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