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Russia’s Imported Wine Market Returns To Growth Mode

December 6, 2011

Russia’s wine market slipped by 1% to 126 million nine-liter cases last year, its second straight annual decline after hitting 130 million cases in 2008, according to Impact Databank. The good news for global wine marketers is that the downturn has come from Russia’s domestic wine category. Imported wine grew by 17% last year in Russia to 58.9 million cases—still below the high-water mark of 71.5 million cases in 2007, but representing a major resumption of growth.

“We’re seeing very good development of premium wines,” says William Carey, chairman and CEO of Central European Distribution Corp. (CEDC), whose Whitehall unit is one of Russia’s better-known wine importers. “Growth is coming from brands like Concha y Toro and Pascual Toso (Argentina).” Whitehall also imports Constellation’s wine brands, including Robert Mondavi, Hardys and Nobilo, as well as Moët Hennessy’s Champagnes. Other key labels include Joseph Drouhin and E. Guigal.

Gruppo Campari CEO Bob Kunze-Concewitz says his company’s wine portfolio is well positioned to engage Russian consumers. “Imported sparkling wines and vermouth are growing very strongly, and we expect our Asti Mondoro and Cinzano labels to accelerate in the coming years,” he says, adding that urban middle class consumers from 25 to 45 years old are the target. Kunze-Concewitz also sees “big opportunities” for Campari’s still wine portfolio, which includes Sella & Mosca, Teruzzi & Puthod, Enrico Serafino and Chateau Lamargue.

The Champagne business in Russia is recovering after some tumultuous years. Champagne exports to Russia jumped from €10 million ($13.5m) in 2005 to €30 million ($40.4m) in 2008, but nearly all those gains were wiped out in 2009. Shipments regained steam last year, doubling to €24 million ($32.3m) and volume of 92,000 cases—four times larger than a decade ago. Roust Inc., the distribution unit of Russian Standard, handles EPI-owned Piper-Heidsieck Champagne in Russia and added Charles Heidsieck in early October.

Roust also will soon be in cooperation with CEDC’s Whitehall unit through Russian Standard’s recent purchase of a 9.9% stake in CEDC. Russian Standard plans to use Whitehall as a major platform for entering the still wine segment, a new area for the company.

For all the excitement surrounding the imported wine category in Russia, low-priced domestic offerings still comprise a large share of the market. Often blended with imported bulk wine, most domestics are sold in the bag-in-box format for as little as $5 a three-liter box. Bulk wine from around the world began pouring into Russia after the government banned top sources Moldova and Georgia in 2006. Moldovan wines have since been allowed back into the country, last year providing over 33 million cases of wine to Russia. The government may now also permit several Georgian producers to return.

The Russian government has made other, more sweeping changes across the wine industry in recent years. One of the more onerous initiatives was this year’s effort to re-license every alcohol producer and wholesaler in the country under a new certification system. Russian Standard chairman Roustam Tariko sees the re-licensing plan, as well as swifter retail consolidation, as positive developments. “We’re seeing consolidation in Russia across fast-moving consumer goods industries, and it’s coming to beverage alcohol as well,” he said. “This consolidation will allow for easier regulation, better quality products and more focused competition.”

For a full report on Russia’s drinks market, see IMPACT’s December 1, 2011 issue.

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