The main results of the year 2017 in the Russian market of alcoholic goods were the supersession of illegal alcoholic drinks and the increase in excise payments within the country’s budget.
On June 30, 2015, Federal Law dated 29.06.2016 No. 182-F3 ‘On Amendments to the Federal Law ‘On State Regulation of Production and Turnover of Ethyl Alcohol, of Alcoholic and Alcohol-Containing Products and on Limitation of Consumption (Drinking) of Alcohol Products’ entered into force. In accordance with the law, all wholesale distributors of alcoholic products were required to implement the EGAIS (Unified State Automated Information System) software by January 1, 2016, whereas retail outlets selling alcoholic products in cities and large settlements were required to do the same by July 1, 2016.
According to the Federal Service of Alcohol Market Regulation of Russia, following the implementation of the EGAIS in the wholesale and retail markets of alcoholic products in 2016, the budget received additional 56 billion rubles.
Since mid-2018, an accounting system of alcoholic goods per unit is to be implemented within the EGAIS. The test run of the system started on July 1, 2017. The new change implies that manufacturers and importers are required to register the supply and shipment of each production unit in the system. The movement of each bottle throughout the production and distribution chain will be possible to monitor online at any stage from the manufacturer to the end consumer.
In 2017, excise duties for imported alcohol were increased – for instance, excise duties for imported wines increased two-fold on January 2017. This factor may hinder further growth in imports within the high-price segment.
MARKET VOLUME AND STRUCTURE
In the structure of the Russian market of alcoholic products, a significant share is occupied by the beer segment – in 2017 it was accounting for approximately 83%.
In the past year, market volume increased by 3.4% to the similar indicator of the previous year and reached 887.8 million decalitres.
In 2017, positive dynamics of domestic production against 2016 were demonstrated by only 2 segments of alcoholic goods – cognac and beer – with an increase by 11.8 and 2.3% respectively. The remaining segments of the alcohol industry demonstrated negative dynamics.
Imports of alcohol into the Russian market have been declining since 2014, which is caused by ruble devaluation and higher costs of imports. During this period a decrease in consumer purchasing power could be observed as well. In the conditions of declining imports, domestic manufacturers did not succeed at rapidly refilling the market with quality goods – instead, the share of illegal alcohol increased. As the ruble began to stabilize somewhat in 2017, imports resumed their growth.
In 2017, imports of alcoholic products increased by 23.4% in physical terms compared with 2016, amounting to 79.7 million decalitres.
Imports of alcoholic goods demonstrated a sharp increase across all product categories in 2017: imports of beer, natural wine, and alcoholic beverages with alcohol content of less than 80% Vol. increased by 100, 51.4, and 45% respectively in volume terms.
Rapid growth in alcohol imports is connected with the low comparative benchmark of the previous years for 2014–2016. A decline in imported supplies of alcoholic goods began in 2014, caused by ruble devaluation and increased costs of imports – at the time, the purchasing power of the Russian population started to decrease. In 2017 the ruble began to recover, and so did alcohol imports.
In the structure of imports in physical terms, the largest shares are accounted for by natural grape wines and beer – 56.1 and 27% respectively. Alcoholic beverages with alcohol content of less than 80% Vol. (liqueurs, infusions, whiskey, rum, gin, vodka etc.) occupy 9.9% of imports, whereas vermouths and fortified wines have the share of just 2%.
In 2017, exports of alcoholic beverages in physical terms (in terms of alcohol) amounted to 40.4 million decalitres, which is 8.6% lower than the indicator of 2016.
In the structure of exports in volume terms, the share of 64.3% belongs to beer exports. Alcoholic drinks with alcohol content of less than 80% Vol. occupy 5.4% in the structure, whereas alcoholic drinks with the alcohol content of more than 80% Vol. account for 28.4%. The share of grape wines equals 0.7%.
According to the Ministry of Health of the Russian Federation, per capita consumption of alcoholic products in the country in 2017, including banned alcoholic beverages (homemade alcohol-containing goods and liquors) amounted to approximately 10 litres of absolute alcohol annually, having declined by 0.5 pp.
Data by the Ministry of Health indicate that since 2010, a gradual decline in alcohol consumption has been taking place, which is a result of active propaganda of health and wellness, social advertising and the development of alternative leisure activities such as sports. The ban on sales of alcoholic drinks at night, which was imposed in 2013, also contributes to a decrease in said indicator.
TRENDS AND PROSPECTS OF DEVELOPMENT
Given the retrospective analysis of the development of the market conditions in 2013–2017, it has been forecasted that during the period from 2018 to 2020, growth rates of the alcohol market in Russia will be at 4–5%. This is the moderate, most realistic forecast. The optimistic forecast (involving growth in imports in the high-price segment) implies growth rates of 7–9%, which is unlikely against increased excise duties on imports within the high-price segment. Market growth according to the pessimistic forecast (assuming decreased direct imports from Italy and Spain as well as a drop in volumes of domestic output) will amount to 1–3%, which is not a likely outcome either.
No radical shifts in the structure of the market volume during the time period analysed are expected. The beer segment will remain the leader, demonstrating a large share of domestic production. In 2016–2017, domestic production of beer in Russia was characterised by positive dynamics, and, according to “NeoAnalytics”, the direction will be maintained in 2018–2020. Estimations by “NeoAnalytics” indicate that exports have capacity potential, their share in the overall structure of alcoholic product output being insignificant – the supply offered is consumed within the country, thus resulting in a shortage of exports.
In addition, indexation of prices for alcoholic goods is expected during the period from 2018 to 2020.
Research Company “NeoAnalytics”
MSc in Social Management