Weekly analytical column of Vadim Drobiz March, 7 – March, 13 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/

Week on March, 7 – March, 13 2016


Rospatent called “protect” brand “Russian vodka” as a national

Head of the Federal Service for Intellectual Property Gregory Ivliev said of the need to protect the brand “Russian vodka” as a national, as well as, for example, the French protect cognac or champagne. One of the deputies of the State Duma believes that it is unacceptable to use the brand “vodka” by foreign companies. He appealed to the Industry and Trade Minister to raise the issue at the WTO level and international courts. Ivliev, in turn, explained why the word “vodka” (as opposed to the “Russian vodka”) can not be use as a brand. He recalled that the first mention of word “vodka”, as spirits, appeared in the XVI century chronicles, and it was the territory of the Polish-Lithuanian Commonwealth (Rech Pospolitaja), is situated on the territory of present-day Poland, Ukraine, Belarus and Lithuania. He noted that the word “vodka” was used not only in Moscow but also in Stockholm, and Warsaw. Head of Rospatent thus agreed that the nationalization of the brand “Russian vodka” can help Russian export.

Imports of wine production in Russia 2013 – 2015 years

Name 2013 (million liters) 2014 (million liters) 2015 (million liters) The change compared with 2014 year (%)
Cognac and brandy (Excluding Armenia) 26.34 25.52 8.81 -65.5
Wine 271.39 248.16 167.22 -32.6
Sparkling wine 43.08 50.14 33.25 -33.7

The devaluation of the ruble and the decline of purchasing power caused a significant reduction in the volume of imports of alcohol in Russia in 2015.

Revenues of Soviet and Russian budgets from excises on alcohol

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.

What Russians drink

According to experts, to 30 million Russians substitutes now strong legal alcohol by cheaper or simply illegal vodka – it is one in five. Over the last year the Russians consumed 150-180 million liters of pharmaceutical tinctures, about 400 million liters of alcohol liquids dual purpose, not less than 200 million liters of moonshine, 100-150 million liters of artisanal vodka, as well as 200 million liters of vodka factory in illegal retail.

The largest Russian manufacturers of vodka

On the results of 2015 the share of  “Tatspirtprom” сompany is 13% of the production of vodka in Russia, according to Rosstat materials. The company significantly increased its share of the vodka market: in 2014 it occupied 10%. “Tatspirtprom” in 2015 increased the production of vodka by 24%, reaching 86 million liters. Second place goes to “Synergy” (76 million liters, 12% of the market), the third – “RuSt” (72 million liters, 11% of the market).


Problems with the use of the brand “Cognac”

The European Union, especially France, insists that Armenia undertook refuse to use brand “cognac”. Armenian authorities do not agree with this requirement. After the rejection use of the brand name will not only image losses for 50 Armenian cognac producers, but also will be the reduction of sales volumes of the beverage in the market. The original way of solving the problem was set out in the Аssociation agreement, according to which the Armenian side was given 14 years, after which it was necessary to take a final decision. However, new negotiations began, because Armenia does not sign an Аssociation agreement with the EU.

Problem, associated with the name “cognac”, enough sensitive for the Armenian side, since cognac is produced in this area for over 100 years. Currently, in the Armenian market are about 50 enterprises producing “cognac”. “Сognac” one of the most famous Armenian brand in the CIS market. Due to the rebranding possible reduction in the volume of consumption of the drink.

The main market for Armenian “cognac” now – this is Russia. But because of the economic difficulties in Russia and devaluation of the ruble, Armenian “cognac” has become uncompetitive in the market. Sales decreased much: аt the end of 2015 by 50%. And export “cognac” under the brand name “brandy” economically inefficient, because on the market it is considered a cheaper variety of alcoholic beverage.

The Armenian side believes that the export of the drink in Russia under the name “cognac” will continue as long as the latter does not sign a corresponding document with France or the European Union on the termination of the sales in the Russia beverage under the name “cognac” any manufacturer other than French.


Preferences of Ukrainian consumers

Most Ukrainians prefer vodka, the second place are occupied by sparkling wines, and the third of the most popular alcoholic drink in country is wine – reported AllBiz International Center for Internet commerce. Beer only took 4th place in the ranking of favorite Ukrainian alcoholic beverages, just behind him on the 5th and 6th are brandy and whiskey. Among the outsiders appeared on the Ukrainian market, alcohol tinctures, liqueurs and alcoholic cocktails. Compared to 2015 the demand for vodka is growing rapidly – nearly 40%. But the biggest increase in sales in this year is seen in wine – about 50%.

However, all is not well in the vodka market of Ukraine. Yuri Sorochinskiy, CEO “LVN Limited” – Ukrainian producer of the famous vodka brand the Nemiroff – predicts the decline of the Ukrainian alcohol market by 20-25%, to 150 million liters in 2016. Due to the drastic increase of tariffs for 50% perhaps in March this year legal alcohol market will collapse. Last year the average vodka production volume fluctuated in the range of 190-200 million liters. According Sorochinskiy, a gradual decline began in 2011, and in recent years it has only accelerated. The main reason for the decline are ill-conceived tax reform, hyperinflation and a paltry purchasing power of the population.


Export of Georgian wine

According to the Ministry of Agriculture of Georgia, in February 2016 the country increased its wine exports doubled over the same period of 2015. Most Georgian wine goes to Russia. Compared to February 2015 grew by 48.8% and reached a value of 2,559 thousand bottles (56.5% of total Georgian wine exports). This is followed by Kazakhstan (337.6 thousand bottles), Poland (more than 332 thousand bottles), China (over 219.3 thousand bottles) and other countries.


The drop of vodka production in the country

According to the Belarusian news agencies in the country in the January 2016 vodka production dropped to 6630 thousand liters. Compared with January 2015 production of vodka dropped by 20.6% or 1 720 thousand liters.

The average Belarusian family in October-December last year on food spending 41.2% of total consumer spending, and on alcohol – 2.2%. Well, can not population of country become an inveterate drunkard if spends only 2.2% of revenues in the legal retail alcohol. I remind, that the latest report of the World Health Organization  claims that Belarus belongs to one of the most drinking country in the world! (If only the Belarusian statistics report gives correct numbers.)

Email: alko-pr59@yandex.ru


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