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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.

Mindless drinking

Roman Smirnov just had a terrific day. One of this evening’s guests ordered three bottles of Grands Échezeaux and one of La Tâche, all four by one of the greatest Burgundy producers — Domaine de la Romanée-Conti. The final wine bill came to a whopping 850,000 rubles (approx. €11,000). Why does Roman care? Because he is a sommelier at the celebrated Russian chef Anatoly Komm’s upmarket restaurant. Too bad Smirnov and other sommeliers at top venues cannot simply rest on their laurels anymore as the kind of prolific outlay is becoming extremely rare.

While fine wine bills have soared across the country due to the twofold weakening of national currency and economic turmoil, the question restaurant owners, sommeliers and wine traders ask themselves is why on Earth the rich man’s wine wardrobe remains so clearly driven by a small group of overpriced wines. And the broader one: why doesn’t wine culture flourish yet, after 25 years of open market?

Back in the 1990s it was looking so promising for the wine trade. Opening the market for imports and new wealth came smoothly together. What attracted Russian wine importers and sommeliers at first were classic wines. “Companies were willing to bring crème de la crème of the fine wine world”, recalls Dmitry Bazashvili, a Moscow sommelier with extensive experience in the city’s top restaurants. This meant exactly what it sounded like: Bordeaux, Burgundy, Tuscany, Piedmont. The blue-chip stuff of fine wine world. It hasn’t been until the 2000s when the practice of using top wines to show off took off: the talks of Petrus’ baths had already been in the air. Until recently “resolving issues” (reshat voprosy, in Russian) while drinking top Bordeaux was a common practice.

The luxury consumer

Expensive bottles which get two-three times more expensive when they reach the Russia’s capital, attract a well-defined clique of consumers. They are top managers, businessmen and, not the least, officials of all sorts. Top wines sales have often been fuelled by the money coming from the government-affiliated structures. Oil, gas, mining, construction businesses, everything that turn around tremendous amounts of money, are the most desirable clients of all, often willing to pay ridiculous money for the “right” bottles. I drink Tignanello, you drink Tignanello: like two submarines call-signs it’s a way of telling foes from allies.

Ironically, it’s not the desire to enjoy the aroma and taste of top wines that is the main driving force behind the demand for the “blue chips”. “Up to two thirds of such wines are destined for gifting,” says Vladimir Basov, running wine importing business and managing several wine bars in Moscow and St. Petersburg. “Most consumers of top wines regard them as status symbols rather than something to enjoy”. Sounds familiar: think China or Brazil. Doesn’t any developing country follow the pattern? When it comes to label-drinking, Russia has some specific features.

Label-drinking “a-la Russe”

As the rich became introduced to what sommeliers and Russian wine trade referred to as “best wines”, the interest to other wines quickly faded. Feels like the vici part of veni vidi vici never happened. At a certain stage top wine drinkers decided that they know wine because they drank the “best” ones. The will to discover new things rather than seeing to the old habits is something that never became a healthy habit in the country. Selecting wine is intimidating to the rich ones with too much at stake: their image, personal and business relations. With each new bottle a Pandora box, label-drinking came in handy.

Fabio Borgianni, Quadrum restaurant manager, Four Seasons Moscow

“Around 60% of our Russian guests want famous labels like Ornellaia, Masseto, Solaia, Tignanello. They are looking for rich, full-bodied, rounded wines with universal powerful taste,” says Quadrum restaurant manager Fabio Borgianni at Four Seasons Moscow, overlooking Kremlin. To encourage guests to break away from their habits Fabio has to go round and about and make use of tricks of all sorts. Guaranteed return of an already open bottle if the wine does not fit the guest’s taste is one of those that regularly works well.

One might think that Tuscany example is the only that of brand-driven, mindless consumption in Russia. It’s not. Burgundy, the Holy Cow of wine aficionados, follows almost the same consumption pattern. Even assuming the consumers of Burgundy should know more about wines they still choose the famous labels. “Half of those who prefers Burgundy in restaurants do so to make an impression,” points out Basov.

Professionals like an expat in Moscow Fabio Borgianni are in low demand these days: sommeliers prefer to think less, sell more and are often tied up by restaurant owners who control the wine list and benefit on specific agreements with the wine traders.

R.I.P., Mr. Sommelier

With wine advertising ban closing the possibilities to deliver the wine-related information to the final consumers in 2013, sommeliers remained one of the few legal channels to convey the wine knowledge. But the hopes that sommeliers could somehow replace media vanished fast. It’s sad to admit that “sommelier” in Russia has turned into a curse-word. It was in this decade when restaurant lists became dominated by commercial wines and regulated by the contracts between importers and restaurant owners. Money agreements, that is. Sommeliers slowly evolved from deciders to what’s called in Russian vinocherpiy — a guy who simply pours your wine. The “labels” — expensive, famous, promoted by sommeliers and wine businesses — became just the right tool.

