Weekly analytical column of Vadim Drobiz Week April, 25 2016 – May, 01 2016 (9)

Weekly analytical column of Vadim Drobiz

Week April, 25 2016 – May, 01 2016

Vadim Drobiz – Head of the Center for Federal and Regional Alcohol Market Research (CFRAMR)

The most quoted in the Russian media expert on the alcohol market of Russia, former Soviet republics and Eastern Europe. The latest news, detailed analysis, commentary, statistical databases on the alcohol market since 2002.

Full versions of the materials published in Russian on the website Vadim Drobiz http://cifrra.info/

Email: alko-pr59@yandex.ru

Wine wars or how much need to Russia bulk wine?

Recently, a hundred and fifty French farmers blocked the road, stopped a convoy of huge five tanker trucks with Spanish wine. Threatening violence to drivers, they poured more than 30 thousand liters of the product on the ground. In two cars entirely no remained wine and three other vehicles allowed the attackers to leave half empty, writing on the sides of the tanks warning that wine was substandard. It happened in the area of Languedoc-Roussillon, 10 km from the border with Spain.

French winemakers thus protesting against the rapidly increasing imports of cheap wine in their country. They are outraged that the draft table wine from Spain is sold for 30-40 euros per hectoliter (100 liters), while similar French wine is worth twice the price – 70-80 euros. Spain called on the French authorities to find a way to make their farmers to stop such actions, and ensure the smooth and safe movement of goods between EU member states. French winemakers suspect that the relative cheapness of Spanish wines occurs because during they manufacture used the South American bulk wine. (In Russia such bulk wine belongs to the category of wine materials.) The French blamed the Spaniards that they are mixed bulk cheap wine from South America with their wines and sold under the more expensive brands.

In recent years, France increased imports of wine from Italy and Spain, rather than to develop its own production. Thanks to low taxes and the absence of customs barriers within the EU Spanish and Italian wine producers displace competitors from the French market.

In France itself, the area wineries, purchased by foreign investors, mostly British and Chinese, reached 12 thousand hectares, accounting for nearly 2 percent of the total vineyards area. These figures only cover the wineries, which produced red wine, and did not take into account the production of cognac and champagne. 30 years ago, French wines in restaurants all over the world held about 80% of the wine list, they now account for about 40%. And this is one of the reasons for the disturbance of French winemakers.

Spain is in the lead on deliveries of wine, not only in France but also in Russia, where about a third of the total volume of wine produced from imported bulk, another third – of Russian grapes, the rest – from wine material unaccounted by statistics. But according to some expert estimates, the share wine from foreign bulk is about 70% of the Russian wine market. Official statistics in Russia winemaking gives the figures of total production, with no separation of the wine produced from grapes of the Russian or imported wine.

Foreign wines shipped in large containers (tanks or tankers) from abroad in bulk, get to Russian manufacturers, which are then manipulated with them: can add (or not add) different flavors, juices, sugar, alcohol, dyes, flavor enhancers, preservatives, etc., which allowed the Russian legislation. Then the wine is bottled or in bags, glue labels. At the same time on ones, especially for sweet and semi-sweet wines, it is written “Made in Russia”, on other may be specified producing countries of bulk wine.

According recently published of OIV data Russia in volume of imported wine is in seventh place (fell from the fifth).

The volume of wine by countries:

Country The volume units,billion liters In money terms,€ billion
2014 2015 2014 2015
Germany 1,54 1,51 2,56 2,47
United Kingdom 1,36 1,36 3,6 3,92
USA 1,07 1,1 4,04 4,86
France 0,69 0,78 0,62 0,67
China 0,39 0,56 1,15 1,84
Canada 0,38 0,41 1,47 1,62
Russia 0,47 0,4 0,87 0,63
Netherlands 0,38 0,35 0,95 0,87
Belgium 0,31 0,32 1 0,93
Japan 0,27 0,28 1,21 1,32

Wine imports to Russia by the end of 2015 decreased by 14.5% in volume terms to 400 million liters, and – 27.7% – in terms of money, up to €625 million. “The reason for decline was the sanctions and the related economic crisis in the country”, – stated in the report of the OIV. These are the official figures, excluding smuggling and “gray” imports.

Last summer, Minister of Agriculture of Russia Alexander Tkachev proposed a ban on the importation of foreign wine or significantly increase on them duties, to make imports of wine in Russia unprofitable. He also said that “Our factories are in fact only shops for bottling wine. If today a farmer or a large cooperative begins to build a new winery, it will be repaid no earlier than in 15 years. In such circumstances, it is easier to bring the tank or a ship from South Africa or any other country, delivering just 100 or even 1,000 tons of raw wine, and bottling and selling it under the Russian brand. This option the use of someone else’s wine is easier. It is unacceptable!”

Some Russian winemakers supported Minister of Agriculture. In particular, the Crimean wine producers. And who wants to have a competition? Monopolist always be easier! Besides Mr. Tkachev before being appointed to the post of Minister of agriculture was the governor of Krasnodar region – a region which produces most of Russian wine, and he has there for certain commercial interests.

But the majority of Russian winemakers have opposed the ban on the import of wine materials. So, the president of the Union of Winegrowers and Winemakers of Russia, Leonid Popovich, said that at present the Ministry of Agriculture proposed a ban on the importation of foreign wine can not be implemented as soon be lost third of the total wine production in the country (according to other estimates, much more). Detailed analysis of the problems of the Russian winemaking shows that a total ban on imports of the bulk is not beneficial to anyone – neither the producers nor the consumers nor the state.

Thus, the area of cultivated vineyards in Russia are today about 100 000 ha, which is almost an order of magnitude less than in Europe or the US. Expansion of areas, if there is money (!), will take years because from the planting of young vines and to produce a first enough quality wine is need for at least five to seven years. In addition, if to prohibit the foreign bulk, just created a deficit of wine, prices will rise and the people will switch to a liquor, which will hit the health of the population.

And if you go back to the title of this article, Russia also participated in the “Wine Wars” but not about the price. 10 years ago, the chief sanitary doctor of Russia, Gennady Onishchenko, has banned the import of Georgian and Moldovan wines, which allegedly hade pesticides (?) (Most experts believe that the motive for such bans were political factors.) As a result, the quality of now supplied wine from Georgia and Moldova improved markedly, which can not be said about their prices.

From my point of view, the growth in production volumes of Russian wine will begin no earlier than in 5-10 years. I can confidently say that most of the wine, which buys in the shop Russian consumers, will be from imported bulk. I believe that this is not a bad option. The more Russia will import wine materials in the coming years, the smaller among the Russian wine will be counterfeit.

I want to give the following statistics: last year Russia produced 400 million liters of still wine; Champagne and sparkling wines – 161 million liters; wine drinks – at least 200 million liters. Total about 760 million liters. At the same time the Russian wine materials for this products have produced about 310 million liters, of which about 65 million liters sent to the production of brandy spirits. Officially, 204 million liters of wine materials purchased abroad. The result is that of the 760 million liters of wine production excluding cognac and brandy, only about 250 million (310-65=245) made on the Russian wine materials.

