Russia’s fast-growing wine market

The wine market in Russia is currently estimated at 1081 million litres per year (2006 estimate) and Euromonitor forecasts this volume to grow to 1536 million litres by 2010. The market has consistently achieved an annual rate of growth of approximately 30 percent over the last several years, according to Ernst & Young. These figures apply to both mass-market and premium wine products. Consequently, the Russian wine market is now recognised as one of the most dynamic and attractive in the world.

While Australia still supplies less than 1 percent of the Russian wine market, export growth in recent years has been very strong. In the year to the end of January 2007, exports of bottled wine from Australia to Russia increased by 60 percent to just over 1 million litres (the equivalent of 118,000 cases), according to figures from the Australian Wine and Brandy Corporation (AWBC). This growth came on top of even stronger growth of 161 percent in the year to January 2006. AWBC data shows that Australian exporters achieved an average price of A$4.20 per litre for bottled wine, down from A$4.62 in the previous year. Bulk wine sales constituted just 48,000 litres — less than 5 percent of the total.

Wine distributors in the Russian market have seen their wine sales volume increase by 30–35 percent annually across all regions where they have a presence. While the market remains relatively fragmented, changes to the tax regime in 2006 forced consolidation among smaller importers and distributors. The leading import companies in the Russian market are DP-Trade, RusImport, Svarog-M, Luding and Whitehall.

The largest volume of wine (some 66 percent of sales, according to Ernst & Young) is produced domestically using grapes grown either in Russia or in Ukraine, Moldova, Georgia and Armenia. Traditionally, cheap Moldovan and Georgian wines comprised the largest share of wine imports, although figures from the State Customs Committee of the Russian Federation highlight a shifting consumer trend towards more expensive wines. As a result, the market share of Moldovan wine producers has decreased since 2000. In 2006, the Russian Federation imposed bans on the importation of wine from Moldova and Georgia.

Russia has a growing interest in New World wines and Australian wine products in particular. The price-to-quality ratio of New World wines compares favourably with more expensive European wines, which is a key factor contributing to market growth and public interest in these wines. The increased consumption of New World wines from Argentina and Chile is the direct result of the successful marketing and promotion of these products on the Russian market, and bears little relation to the quality of product.

As a producer of top-quality wine, Australia has a wonderful opportunity to overtake Argentina and Chile and fill the increasing demand for New World wine. Current market indications all point toward Australian wines gaining in prominence through increased public exposure and marketing. Since August 2003, Austrade Moscow has assisted five Australian wine exporters to generate approximately A$20 million in sales to Russia.

Austrade offers a range of programs to help Australian wine producers learn more about the Russian market. Attending trade shows and tasting events organised by Austrade and AWBC is the best way to directly engage buyers through wine tastings and product placement to a very receptive Russian audience.

Opportunities in wine technology, equipment and services

Wine production has a long history in Russia, Ukraine, Armenia, Georgia and Moldova. Wine producers are increasingly looking to modernise their facilities and techniques to produce better quality wine that can attract higher prices in the market. There are significant opportunities for Australian companies to supply technology, equipment and services into CIS markets, including:

• Planting systems and equipment
• Watering and wine maintenance systems
• Automated harvesting equipment
• Expertise and education services in vine management and wine making
• Marketing and distribution
• Investment.

In October 2006, Austrade and the Government of South Australia, the largest wine-producing state in Australia, conducted a study into opportunities for Australian wine technology, equipment and services in Russia. The report is available online from the South Australian Government.