However turbulent, the Russian market is strategic for wineries
With Euro and Dollar / Ruble exchange rates skyrocketing yesterday due to Russia’s disagreeable behaviour with the OPEC, the question we are left with — has the next crisis just arrived and how this will affect the wine market, wine sales and our ability to keep going.
The Covid-19 doesn’t help the situation causing people to be more cautious about dining out and wine bar hopping — we will definitely see the plunge in numbers of uncorked bottles . Will it be temporary or a long-term situation is yet to be discovered. The Coronavirus affects all businesses and increases pressure on OnTrade and off-trade too — people save money and buy more essential things — which wine is not. I won’t say we see the shelves emptied of toiled paper. Thank God.
We are, of course, not in Italy — but otherwise panic could be around the corner if the pandemic situation in Russia goes bad. So far, less than 20 has been reported to catch the virus, but number will surely rise, how much — no one knows.
So is it the time for grave expectations? As a matter of fact, any wine merchant will tell you: we are kind of used to crises, not to say immune to their sad consequences. 1998, 2006, 2008, 2014 — some of the hardest timestamps in the modern Russian wine trade. Badly managed economy, oil prices dependence, over-regulated market and people’s income don’t let many more consumers to join the wine world. Prohibitive wine information policies and advertising restrictions don’t help as well. We are still talking about limited restaurant goers, even in Moscow.
This year already started to bring some bad news to the wineries across the globe with US-EU trade wars and possible tariff rise. Russia isn’t in great shape for sure, but many wineries are still doing great business here. The question is now, of course, should one look into the market and try to enter it? Well, it depends on many factors. One has to be ready to accept market volatility and be ready to spend time looking for the right partner, visiting the market, etc. I guess, this is right for many markets out there.
If you’re already in the market, during crises you suffer consequences, but if you leave the market, the price of re-entry is much bigger — it’s lost time, lost listings, lost positions in the wine lists. Searching for a new importer is mostly painful, but it’s something you should take as necessary pain. Is it better to spend years searching for the right partner, or try to get some partner at all? It’s an open question and it depends on what you can afford and how adventurous you are as a person.
Some problems of this market are common around the world, some are specific to Russia and some we don’t have AT ALL. Take the monopoly system in the Scandinavian countries and parts of Canada. In Russia no one is deciding what should or shouldn’t be on the market. There’s no monopoly and you can, in theory, bring whatever wine you like. The alcohol trade system is quite corrupt, but not as corrupt as construction industry, healthcare, etc. Wine market is very small compared to vodka and beer, so it’s still populated with idealists who like the product and like their job.
People working for wine importers are passionate about wine. They are surely underpaid, but they are still passionate. Former FMCG managers aren’t good at wine jobs, because they don’t get that wine is not shampoo, it’s a very special commodity, very personal and emotional. It’s stupid too, prone to trends and fashions, it’s shallow at bigger scale (natural vs organic vs biodynamic — spare me from this dumb conversation for a moment).
So if you’re looking at the Russian market and try to understand what’s happening here, you definitely shouldn’t quit. Today’s crisis is just another turn in the long history of turns.