Am getting up: produced in Russia in 2015 year 760 million liters of wine production from about 450 million liters of wine materials (total Russian and foreign). What is it like? And where have the remaining 310 million liters? And this is a small (or maybe big?) tricks of Russian statistics! Or is it the number of smuggled wine material?

Its own wine material to take nowhere, either now or in the near future – it is necessary to wait for many years. While there is only one way – increasing purchases of imported raw wine materials under the appeals of head of the Ministry of Agriculture to close the supply of imported raw wine!

My conclusion – this is an extremely dangerous political slogan! I thus constantly repeat – it is necessary to plant, planting and again to plant new vineyards every year to the maximum. According to my forecast within the next 5 years growth of the Russian wine materials will be a maximum of 10-15 per cent. Last year new vineyards planted in the country is small, this year the situation is very similar, so the scale of the quantitative growth of the Russian wine from domestic wine material is expected not earlier than in 10 or even 15 years.

Some more statistics:

– in 2014 Russia imported 232.4 million liters of still wine + 47.2 million liters of sparkling + 168.5 million liters of wine materials. Total imports 448,1 million liters;

– in 2015 Russia imported 162.0 million liters of still wine + 33.3 million liters of sparkling wine + 203.5 million liters of wine materials. Total = 399.0 million liters;

– total difference of 49.1 million liters or 11% of imports fell. But it is not so! I want to recall that in 2015 in Russia began to arrive wine from the Crimea which became part of Russia. 2014 was in the Crimea very difficult but the grape harvest collected and in the same year made no less than 40-50 million liters of wine material, which was used in 2015. That’s the missing imports. And although the Russian annexation of the Crimea the Western countries did not recognize, but Crimean wine material go to Russia and Russian statistics is taken it into account!

This article contains material from the site


Armenian cognac is losing ground in Russia

The devaluation of the Russian ruble and reduced incomes of Russians to cause serious damage to many producers in the former Soviet Union, which has long been focused on the Russian market. One of the most affected products is Armenian cognac: in last year its exports to Russia fell to 39.6%. The situation is exacerbated by the fact that the Armenian cognac producers have not yet found an adequate substitute for the Russian market and in the near future most likely will not.

In 2014, Armenia released 18.725 million liters of brandy, or 8.1% less than a year earlier, while exports declined from 18.3 to 18.1 million liters. Last year, the decline in production continued: in the country issued a total 16.948 million liters of cognac (decline by 9.4%). The main reason for this situation – the economic crisis in Russia, which accounts for about 75% of export of Armenian cognac. It is an expensive product. On the store shelf the price difference between the Armenian and French cognac is not too much for the majority of the Russian population, so it is not surprising that in a situation of falling consumer demand in the country its sales are down.

A similar situation exists in other segments of the Armenian alcohol. According to the Customs Service of the country, Armenian wine exports fell by 31.5% in 2015, from 2.12 to 1.45 million liters, and the cost – from 6.3 to 4.1 million dollars. As in the case of brandy, the main volume of export of Armenian wines (79%) are in Russia.

Significantly (by 19.3%) decreased Armenian export of beer, which at the current rate of the ruble forced to compete on the shelf not with Russian but European brands of beer (0.5 liter bottle of beer well-known Armenian “Cilicia” in the Russian retail market is now worth about 110 rubles – $1.64). Accordingly, the beer production in Armenia decreased by 12.8% last year.

In general, the alcohol industry of Armenia is almost entirely export-oriented. Drink all your own alcohol Armenians can not in principle – a very small domestic market (in the Armenian population of only 3 million people) and the purchasing power of the population is very low.

Among the representatives of Armenian business, which are engaged in exports, it is now more insistently promoted the idea of the need to find new markets for their products. However cognac producers to take advantage of this recipe will be difficult, given the long-standing problem with the use of the name “Armenian cognac” outside the CIS market. And this despite the fact that the legendary Yerevan Brandy Factory, which produces the brand “Ararat”, owned by the French corporation Pernod Ricard. The problem of the use of the name “cognac” – one of the most painful topics in the negotiations with the European Union. In this regard, the EU has a tough position. Supporters of the EU concessions on this issue in Armenia is. They believe that the refusal of the name “cognac” is inevitable, but it is necessary to find an adequate replacement for it. However, the fact that the Armenian cult drink can win the hearts of lovers of distillate outside the CIS, there are big doubts.

Export market of Armenian brandy is almost monopolized by Russia. However, the Armenian manufacturers in recent years have made a significant step to diversify its exports and the Armenian cognac was able to gain a foothold in other markets, but mostly CIS countries. 95% of Armenian brandy exports account for only four countries – Russia, Ukraine, Kazakhstan and Belarus. But in all these countries the economic crisis. On the world market, outside the CIS, cognac can only be French, and even if Armenian cognac to sell under the name “Armenian brandy”, I believe that it still will not buy. Due to the crisis the current situation will last for a long time. The only way for Armenian producers – severely reduce production, as is already done Moldovans, and wait until the crisis is over in the CIS countries. Perhaps it will take twenty years!

Experience of Ukrainian, Georgian and Moldovan food and drink producers indicated that to gain a foothold in the European market is rather difficult for the post-Soviet companies. Their brands are unfamiliar in Europe, and the market is very saturated. Even the Association Agreement between Armenia and the EU does not guarantee new markets.

Errors of Western beer companies in the Russian market …

Major Western beer companies, initially began working in the Russian market, miscalculated their growth in the years 2000- 2007. Subsequent developments showed that it was necessary to slowly increase their production. It is well known the market principle: the rapid growth is inevitably followed by the fall, and sometimes rapid. You just need to predict it in advance. I think that in any country of the world is difficult to find a similar example where beer production and consumption has grown for 12 years, as in Russia, 5.5 times! And at the same time, this growth did not start from scratch. How is this possible in a country with a stable number of potential drinkers by age?

Western brewers by their advertising managed in Russia be ahead of time! Such growth may be possible, for example, at least 30 years … Suppose that in the best form – for 25 years. There must be a change of at least one generation of people! From 1995 to 1999 there was a doubling of the production of beer in Russia and came to 31 liters of beer per capita per year consumption. And then it was necessary caution and correct calculation of future actions. But the thirst for big profits hampered show common sense. Would grow by 10% a year – and all would be well. But their continued to produce more and more beer. In 2005, there was a doubling of the following index of 1999. And then all the exact same picture: in 2006 (+ 15.6%), and in 2007 another +135 million dal.

Western beer companies since 1999 should be quietly growing by 4%-5% per year. This is the normal growth rate for any civilized system. And then would come out in 2013-2014 on the output of 830-840 million decaliters. These beer volumes are about today. And here also the demographic crisis in the country.

What it was sold in Russia in the years beyond the 4%-5% growth – this was a bonus, an extra profit of western beer giants. They have earned big money. But time caught up them.

Today, beer consumption decline is observed throughout the civilized world. And there is also to a large extent reason – the demographic character.

Volumes of beer consumption in Russia in different years in million decaliters:

Year                       Beer consumption

in million decaliters

1984 350
1993 238
1995 213
1996 208
1997 252
1998 336
1999 445
2000 540
2001 638
2002 703
2003 730
2004 850
2005 895
2006 1035
2007 1160
2008 1140
2009 1035
2010 1015
2011 981
2012 955


But what about the export of Georgian wine to the Russian market: The attached table are taken to compare the volume of Georgian wine export to Russia in the first quarters 2014, 2015 and 2016. Given also the share of Georgian wine in total volume of imported wines in Russia.

