail

In 2008 I was receiving dozens of wines for tasting and was able to review wines from all over the world without leaving the country. This would enable wine importers to obtain samples of new wines they would later import to Russia. Under the existing legislation no wine bottle can enter the country without a duty stamp on it – which means no more wine deliveries without customs clearance.

9. Get state wine production regulations in line with European practices

Yes, we do produce wine in the south of Russia. God only knows how much of it can really be called Russian wine – most of what we have on shelves is a product of bulk wine imports and bottling inside the country. There is no working practice of controls or legislation to prevent these practices for Russian wines. If the government wants healthy and competitive internal wine production it has to use free market instruments for this, not protective instruments.

It’s a big list. But there’s only one thing stopping us from putting Moscow on the map of the world wine trade. Ourselves.

Special for Meininger’s Wine Business International, Feb 21, 2014

American wines: gambling on Russians

There is no easy way to say it. Wine market in Russia is subject to serious diseases – with subsequent choking and loss of conscience. It’s violent, it’s turbulent. It’s bureaucratic and irrational most times. Ah, yes – it’s corrupt, too. Wine is widely and openly treated as a serious problem by the Russian authorities. Wine is a political instrument for the relations with the former USSR-bloc countries. There are banning taxes and even greater margins in the major networks and wine shops. You would probably ask – why would any sane US winery be willing to be here? Obviously – there are reasons.

Banned dreams: public health vs deep pockets

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

Magnum magazine was closed about 4 years ago

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?

 

Additional links:

BBC News