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6/2017


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DRINKS
Prospects of Development of the Russian Wine Market
Research by the Center for Investigations of Federal and Regional Alcohol Markets (CIFRRA)

Review of the Russian Beer Market
Research by the Company I-Marketing

TEA & COFFEE
Review of the Russian Coffee Market
Research by the Company Step by Step

CONFECTIONERY
Review of the Russian Confectionery Market
Research by the Information Agency Credinform

Review of the Russian Market of Fruit Preserves
Research by the Company I-Marketing

MEAT
Review of the Russian Meat Market
Research by the Company Market Analitika

FISH & SEAFOOD
Review of the Russian Market of Fish and Fish Products
Research by the Company NeoAnalytics

DAIRY PRODUCTS
Review of the Russian Dairy Market
Research by Information Agency Credinform

Ways to Increase Realization of Expired Food Products
Study by the Marketing Agency ScanMarket

INGREDIENTS
Review of the Russian Market of Starch Products
Research by the Company ID-Marketing

TRADE SHOWS
22nd International Exhibition Agroprodmash-2017


4th exhibition Anufood China-2017


34th Exhibition Anuga-2017


Exhibition Drinktec-2017


26th International WorldFood Moscow Exhibition


FOODSERVICE
Review of the Russian Restaurant Market*
Research by the Company RBC Market Research

FINANCE & LOANS
Leasing Market in Russia
Research by the Rating Agency RAEX (Expert RA)

Prospects of Development of the Russian Wine Market

Research by the Center for Investigations of Federal and Regional Alcohol Markets (CIFRRA)