Exports to Russia in the 1st quarter of 2014, in liters 7 397 930
The share in total Russian wine import in the 1st quarter 2014 in % 14.08
Exports to Russia in the 1st quarter of 2015, in liters 1 807 362
The share in total Russian wine import in the 1st quarter 2015 in % 6.54
Exports to Russia in the 1st quarter of 2016, in liters 3 066 982
The share in total Russian wine import in the 1st quarter 2016 in % 10.62
The share of the entire Russian wine market in the 1st quarter of 2016, in% 2.98

As the table shows the volume of export of Georgian wines in the 1st quarter of 2016  + 70% to the results in 2015, but almost 2.5 times lower than in 2014.

Moldovan “divin”

According to the agreement signed between Moldova and the EU, by 2016 the country should cease to mark their alcoholic beverages as “cognac” and go to another alternative name – “divin”. Thus “divin” is Moldovan grape brandy, prepared according to the classic French “cognac” technology. The following table shows the production “divin” over the past 16 years, in millions of decalitres (dal).

Year Volume of production,in million decaliters
2005 4.781
2006 2.245
2007 2.022
2008 2.815
2009 1.785
2010 1.766
2011 2.395
2012 3.064
2013 3.451
2014 2.762
2015 2.176


Whiskey production – a primitive process, but all sorts of myths and legends around it. It’s no more complicated than the production of cognac. Currently, 50 countries produce whiskey – the most famous, of course, Scottish, American, there is a certain fame in Japanese. 30 years ago, no one knew that in Japan there are whiskey and that it can ever be popular even in Japan. Today, this whiskey win at many competitions, even a Scottish single malt whiskey.

A little official statistics…

Imports of whiskey in Russia and sales through retail, million decaliters (dal) by year:

Year The volume of imports,in million decaliters Sales in the retail,in million decaliters
2000 0.042
2004 0.164
2005 0.381
2006 0.663
2007 1.39
2008 1.58
2009 1.42
2010 1.92 4.20
2011 3.33 3.94
2012 4.22 4.98
2013 4.11 5.37
2014 4.13 6.27
2015 3.36 5.69

I can not reasonably explain why the amounts of whiskey sales in retail so much greater than the volume of its imports, especially in 2010, 2013-2015. This is a question to Rosstat!

The situation in the alcohol market in Russia in January-February 2016 compared with January-February 2015:

The name ofthe drink ProductionJanuary-February2016 to

January-February 2015

ImportJanuary-February2016 to



Retail salesJanuary-February2016 to



Vodka -17.2% -66% -3.1%
Cognac -4.4% -29% -
Cognac+ brandy -0.5% -29% -4%
Whiskey -29% -
Rum -13% -
Tequila -39% -
Gin -5% -
Absinthe -86% -
Still wines -12% -6% +0.1%
Champagne and sparkling -23.4% -12% -2.3%
Wine materials +200% -
Wine beverages +51% -17% +6%
Vermouth -17% -
Beer +1.7% +7% -2.65%

)Weekly analytical column of Vadim Drobiz Week April, 18 2016 – April, 24 2016 (8)

Weekly analytical column of Vadim Drobiz

Week April, 18 2016 – April, 24 2016

Vadim Drobiz – Head of the Center for Federal and Regional Alcohol Market Research (CFRAMR)

The most quoted in the Russian media expert on the alcohol market of Russia, former Soviet republics and Eastern Europe. The latest news, detailed analysis, commentary, statistical databases on the alcohol market since 2002.

Full versions of the materials published in Russian on the website Vadim Drobiz http://cifrra.info/

Email: alko-pr59@yandex.ru

Russian alcohol market on the results of the 1st quarter of 2016

In my opinion, all processes of import substitution in the sector of spirits and wine products on the Russian market ended at the end of 2015. All that could did  – have already substituted – so we see a drop of wine production in Russia in Q1 2016: wine – (-8%), sparkling wine – (-17%). Only brandy remained at  level of 2015 year. And even the Crimea in large quantities supplying products to Russia from imported raw wine materials. Serious wine consumption growth in the country should not wait: the economic crisis, the sheer demographic crisis on the wine market, the impact on youth craft beer industry.

In Russia continues to drop in sales of imported spirits (whiskey, rum, gin, tequila, etc.). Last year, on average, this group fell by (-30%), in the 1st quarter of this year the total fall in the group of alcohol even 20%. Well, maybe not this category fall by 50% for 2 years! It’s too much even with the onset on the premium market of imported alcohol Russian surrogate alcohol products.

In the 1st quarter of 2016 fell imports to the Russia of vermouth (-25%), cognac (-30%). On the other hand, went up quiet wine import growth (+ 4%) and sparkling (+ 2%) after a sharp drop in 2015. Rather, it affects on the situation of uncertainty importers – whether to import a lot, if still not very clear how it will work retail since July 1, with the conduct of EGAIS system.

 Results of the largest manufacturer of alcoholic beverages in Latvia Latvijas Balzams in 2015

The turnover of the company Latvijas Balzams in 2015 amounted to 73.791 million euro – 1% more than in 2014. Profit decreased by 11.3% – up to 7.065 million euros. This is evidenced by the financial report submitted by the exchange Nasdaq Riga.

The increase in turnover of Latvijas Balzams last year contributed mainly to the increase of 4.85% of orders from Stoli Group. While sales of enterprise products in Russia and Ukraine last year fell significantly. Profit fell under the influence of the sales drop on the most profitable for the company markets and investments in advertising of brand Latvijas Balzams.

In 2016, the chances of profit growth in Latvijas Balzams estimates with caution, given the drop in oil prices impacts on the Russian economy, slowing growth in China and uncertainty in the EU economy. For comparison, in 2014 Latvijas Balzams turnover amounted to 73.052 million euros, profit – 7.962 million euros.

Founded in 1900, the company Latvijas balzams is the largest producer of alcoholic beverages in the Baltic States. Since 2014 Latvijas Balzams is in a holding company Amber Beverage Group.

Whisky in Russia

Now the major players in the whiskey market in Russia – a multinational spirits companies. The first place is occupied by Diageo (brands Johnnie Walker, White Horse) with a supply capacity of 10.5 million liters in Russia in 2015, the second – Bacardi (William Lawson`s, Dewar`s) – 6,1 million liters, the third – Pernod Ricard (Jameson, Chivas Regal) – 5 million liters.

Whiskey market in Russia grew until 2012, being one of the fastest growing categories among alcoholic beverages. In 2012-2014, there was a stagnation – the volume of imports fluctuated at the level of 40-42 million liters per year, but in the crisis in 2015 was projected drop of whiskey supply to Russia: devalued the ruble and imported alcohol prices rose sharply. According to the Federal Customs Service imports of whiskey fell by 22.3% last year, to 33.59 million liters.

About craft beer in Russia

For a start it is worth recalling that, according to the Brewers Association of the United States. craft may be considered the one brewery, which produces no more than 70 million decaliters of beer per year, is an independent (outside investors and shareholders may not have more than 25% in the capital) and manufactures products with a large proportion of malt in accordance with the traditions of brewing.

