Reviews

Where wine sits in the market
Meininger’s Wine Business International Issue 6 December 2008

Russia as a vodka drinking country?

Not any more, it appears. Beer is now the people’s beverage, while those who are getting paid more, are upgrading their choices of spirits. Over a decade ago beer producers launched a crusade, and their efforts paid handsomely. Russia is now the third largest beer market in the world after China and the US. With a total of 110.5 million hectolitres in 2007, as estimated by Business Analytica, Russia for the first time beat Germany to become the largest beer consuming country in Europe.

Yet, Russian drinking culture is at odds with the European model. Beer is a favourite beverage for outdoors or at home, and only 9% is consumed in pubs, cafes or restaurants. This explains the popularity of PET packaging with local consumers, as they spend more money on a beverage itself and pay less for a container. At present, most sales are made in the mid-price segment, but the market is becoming increasingly polarised between entry level and premium products. Just five companies dominate, with an 85% market share between them. All are international giants — Carlsberg, SUN InBev, Heineken, Efes and SABMiller.

While the general trend of switching from liquor to lower alcohol beverages in Russia continues, not all spirits are affected equally. Vodka producers have suffered most, as the market share of vodka shrank by 10% in the past four years. Producers have responded by consolidating their businesses, and almost a half of this market is now controlled by 10 companies. Consumers, in the meantime, are slowly trading up. More mid-priced, than cheap vodka was sold in the first half of 2008 — something never witnessed before.

Brandies, both local and foreign, and imported spirits have gained in popularity. The brandy segment increased by 50% in the past year alone. As their income rises, Russians also appear to prefer expensive imported drinks — with whisky, gin, tequila and rum experiencing strong sales growth.