It is time to switch from the never-ending pompous and unrealistic import substitution programmes to rational calculations, based on the possibilities of grape producers of the three leading Russian regions Kuban, Dagestan and Crimea. Their potential in expanding vineyard territories does not exceed 5,000 hectares per year (with the following ratio: 85% wine grapes; 15% table grapes), and such a result would be excellent it is impossible to try and chase the Soviet indicators in vineyard planting. One ought to accept that additional 5,000 hectares every year is a fantastic result. The latter implies that in winemaking, both businesses and, to some degree, the state invest 5 billion rubles each in new vineyards alone (and if resources allow it and more can be achieved, that is great). This will result in 3.5 million decaliters of additional wine materials every year starting with 2018 (harvest from vineyards planted in 2013). There is no need to hurry rapid import substitution only looks beautiful on paper, in reports to state authorities.
In addition, it is important to understand what level we start with namely, whether we really have 90,000 hectares of vineyards today. Hopefully, more territories will be added to the Russian vineyard register (which has less than 65,000 hectares today, 54,000 hectares thereof being fertile vineyards) by the end of the year: the approach of winegrowers and winemakers who are not in a hurry to get into the register is more than strange is there a better way to officially conform the origin of your grapes and wine materials to the state, the society and the consumer?
Why am I claiming that 5,000 hectares of new vineyards every year should be considered an excellent result?
For instance, this is the information provided by Crimean officials: 1,500 hectares of vineyards are planned to be planted in Crimea by 2020, as announced by Prime Minister of Crimea Sergey Aksyonov. Head of the republic also noted that 560 hectares were planted in 2016, and more than 670 hectares were set up in the first half of 2017.
Several days before Aksyonovs publication, Andrey Ryumshin, Minister of Agriculture of the region, announced the following, Crimea plans to increase its vineyards territories almost four-fold over the next five years. Authorities of the Republic of Crimea are planning to increase vineyard areas from 13 to 50 thousand hectares during the following five years. Ryumshin pointed out that in previous years the region was planting vineyards at the average rate of 500 hectares per year, We are meeting the indicator namely, 500 hectares per year; however, our goal is to plant 5 to 10 thousand hectares every year. We have the required territory and investors who are ready to do this, but we have a problem with seedlings. He believes that creating local seedling nurseries will help resolve the latter, We are planning to create our nurseries in the next 1-2 years.
Aksyonovs claims are believable, whereas Ryumshins are not. No such numbers can be expected in Crimea in the next 8 years.14.5 hectares of vineyards will be reached in 2020, and these will give no more than 6 million decaliters of wine materials in 2025, even if the average yield is raised to 60 centners per hectare (it is almost 2 times lower today). Starting with 2012 they might begin to actively plant vineyards and Crimean projects might start working (one of them involving an investment of 8 billion rubles to grapes; there is also a Tatar project with a huge area of rented grape land). But all this would occur at least 5 years after vine planting and until wine grape harvest!
Is there any point in turning a development programme into a freestyle essay?
Below are the fresh forecasts on grape harvest in the regions of Russia (according to TASS):
The Ministry of Agriculture and Processing Industry of Krasnodar Krai announced that in 2016, the region, Russias leader in volumes of grapes grown, collected a record harvest of 237 thousand tons. This accounted for almost half of all grapes harvested in the country (46% of 515 thousand tons). Table grapes amounted to less than 20 thousand tons, whereas 217 thousand tons fell on grapes used in winemaking. The average harvest for Krasnodar Krai equalled 107 centners per hectare. Valery Popov, head of department at the North Caucasian Federal Scientific Center for Horticulture, Viticulture and Winemaking, pointed out that in the current year harvest is not expected to exceed the volume of the previous year.
The situation in Crimea is similar. Gross harvest of grapes in 2017 is planned at the level of 2016, when 56.3 thousand tons of grapes were collected, with the average harvest of 35.4 centners per hectare. Wine grape varieties occupy 90% of the volume grown in Crimea.
In Dagestan, which is second in volumes of grapes grown in Russia, is planning to beat last years record, when the republic harvested around 150 thousand tons of grapes, the largest volume in the past 31 years. The local Ministry of Agriculture and Food Products is counting on 155 thousand tons of grapes, 101 thousand tons thereof being wine grapes.
Together, the three main wine regions of the country are expecting to collect 350 thousand tons of wine grapes. This implies 26 million decaliters of wine materials for various production purposes. Let us assume that the other grape regions such as Rostov region, Stavropolye and others will provide 5-6 million decaliters of wine materials combined. I see no quantitative leap yet. There is only hope for 2018, when harvest can be collected from vineyards planted in 2013.
Programmes should be real, especially given that in crisis, which started in late 2014, the state is not planning to drown winemakers in funds. Therefore I would like to once again suggest that an expansion of at least 5,000 hectares of vineyards every year (new vineyards or replacement for old ones) be considered a wonderful result, and to propose that all those promises to substitute imports in Russia in 5-7-10 years made by our authorities be forgotten about. Cannot see it happening for now...
Nevertheless, one should talk about import substitution. Russian winemakers have expressed an initiative to limit imports of cheap bottled table wines from France, Italy, Spain, Germany et cetera into Russia. Why not? Yes, we lack our own grapes and wine materials to ensure the needed volume of finished produce. Let us import wine materials and cognac distillates from European countries, while gradually replacing imports of cheap table wines (for example, up to 1 euro in purchase price and 200-250 rubles in retail) with Russian products made from wine materials supplied by these countries.
Afterwards the state needs to be convinced that there is a need for a gradual decline in imports of cheap finished produce for instance, by 5% per year. There is no need to label this as sanctions instead let us call this measure support for production and domestic producers. Let us look at Belarus and its experience as an example it only imports products that are expensive and famous around the world; cheaper products such as vodka, cognac, whiskey, wine or sparkling wine are made locally; wine is produced from Moldavian wine materials.
The state provides winemakers with funding for development and is, logically, expecting certain progress as a result. Time goes by, and yet wine production keeps declining. After a 25% increase in 2015, we have been facing a decline in both 2016 and 2017, against growing imports of wine products in the cheap and expensive segments (+35%) since September 2016.
No growth in wine consumption is to be expected: 90% of wine in Russia is consumed by women approximately 50% of the female population there is no more hope for women in this sense. 5-7% of Russian men drink less than 10% of wine every year. In order to make part of the male population switch to wine, we need 20 years and a new generation with growing quality of life and massive propaganda. The situation could partly be fixed with former fortified grape wines if only they cost less than table wines, as they do not compete with each other.
Substituting imported wine materials is not a quick process, but we are already following this path. In 2022, 20 million decaliters imported in 2016 will be fully substituted with grapes harvested from vineyards planted from 2012-2013 onwards. This means that today domestic winemakers ought to be helped with the reduction of inexpensive imported wines in the mass market, especially given that there is no equal competition between Russian and foreign wine producers nowadays compared to producers in Western countries, Russian winemakers receive pennies from the state.
The above will stimulate domestic production. Our wineries, glass factories, printing houses, infrastructure and workers will all be involved. I see no disadvantages in winemakers proposal to gradually decrease imports by 5% per year, increasing the supply of domestic produce from the growing volume of domestic and imported wine materials.

Vadim Drobiz,
Director of the Center for Investigations of Federal and Regional Alcohol Markets (CIFRRA)





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