The reason for appearance of the crafting brewing in the world in the early 1970s – consumers tired of the domination of beer of industrial standard, which resulted from the consolidation of the beer market in the world. As for the Russian beer market, is now crafting brewery accounts for about 1% of it. However, multinational companies are already seeking to take a seat in the front row. Against the background of a stable reducing their own sales international giants will fight for the youth audience in Russia, which crafting beer is gaining popularity.

In Russia there are no official statistics that would reflect the exact amount of crafting beer segment. As there is no industry associations crafting producers who could carry such statistics. But some calculations to do it is still possible.

According to beer сompany “Baltika” (owned by Danish group Carlsberg), in 2015 the volume of all Russian beer market amounted to 698 million dal. Nielsen Company estimates that in volume terms on the four international brewing companies in 2015 accounted for 73.5% of all beer in the Russian market: Carlsberg – 34,7%, Heineken – 12,9%, Anheuser-Busch InBev – 12,8% , Efes – 13%. The remaining 26.5% of the market consists of relatively large producers of beer, for example, the Moscow Brewing Company and “Ochakovo” (for two accounts for about 6-7% of the market, and about 2% in Trechsosensky brewery and 1% in the “Buket Chuvaschji”). On imported beer from the CIS and other countries together accounted for about 2.5% last year, another 1.5% – on private brand of retailers. The rest, about 13%, accounted for the smallest local producers, the number of which, according to various estimates of market participants, ranging from 250 to 350. They are today the fastest growing group.

Proper assessment of market participants about crafting beer volumes in Russia vary widely. For example, the Heineken evaluates them in a little more than 1 million dal in a year, that is significantly less than 1% of the total beer market in the country. The “Baltic”, however, believe that the real producers of craft has a share of about 2% today, and it is already almost 14 million decaliters.

Since 2010 the number of crafting breweries in Russia increased 7.5 times – from 13 to 98 in 2015. (For comparison: in the past year crafting US breweries produced 287.4 million decaliters of beer (13% more than in 2014) to $ 22.3 billion – a 12% of the US beer market by volume and 21% in value terms).

The difficulty in assessing this segment of the Russian beer market is largely due to the fact that there is no conventional definition of crafting brewing in Russia. In most cases, a beer crafting involve experimental author’s beers produced in small batches, which use the original ingredients and innovative recipes. But at the same time, many local manufacturers use a fashionable and beautiful the term “craft”, replacing them before another popular term “living beer”.

I believe that in the future may take crafting beer in Russia of 10% -12% of the market, but it will happen no earlier than in ten years. Then beer giants will not be limited only to the delivery on the Russian market of their own crafting brands, but they will buy Russian breweries, that have achieved the greatest success in this segment. This is already happening in other Western markets. I also believe that to win the Russian segment of crafting beer large breweries will be use retail chains, where products of breweries, specializing in the production only craft, now virtually non-exist. Today, the traditional sales channel of crafting beer are dedicated bars, pubs and shops.

The appearance in Russia crafting breweries and bars with their products is characterized mainly for megacities, where the standard of living of the population is traditionally higher. In the bars the price of crafting beer domestic production varies from about 150 rubles (US $2.3) up to 350 rubles (US $5.4) for a half-liter mug, taking from the price point of view the intermediate space between the premium bottled beer from the shop and draft imported beer from bar.

Email: alko-pr59@yandex.ru

Weekly analytical column of Vadim Drobiz Week April, 11 2016 – April, 17 2016 (7)

Weekly analytical column of Vadim Drobiz

Week April, 11 2016 – April, 17 2016

Vadim Drobiz – Head of the Center for Federal and Regional Alcohol Market Research (CFRAMR)

The most quoted in the Russian media expert on the alcohol market of Russia, former Soviet republics and Eastern Europe. The latest news, detailed analysis, commentary, statistical databases on the alcohol market since 2002.

Full versions of the materials published in Russian on the website Vadim Drobiz http://cifrra.info/

Email: alko-pr59@yandex.ru

The benefits and harms. What more?

For one of the Russian TV channels I have prepared material on the anti-alcohol campaigns in the world in general and the Soviet campaign period 1985 – 1990 years. From my point of view, all that is written about this in the Russian media and say officials mostly lies and myths.

I believe that illiterate anti-alcohol campaign (ААС), based on the prohibitions and restrictions, meaningless, stupid and destructive. They are in this case are means of PR interest groups of persons, or carried out in order to cover a certain other planned events, objectives, reform, the corporate interests of the public and state medical organizations …

  1. International ААС

– the positive experience of AAC there is no and was not. It is impossible to change something only prohibitions and restrictions in any country of the world. Without fail they must be accompanied by a dramatic improvement in the level and quality of life. Without this, usually, in the course of the AAC, and after its completion predominate adverse side effects, which even at the beginning did not expect.

  1. Historical facts

– it is useful to remember that the basis for the beginning of the liberation struggles of the future United States from Britain were high taxes on alcohol in the 17th century.

– Prohibition in the United States in the first third of the 20th century has led only to negative consequences: repeatedly increased production of illegal alcohol; there was a total criminalization of State institutions and society (Hollywood on this subject took a lot of pictures); Mafia flourishing (especially Italian), home moonshining; there was a flowering of addiction etc. Published data show that with the introduction of Prohibition in the United States real serious reduction in alcohol consumption, taking into account illegal production, has not occurred.

– the later period: the last 30 years, Finland and Sweden live on anti-alcoholic recommendations of the World Health Organization. The result – only negative consequences. Alcoholism in the two countries officially grown at times among adults and adolescents. This does not save even a state monopoly on the retail sale of alcohol. In fact, in Sweden and Finland there is a massive moonshining, the purchase and importation of alcoholic drinks from neighboring countries, especially the Baltic, Russia and Belarus. Finnish tourists, for example, bought in 2014- 2015 and imported to their country for more than 30% of all alcohol sold in retail trade in Estonia.

– in any country with European culture (they include and Russia, despite that Russian authorities say about “turn to the East”), not to come up with the local authorities from Prohibition to semi-dry, or what else, 80% of the adult population (the most energetic, socially and economically active, educated, healthy, etc.) consume alcohol. It was, is and will be. Of this amount, not more than 10% -15% alcohol abuse.

3. Russia and the world today:

– In 2013 it was officially recognized that alcohol consumption in the EU and in Russia on average equal to 12.5 liters of pure alcohol per capita per year. Of course, different countries have different culture consumption, consumption patterns, drinks themselves, their quality, but the volume is approximately the same. With regard to the set of the WHO threshold of 8 liters of alcohol per capita per year, after which begins the alleged degradation of the nation, the country with European culture have a minimum of 120 years consumption per capita accounts for about 10-12 liters. So WHO already in 2015 raised the question of increasing the set threshold from 8 to 10 liters. With the same amount of consumption in the 12-12.5 liters of alcohol per year alcohol drinks in Russia today is 8-10 times more expensive relatively, than in EU countries and North America. Example: on unemployment benefit in the US, the EU and other developed countries resident can buy more than 200 bottles of legal strong alcohol. On unemployment benefit in Russia  – 20 bottles (10 times smaller!); on minimum wage – 30 bottles; on the normal (by Russian standards) wages in the region- 70 bottles of legal vodka.

