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Worldcrunch

Why The Vodka Nation Is Ripe For Wine

Move the shot glasses aside and make way for some stemware. One expert characterizes the Russian wine market as one of the "most promising in the modern world."

Article illustrative image Partner logo Middle-class Russians are discovering the pleasure of wine.

MOSCOW — Around the world, people are drinking less wine, which comes as a surprise to middle-class Russians, who have only just begun to discover its pleasures. But that fact could represent a silver lining for global winemakers, who are looking to Russia as a market ripe for growth.

According to the International Organization of Vine and Wine (OIV), both production and consumption of wine has been dropping around the world over the past decade. In the 1970s and 1980s, wine production was stable at around 33 billion liters per year, but that has dropped to 28 billion liters a year, with per capita consumption falling even more. 

Why this is happening can be explained by changes in the way people in developed countries live. "Look at how the labor markets have changed over the past 60 years," explains Vadim Drobiz, head of a federal research center on the alcohol market.

"We sit in offices all day where it's not acceptable to drink wine," he continues. "Before World War II, in France it was totally normal to drink a liter of wine over the course of the workday, including lunch. At that time, people in France and Italy drank 120 to 130 liters of wine per year per capita. Now the per capita wine consumption is a third of that. In addition, there was automobile, which further restricted wine consumption. Plus, wine has lost the battle for youth, who have a culture based around cheap beer and cocktails."

Glass half full?

But there are distinctions within the Russian wine market in particular that offer hope for commercial vineyards. First of all, Russians are heavy drinkers. According to the World Health Organization, Russians drink 15.1 liters of pure alcohol per capita per year, or 32 liters for every male over the age of 15. That's about one shot of vodka every day. Russia is among the heaviest-drinking nations in the world.

In addition, most wine in Russia is of poor quality. "In Russia, a lot of wine is semi-sweet or fortified," explains Denis Rudenko, a wine critic and member of Russia's sommelier union. "In the West, only 3% to 4% of wine is semi-sweet or fortified."

Drobiz says that domestic wine in Russia has gone from representing about 30% of the market before 1998 to 60% now. And that's despite the fact that "only around 15% of Russian wine is good," he says. "There are some small Russian producers who have won prizes at international competitions," he says, but those individual successes have done little to transform the overall state of Russian wine production. 

Photo: Marc Eliot/Flickr

The ripple effect

So most Russian wine is still cheap — and bad. Drobiz says that 85% of Russian-produced wine costs less than $3.60. Only 5% of wine sold here costs more than $30 per bottle, and that is all imported. 

Another way that Russia's wine market is unique is that consumers like to buy brands that were famous before the fall of the Soviet Union, which is to say wine made in former Soviet republics. At the beginning of the 2000s, wine imports were dominated by Moldovan wine, but a series of embargoes have reduced Moldovan market share down to zero.

On the other hand, Georgian wine has recently returned to the Russian market and has been growing, now controlling about 12% of the import market. Meanwhile, wine imports from the West have been growing, particularly in Moscow, which accounts for 40% of the sales of expensive wine in the country. (Planned retaliatory sanctions on agricultural products from the West are not expected to include wine.) The capital is where new tastes and a new wine culture are developing, and it is slowly spreading to the rest of the country. 

All of these figures have led winemakers around the world to hope that a portion of Russian alcohol consumption could change from vodka to wine. "In the Soviet Union, per capita wine consumption wasn't high, but it was respectable, at 20-21 liters per capita per year until around 1980," says Drobiz. "Then there was the anti-alcohol campaign of the 1980s, the fall of the USSR, the crash in the economy and the standard of living, and by 1995 wine consumption had crashed. Now it is up to around 4.5 liters per capita per year."

Those numbers make the Russian wine market look like a fabulous opportunity. "Consumption could easily rise by a factor of 3.5 or 4, up to 15 liters per capita per year," Drobiz says. "That makes the Russian market one of the most promising in the modern world."

Hopes for selling wine in China and India have proven to be overly optimistic, because neither country has a wine-drinking culture, he notes. "As soon as China started cracking down on corruption last year, consumption dropped, because wine there is considered an expensive gift or a fashionable drink for a very small part of the population," Drobiz says. 

It's possible that there's still hope for the Chinese wine market, but history has shown that wine culture doesn't stick even in rich Asian countries such as South Korea and Japan. Wine doesn't complement their cuisine very well. At the moment, statistics show that wine only make up 4% of alcoholic drinks consumed in Japan — a 30-year low — and in South Korea, wine makes up only 2% of alcoholic drinks.

Is it possible, then, that Russia is the best hope for global winemakers? Perhaps, but in order for that to happen, ordinary Russians will have to give up some of their vodka and beer.

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About this article source Website: http://www.kommersant.com/about.asp

Kommersant ("The Businessman") was founded in 1989 as the first business newspaper in the Russia. Originally a weekly, Kommersant is now a daily newspaper with strong political and business coverage. It has been owned since 2006 by Alisher Usmanov, the director of a subsidiary of Gazprom.

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