Designed to be the guides into the immense wine world, Russian sommeliers quickly became something else: a tool for promoting a limited number of fine wines, expensive and easy to sell. Driven by the desire to serve best to their nuveau-riche guests, sommeliers seldom dare or care to persuade those to enrich their wine vocabulary with a bit cheaper wines of the similar quality as the top ones.

Nobody trusts anybody

Russian sommeliers seem to have lost unconditionally in fight against label drinking. The clear lack of trustworthy local experts added a lot to it — no Russian Robert Parker has yet been born to influence, guide and inspire. Journalists are moving to make their own wines and wine writing is still widely banned from papers by law, making the profession extremely rare and non-rewarding financially. Besides, top drinkers rarely listen to experts of any sorts and, especially, the younger ones. Prices of wines sold are directly linked to the seniority of those who sells them.

Arkady Novikov, powerful Russian restaurateur, the head of Novikov Group

It’s not only about the sommeliers per se. As a famous Russian proverb puts it, fish begins to stink at the head. Trust between the Russian venue owners, directors and sommeliers leaves much to be desired — at best. The anticipated restaurant life cycle of virtually any given restaurant is short and is a major reason behind the lack of inspiring wine lists. While most restaurants in Russia are run by businessmen rather than chefs, exclusions only make the rule more obvious. And then business goals step in: “You’re a good sommelier. Look, I’d pay you a basic salary and you go ahead and do business of your own,” the owners say. It is also about the money. Expensive wine requires expensive service — stemware, specialists, storage facilities and more importantly, time to store top wines.

Russian restaurateurs generally want quick returns, which is not good news for wine consumers. Unwilling to invest in wine cellaring, restaurants are managing smaller lists of no more than 150 wines. “As a result, we have reduced the interest in wine among guests. We stayed at the level where we like to drink Chablis but still think it’s a grape variety”, says Alexander Khatiashvili, special projects director at Simple, the fine wine importer based in Moscow. And if the lists are so limited they are bound to be filled with self-selling labels that turn around fast with virtually no effort from the sommelier side.

It’s possible that for this exact reason the most expensive wines like those of Domaine de La Romanee-Conti, distributed in Russia by Dmitry Pinsky’s company DP-Trade are among those that seldom suffer from crises. “In troubled times our best-selling wines are those of DRC. Their consumers don’t change their habits, ever”, says Pinsky puzzled himself.

Psy-factors

Back at Anatoly Komm’s restaurant Roman Smirnov says wines with a price tag of 5–35 thousand rubles a bottle (€70–450) are the backbone of top venues’ sales. Unfortunately for leading wine producers, the number of places capable of offering expensive bottles is declining fast: dealing with them proves to be psychologically hard to match short-term goals of restaurant owners.

Psychological observations of wine consumption are interesting and noteworthy. Insiders point out the Russian wine market is distorted by itself: it generates an extremely narrow interest towards a dozen of wine labels. “The rich ones start their wine journey with top commercial wines and are forced to believe that drinking such wines is a matter of prestige. In 95% of cases they will continue to drink full-flavour, commercial wines”, notes Mikhail Volkov, the co-owner of a wine bar downtown Moscow promoting more subtle wines of Burgundy, Germany and Austria. Unable to attract enough consumers in long term venues like his one rarely survive in the city.

Mikhail Volkov (right), the co-owner of Winil wine bar, Moscow

Driven by stereotypical wine beliefs Russian restaurant-goers often categorically reject certain wines (“all Rieslings are sour” or “I only drink Italy”). They limit themselves to a certain label: even the harvest year is not important anymore. The only thing that matters is the familiar name on the bottle. “For the fun of it, take a Sassicaia bottle and add another producer on the label with smaller font — no one will ever notice”, says Roman Smirnov.

Two ways it could end

So it’s a bit thick, all of that. There’s limited wine information flow, sommeliers are bound by restaurant owners, who are, in turn, bound by short-term thinking and depressing economical conditions, which are, in turn, bound by political situation. And drinkers are pressed down by psychological issues connected to the general interest to life and living. Label-drinking is a minuscule part of the wine-trade business complications and could be perceived as a natural market response to squeezing, tightening and red-tape control of the sector.

Some say it’s time for new wines for reasonable money. “The best wine bars in Europe aren’t full of wine connoisseurs, it’s just people who came to have a good time,” says Vladimir Basov. Importers and restaurateurs are seeking to bring new trends: those who don’t feed on Super-tuscans, promote subtle German and Austrian wines and the word “Riesling” sounds more often than “Supertuscany”.

“Wine is an element of culture. The more you travel, the more you learn. At least people are now taking pictures of wine labels,” says Mikhail Volkov. “We need another generation that would replace the current one, that have traveled the world and came back. Only then something will happen in this market,” dreams Khatiashvili.