From this involuntarily raises two questions:

– why Westerners are not drowned in alcohol at such its availability? Simply population of all countries consume alcohol to its limits – physical, financial, cultural, religious, medical, customs, etc.

– why Western governments allow for such a low price and availability of alcohol? In my opinion, they well aware that much more expensive and more difficult to deal with the social and health consequences of use and abuse populations of illegal and surrogate products than with the same, but from a legal factory production. In Russia today 65% of spirits – is illegal and the surrogate products. Over 50% of the volume of alcohol sold outside the legal official retail.

4. Russian history

– in Russia has always drank a lot (the last 300 years at least), but had never been very drunk country in the world. Just Russian drunkenness due to poverty of the population has always been at the household level “ugly”, unattractive and uncomfortable, way to release the “steam” dissatisfaction with their lives. For a long time, the population of Western countries prefer to drink alcohol in the bars, cafes, restaurants (there are drunk alcohol 40%), while in Russia only 3%, and mostly Russians drink on the street, in parks, on a picnic, etc. For 70% of the Russians too expensive to go to bars and restaurants.

– 19th century – the heyday of alcoholism in Russia. In archives can be found information that more than 50% of children in the late 19th and early 20th century have been drinking alcohol. In 1861, the abolition of serfdom – 20 million people of the 60 million population of Russia become free but left without money and property – and most of them with grief and despair began to drink.

– it is a complete lie about the “temperance riots” in Russia, which took place in the second half of the 19th century. These were the revolts of the population for reducing prices for vodka! False assertion that Russian was a sober country in the 18-19 centuries and the beginning of the 20th century only reduces the importance and complexity of the problem of alcohol abuse in Russia.

– has not been in Russia 4 liters of alcohol per capita in 1905, as claimed by the official statistics, simply because while there was virtually no social statistics. While 90% of the population lived in rural areas and to collect any statistical data it was simply impossible. Because of excessive alcohol consumption in Russia in 1914 introduced a dry law. It was abolished the Soviet government after the Revolution: according to official data each year were seized up to 1 million moonshine devices in the country. It was therefore decided surrogate, artisanal products to replace with the state quality factory production. From this product the government began to receive excise duties.

– in 1950 – 1980 years in the Soviet Union formed a reasonable structure of consumption of alcohol – “wine-vodka”, to which today are moving spirits markets in different countries: 10 liters of spirits per year per capita, 27 liters of wine products and 24 liters of beer. From moonshine-vodka country after World War II the Soviet Union has become a country with a culture of wine consumption. This prevailing consumption pattern began to break down of the reforms since 1985.

5. The anti-alcohol campaign of 1985- 1990 years

Particularly strong reasons for starting the company was not. Alcohol consumption in Russia at that time was at the level of any European country. Once in power, Mikhail Gorbachev decided to start with reforms. For more political effect decided to start with the anti-alcohol campaign. Though actually needed economic reforms. On the significance at that time alcohol problem was in 10th place. In fact, this campaign was needed to cover the ideological, political, social and economic reforms. Similarly, the anti-alcohol campaign in 2008- 2015 years in Russia was necessary as a screen for carrying out administrative and fiscal reforms in the alcohol market in the years 2010- 2016.

In 1985, with the help of a campaign, created an artificial shortage of legal factory quality alcohol. The main thing what experienced a large part of the population – a deep sense of humiliation from action of the power – all admitted alcoholics! On vodka were introduced stamps, there were long queues for it, have been actively promoted nonalcoholic weddings, holidays, birthdays, etc. But alcohol abuse does not exceed 15% of the population!

Any anti-alcohol campaign ostensibly aimed at reducing consumption. But if 65% -70% of the adult population of the country moderate consumers, they don’t care about the campaign. It only creates inconvenience to which people adapt quickly. Even more, it is indifferent to drunks – they go straight to the surrogates.

6. Impact of anti-alcohol campaigns:

– anti-alcohol campaign can not be carried out in European countries in the period of serious social and economic reforms. It always acts destructively.

– implementation of any restrictive measures on alcohol consumption can not be separated from the general socio-economic policy of country. In Gorbachev’s time appeared many hopes, older people do not want to die so great was during this period the belief in a bright and happy future of the country. People wanted changes. That is what caused the fall of mortality at that time, but not the results of a semi-dry law. Today, it seems strange, but it was …

– Prohibition did not destroy the Soviet Union: in the period of its existence the alcohol brought into the treasury 5%-6% of revenue, after the anti-alcohol measures of Gorbachev was 3%, this does not destroy the economy!

– real reduction of alcohol consumption did not happen, although the official production fell by 2 times. All was immediately replaced by a surrogate, artisanal products. Even I, almost teetotal man, at that time had always at home 3-4 jars (3 liters each) of house wine. And basically everywhere was moonshining.  As a result:

– criminalization of society and the population in the presence of powerful illegal production.

– flowering of addiction … In the USSR this problem almost unknown until 1985 …

– the destruction of reasonable patterns of wine and vodka consumption. It began refuse of wine consumption. A significant role played the effects of economic reforms: a sharp decline in the level and quality of life, falling incomes, total deficit of all.

– formation of hatred among the population to state institutions of power, a sense of moral humiliation and resentment of the fact that normal people have taken away the right to make own decision to drink or not, to decide the rate of drinking, etc.

– in Russia today as a result of ill-considered and sometimes just silly alcohol and anti-alcohol policy have created a most unpleasant phenomenon that has become unaffordable for the majority of population the factory legal alcohol, which immediately led to a sharp increase in the volume of illegally-surrogate alcohol sold out legitimate retailers in the volume more than 1 billion liters per year, which is buy no less than 20 million people in the country.

7. Positive experience of anti-alcohol campaigns:

A positive experience in reducing alcohol abuse is still accumulated in Western Europe in the second half of the 20th century. This occurred for the following reasons:

– by increasing the level of quality of life, medicine, income, care about their health, etc.;

– change the nature of work: people with street work began to move en masse to offices;

– motorization of the population, fear of losing a driver’s license if caught driving drunk;

– the population had other interests. Due to the fact that alcohol in Western countries is cheap (relative to wages), for food and drinks the inhabitants of these countries spend 10% -15% of their income, while 65% of Russia population spends more than 50% of their income. Therefore, the citizens of Western countries have the opportunity to buy something else, to go traveling, has fun, relax, etc. The development of any state and society depends on the availability of public money not only for food and drinks, but also everything else that moves the economy and developing business in these countries!

8. It is necessary to say that …

All the anti-alcohol campaign in the past 120 years in different countries of the European culture led to the same result – increase in drug consumption.

The fall in beer consumption in Russia: causes and consequences

Now Russian media talk a lot about what the Russians reduce the consumption of beer. If they drank 11.5 billion liters of intoxicating drink in 2007, then in 2015, – about 8.2 billion liters, and in the coming year, this trend has continued to decline in consumption. Loss of consumer has a negative impact on the market, since almost the entire volume of beer, produced in Russia, sold here. A capacity to move quickly to the export the majority of brewers have not.

Since the beginning of this year, the American company Cargill stopped the work of one of the largest producers of malt in Russia. Other such enterprises are also not loaded in full. The reason for this was the fall in demand for malt, which experts link with the fall of the beer market. The beer market, in turn, suffers from strict regulation: aggressive excise policy of the state, a ban on advertising, restrictions on beer sales places, threats ban the use of plastic packaging and the introduction on 1 January 2016 in wholesale sector of the automated system of state control over the volume of production and turnover of ethyl alcohol and alcohol-containing products. Another important reason – the general economic crisis in the country.

In my opinion, the main cause of all the present troubles of Brewers – demography. In the 1990s, the birth rate in Russia has plummeted, and until 2002 the country’s children were born in two times less than in previous years. And young people start consume beer at about 17-18 years (in Russia it is permissible age). Here since 2007, when the beer began to consume the first representatives of this not numerous generation, began reducing the consumption of beer.

This trend will be guaranteed to last at least until 2020, independently of all other causes. The new beer consumers becomes potentially half, and on the other hand, people exit from this market in the previous amounts at a certain age – after 55 the Russian men almost do not drink beer. So that is a very significant demographic reduction of the beer market.

Similar processes occur in other sectors of the alcoholic drinks. On the wine market in Russia there is observed a drop from about 2011-2012. Backlog of beer due to the fact that the primary audience of wine in the country are women. They are more or less actively begin to drink wine in an average of 21-22 years. As for spirits, there is a demographic crisis will begin in 2017-2018, respectively. Young people, whatever drinks they drank up to 27-28 years, still come eventually to the strong alcohol.

In addition to the problems of demography Russian beer market is currently characterized by two important circumstances. The first – a gradual shift from the “pedestal” Western beer companies. Five multinational holding companies have come to the Russian market in 1995 and by 2007 it occupied 92%, leaving only 8% to local. But then they began to give ground, and by the end of last year they accounted for already 73% of the market. It is the Western companies had major drop in production – in the last five years, they closed about 12 plants in Russia. And two years later, I think, they will have less than 70% of the beer market in Russia.

This is partly the reason in the second trend – the development of crafting brewing. This are small brewery, which makes beer in small quantities for unique recipes. All are basically Russian. By the way, Russian brewers are increasing production in the face of the current ban beer advertising. I want to note that the usual advertising stimulates consumption of a particular brand of beer but not in general beer consumption.

Western companies think that Russia will become a conditional Czech Republic or Germany, where population drink 120-130 liters of beer per capita per year. It will not work in Russia. In our country, there is also no a direct relationship between the consumption of beer and spirits. Reduction of consumption of one is not at the same time to increase the consumption of another. It is worth recalling that in the Soviet Union and after its collapse no one took the beer as an alcoholic beverage. In 1995, beer consumption was 15 liters per capita per year. When came to the Russian market Western companies for a period 12 years this figure increased to 81 liters per capita. At the same time the market of low-alcoholic beverages was established. It seemed that in these conditions the consumption of vodka and its surrogates, as well as other alcohol drinks had to fall sharply, but nothing happened. From this I conclude that in Russia is no exist relationship between beer and spirits. It is only in the minds of western brewers, operating in Russia, which is necessary to justify the market decline. But they are the true reasons prefer not to mention.

But, as for the market of low-alcoholic beverages, it is practically in Russia no longer exists, because he has fallen in four times over the last ten years, and it was destroyed by Russian laws.

Hangover means no more popular in Russia?

I recently got a call from the office of one of the leading Russian newspapers (“Vedomosti”) with a request to give clarification: it was found another “crisis” in Russia – there was a sharp drop in the import sector, the production and sales of remedy of hangover. They asked: “If this is due to the general decline in alcohol consumption in Russia?” I had to reassure journalists:

– such hangover remedy bought before the country’s middle class, apparently forgetting under pressure of advertising superiority over them classic domestic remedies – cucumber and cabbage brines. It is historically Russian, native and the most effective remedy for a morning hangover, and most importantly – cheap! So this is a vivid example of effective import substitution by native  product!

– but more importantly it seems to me a complete rejection of such means in order to survive the next round of the socio-economic crisis in the country, in which we ourselves were driven in 2014. What is the point in remedy of hangover? Why leave the pleasant euphoric state of mind and body when there are so many problems and hardships? Being constantly in lightweight intoxication can be easier to survive the crisis! (Just kidding).

– and finally: beer, in principle, previously perceived in Russia as an active hangover drink, but the drop, experienced by the beer market in 7-8 years, says the loss of the product even such a primitive and useful properties. And maybe that’s the reason the beer market decline in the country? (Again, just kidding!)

– by the way, in medical journals are increasingly repeated that morning sex is recommended as an effective hangover remedy! If this is true, then we will wait for boomers explosion in our country. In the evening drinking in Russia is still a lot, and in the morning from this bad headache!

Note: One of the causes of poor health during a hangover – improper fluid shifts in the body: in vessels liquid is not enough, and in the tissues – excess. Properly distribute the liquid helps to drink plenty. But before drinking water, it is desirable to make up a stock salt-electrolytes, for example, drink a glass of brine of cabbage or cucumber. But need to remember that a drink should be a brine, not marinade. The dose should be small – not more than glass.

Brine is a mixture of water and salt used to preserve or season vegetables, fruits, fish and meat in a process known as brining. In Russian cuisine the leftover brine, called rassol, has a number of culinary uses, e.g., for shchi, rassolnik, solyanka. Rassol, especially cucumber rassol, or sauerkraut rassol, is also a favorite traditional remedy against morning hangover.

Loyalty to the brand

We are trying to live in a free, democratic market… How many beautiful names and terms presented us with marketing in recent years. Among them is such a thing as lifetime of brand. It can be different. In Russia, one can count several types of alcoholic brands live long enough:

– strong foreign premium – they live a long time. It’s all easy to explain – an age-old loyalty: if on the status is necessary to drink these distillates – then they need to drink in spite of the price of the product: just like Johnnie Walker whiskey and Vodka Absolut;

– wine imported luxury brands – it is for dudes and aesthetes, experiencing their own superiority over the rest of the consumers. Due to them, even at such exorbitant prices for such wine from advertising and activities of the various ambassadors brands in the world, such brands also live for a long time;

– mass wine cheap foreign brands – they are in the Russian market is becoming less and less. In this regard, it can be claim that their lifespan is coming to an end.

– russian wine brands – actually just formed. But at the hearing. Perhaps they have a great future, but only time will tell…

– russian cognac brands – as long as everything is very vague, but let them be all right;

– russian beer brands – it’s just the murder of country’s population with advertising. In recent years, much lose their consumer audience.

– brands of the former republics of the Soviet Union – for example, the Moldovan cognac “White Stork”, Armenian cognac “Ararat”, Georgian wine “Kindzmarauli” and “Apsny” etc. Oddly enough, these brands are still live, but mostly among the elderly. Youth knows them a little.

– old Soviet vodka brands – there are constant litigation between Russian businessman Yuri Shefler, owner of SPI (Spirits International), and the state enterprise “Souzplodoimport” per brand “Stolichnaya” and others. Its brands with a long history and popularity among the Russian pipple.

– new Russian vodka brands of the past 20 years. The list of the main ones is presented in the table below.

Market shares of major Russian vodka brands on the volume of products sold (in%)

Brands January – November 2014 January – November 2015
«Pjat Ozer» 5% 4,5%
«Belenkaja» 5,2% 4,2%
«Zelenaja Marka» 4,8% 3,4%
«Dobrji Medved» 1,25% 2,3%
«Кalina Krasnaja» 0,65% 2,2%
«Chortiza» 3,2% 2,2%
«Тalka» 1,9% 2,2%
«Putinka» 2% 2,2%
«Staraja Marka» 1% 2,2%
«Меdoff» 1% 2,2%
In total 26% 27,6 %
Other 74% 72,4%

The figures show that the proportion of factory vodka brands on the Russian alcohol market market falls. There has been a significant increase in moonshining. It seems to many almost a blessing: it is safer for health, and cheaper for purse. In Russia, there are moonshiners festivals. In stores are bought at great speed moonshine apparatus. Just a little bit – and it will get the scope of the industry, when those who are now do for themselves, will start producing it for sale. This could end very badly for the country!

Email: alko-pr59@yandex.ru

Weekly analytical column of Vadim Drobiz Week April, 04 2016 – April, 10 2016 (6)

Weekly analytical column of Vadim Drobiz

Week April, 04 2016 – April, 10 2016

Vadim Drobiz – Head of the Center for Federal and Regional Alcohol Market Research (CFRAMR)

The most quoted in the Russian media expert on the alcohol market of Russia, former Soviet republics and Eastern Europe. The latest news, detailed analysis, commentary, statistical databases on the alcohol market since 2002.

Full versions of the materials published in Russian on the website Vadim Drobiz http://cifrra.info/

Email: alko-pr59@yandex.ru


Today, the Russian state has a net profit from alcohol in the form of excise duties and value added tax of more than 300 billion rubles a year, even with the fall production of legal vodka in 2015. With the exchange rate at the beginning of April 2016 ($ 1 = 70 rubles) 300 billion rubles corresponds to $ 4.3 billion.

According to the Russian statistics agency Rosstat for 2015 the price of alcoholic beverages in Russia grew by 7.7%. Since the beginning of the current year – by 2.1%, for the month of March – by 0.9%.

At the time, the Soviet Union shared with Spain third largest producer of wine, followed only to France and Italy. Gorbachev’s prohibition cut down 200 thousand hectares of vineyards. The country has lost its own place in the market of production of grapes and irrevocably destroyed several unique varieties. At the same time the existing Russian vineyards not contaminated chemistry as eminent European, simply because purchasing imported chemicals are expensive, and it can save twice as organic.

The well-known Russian economist Igor Nikolaev noticed one contemporary “amazing” phenomenon in the Russian industry: in the Russian Federation falls the production of almost all kinds of goods and services, and only increased the production of yeast and just by 40.3%. This is easily explained – the reason for such a sharp rise in demand for yeast is moonshining mass of the population.

Medicine and alcohol…

I found a good foreign medical material (good – because honest!) What is behind the “spectacular” discoveries in the field of medicine and healthy lifestyle? How many times have you read that red wine prolongs life? And how much of that alcohol is harmful? Often articles of publications contradict each other. In the case of competing editions it becomes mandatory aspect of the struggle for the reader.

Why should not believe in “spectacular” discoveries in the field of medicine? In American Journal of Medicine published a study that may help answer this question. “… From 1979 to 1983, in scientific journals had announced about 101 the openings  in the field of medicine. All they had to help deal with a variety of diseases, but only five have entered the market over the next 10 years, and only one widely used until now. The new assumptions that contradict all previous experience, are often wrong …”

There is a thousand-year experience in the benefit of wine and alcohol in moderation: evidence of that – the preservation of man and his culture in at least the last 2000 years …

Alcohol and budget

I have already mentioned here that in the USSR in 1970-1980-s alcohol gave about 5-6% of revenue in the budget. For comparison: in 2015, alcohol has brought only a little more than 1% of revenues to the Russian budget. And what was before the Revolution, in tsarist Russia? Statistics says that in those days the state budget by 20% -25% was covered by taxes on alcohol. At the same time, according to official statistics, at the turn of the 19th and 20th centuries in Russia per year per capita consumes only 4 liters of alcohol! (Obviously underestimated by official statistics figure!) In fact, in the country was incredible drunkenness! Then the production of alcohol and tobacco monopolized by state.

It would be a disaster if ever again in Russia is 20% -25% of the budget from alcohol. This will mean full economic degradation – we simply will not have any economy in the country in such numbers. And tsarist Russia, no matter how much it did not admired individuals, in the period 1885 – 1917’s was just economically backward agricultural country. While at the same time and excellent built warships, and railroads with locomotives, and weapons made good, etc. But in general, the country has been severely economically backward.

Russia’s “import substitution”…

(From an interview with the owner of one of the Russian retail chains…)

– We had to give up part of premium goods, for example, from frozen snails. Also, there is a shift in demand segments: beef has become expensive and people are buying cheaper pork. Those, who bought pork before, switching to chicken. A chicken lovers now prefer simply to fry potatoes. That is, consumption remains at the same level, but seriously reduces the quality of food … Alcohol also belongs to the group of goods, for which demand falls in the population. And here comes the same flow of consumers in the lower price segment. And those, who drank before cheap alcohol, now switching to illegal drinks and surrogate.

– Is there any food shortages in the country today?

– There is no shortage, including through reexports. Forbidden by Russian “anti-sanctions” Polish apples began to be supplied to Russia via Belarus. When and this channel is blocked, the Poles began to send apples in Serbia, which was not included in the list of countries to which Russia extended “anti-sanctions”. There apples repacked in other boxes under the guise of Serbian and delivered to Russia. And these “Polish-Serbian” apples, because of the double repackaging and additional distance, rising in price. Today, according to the certificates, we sell Azerbaijan tomatoes, but how in a short period of time in this country appeared the new greenhouses and such volumes of production, history is silent. However, it is well known that Azerbaijan has a great relationship with Turkey and very likely this is Turkish tomatoes, which are banned for direct deliveries to Russia.

In the premium segment the story is the same. If in restaurant to order oysters and ask the owner  where they were taken, he replied with a smile: “From Tunisia.” And we realize that in fact they from France, but under the certificate of the country, does not come under “anti-sanctions”.

Error of the authorities? ..

In the current difficult economic conditions in Russia should take steps to strengthen the demand from the population. But Russian authorities have relied on the support of producers. In the entire history of any national economy failed to emerge from the crisis without the resumption of effective demand of the population. Therefore, the government antirecessionary plan would be to focus on stimulating consumption, but this did not happen one  and a half years of crisis. The turnover of Russian retail trade in 2015 fell by 10%, the worst figure for the last 45 years. In 2016 the trend is maintained, while the real incomes of Russians to the beginning of the spring fallen for 16 consecutive months.

The economic crisis is changing the consumer behavior of Russians. It begins to dominate the savings model of consumption. As a consequence – a steady increase in interest from both buyers and retailers to their own brand (OB). Today, almost all retailers who are engaged in their own brands, fix the increase in demand for them – their share in the average check is steadily growing. Experts explain this state of affairs the new economic reality. The fact that more than 70% of Russian consumers have started to save, including food products.


Experts have called, in their opinion, the most effective mechanism for combating with counterfeit alcohol. While the state distilleries will sell “gray” alcohol, there will be an illegal alcoholic products on the Ukrainian market. According to government authorities of the country the shadow alcohol market in Ukraine is not less than 40%. (Very similar figures observed in the Russian alcohol market!)

Over the past few years it has not been established any prerequisites for reducing the amount of illegal products on the alcohol market. Some actions of the state only contributed to an increase in its amount. For example, a sharp increase in excise tax, which is paid by the buyer. New excise taxes take effect from 1 March 2016. They grew by 50% – up to 105.8 ukrainian grivna (UAH) per 1 liter of pure alcohol, or $ 4 at the exchange rate at the beginning of April this year.

In addition, selling prices for ethyl alcohol were increased from 1 April this year. This decision was adopted in mid-March the state monopolist “Ukrspirt”. The rise in price of ethyl alcohol “Luxe” was 18.75%. Increasing the value of the ethyl alcohol company explains the rise in price by 30% of the grain from which it is produced, and by 16% – electricity. Thus, the price of half-liter bottle of vodka increased from 55 to 74 UAH ($ 2.8), growth of 35%. All this in a difficult economic climate and the low purchasing power has led to the reorientation of consumers to the illegal, but more price affordable product and a surge in home moonshine.

It is worth noting that we are talking exclusively about the strong alcohol. The share of counterfeit wine production is very small because it illegally to produce economically disadvantageous.

Today in Ukraine there is a state monopoly on ethyl alcohol production – the main component of vodka, which is concentrated in the hands of the group “Ukrspirt”. And while the state distilleries will sell “gray” ethyl alcohol, there will be illegal products on the Ukrainian market. According to Ukrainian experts, the most effective mechanism for combating with counterfeit alcohol is privatization of distilleries. (It is worth noting that in Russia today there is an opposite trend. There is now distilleries in private hands, and Russian government wants to introduce a state monopoly on ethyl alcohol production!)

The principles of state regulation of the alcohol market

I am often asked: “What are the principles of state regulation of the alcohol market?” The last one came from France. My opinion on this matter as follows:

Firstly: the regulation of the alcohol market – it is always “playing with fire”, it is difficult and dangerous. We must always remember that 80% of the adult population in almost every country will consume alcohol (except for those where alcohol consumption is limited cultural traditions, religion, economic factors, etc.). It is always the most active, healthy, energetic group of people, which develops its own state, its economy and society. Of these 80% – to 10% -15% – will abuse it.

Second: adjusting the alcohol market, the state thus intrudes into the sphere of private life of this large group of people. And most importantly – in the sphere of obtaining pleasure! Therefore, a maximum caution and deep consideration the psychology of consumer behavior.

Third: Do not allow to process of regulation of alcohol market of various deputies, officials, ministers, who will try to make on this a PR company. It is necessary to add also the doctors and public organizations that have a strong influence on decision-making by the state. Their opinions are often biased and subject to certain opportunistic considerations. But the influence of these groups of people in the European and North American countries are not very significant, since any prohibitions and restrictions are ridiculous at maximum affordability of alcohol for all social groups in these countries. It is quite another to Russia, where alcohol is expensive and prohibitions and restrictions only push consumers in the illegal sector of alcohol or moonshine.

Fourth: only adjusting restrictions and prohibitions cannot have an impact on the final consumer in the right direction to reduce alcohol abuse. The degree of excessive alcohol abuse in country define those consumers who abuse alcohol. And the prohibitions and restrictions tend to hit the moderate part of the consumers. As a result, the effect is zero.

Fifth: the real goals and objectives of alcohol regulation as follows:

– most importantly – the safety of products for the population;

– enough to comply strictly with quality standards;

– the formation of a reasonable culture of consumption;

– the formation of a reasonable structure of consumption;

– correspondence between the real physical needs of the population in alcohol, its income and  the legal alcohol prices;

– reasonable anti-alcohol advertising and education;

– the legality of production and fiscal policies;

I knowingly put legality and fiscal in last place – it’s the final indicators of efficiency of alcohol policy. If you do everything correctly and competently, it will be illegal not more than 10% -12% of the market (so historically in Western countries in the last 30 years). And excise tax will be collected safely. Then no meaning if certain industry sectors (production, sales, etc.). will have state ownership. It is already at will; If the state wants to problems on his head and discredit government institutions – please, let them do it. If not – then let it be a private business.

Russian market of beer and malt

Year Manufacture of malt,million tons Production of beer,billion liters
2010 1.01 10.29
2011 0.96 9.94
2012 1.22 9.55
2013 1.11 8.31
2014 1.07 7.66
2015 1.06 7.30

The largest brewing companies in Russia

Name % of the total beer market in volume amount
Балтика (Baltika) 33.6
САН инБев (AB inBev) 13.9
Эфес (Anadolu Efes) 13.4
Хайнекен (Heineken) 12.8
Moscow Brewing Company 3.7
Other 22.6

If every Chinese person would buy a bottle of Moldovan wine…

Moldovan winemakers have long dream of the Chinese market, especially after the loss of the Russian. Currently, there is 1.1 billion people live in the age permitted for consumption of alcohol. As they say in the Moldovan wine industry, if every Chinese would buy a bottle of Moldovan wine, it would solve most of their problems. Over 2014 customers in China was sold 4.3 billion liters of wine (including grape wines – 2 billion liters) of almost $ 40.5 billion. Since 2009, sales of wine in volume terms is growing by an average of 7% per year, and is projected to continue the growth trend of about 6% to 2019 per year. The five largest wine suppliers in China in terms of volume included France, Chile, Spain, Australia and Italy. The share of Moldovan wines in the segment – less than 1%. Studies show that in recent years the Chinese market has been focused on the mid-price segment, as in the country continued to campaign against bribes and expensive gifts to officials, as well as the economic slowdown. Because of this, in China significantly decreased sales of wines of “premium” class.

In quantitative terms, wine consumption in China inhomogeneous. The largest – in the eastern part (6.9 liters per capita) and the smallest – in the north-western part of (0.5 liters). In retail sales of natural wines are the most popular red wines (74%), due to its color symbolizing prosperity. Sparkling wines in the country are the smallest sales (in liters), but they have the highest prices for a bottle of the product – almost three times higher than other wines. They promoted as drinks for weddings and celebrations.

When importing Moldovan wines in China is subject to the following taxes: excise duty is 10% of the cost, duty- 14% for wines and 65% – for fortified wines, VAT – 17%. Therefore, Moldovan winemakers are asking their government, following the example of Chile, to conclude an agreement with the Chinese authorities on the duty-free import of wines. Currently, because of the duties, Moldovan wines difficult to compete with Chilean and Spanish, which are the most affordable of the imported products.

The Chinese, in principle, know little about wine, so Moldova may come to the market on an equal footing with other countries. In Europe, the Moldovan wines difficult to compete with a very strong culture of Italian, French and Spanish wine. In China, Moldovan wines can have a success, and they begin to be present there.

(In my opinion, this is all from the field of fantasies Moldovans, Georgians, French, Spanish, Australians, Italians, etc. On the Chinese wine market are not so simple…)