Pavel Titov pulls his quilted blue jacket around him as he stands on the wooden platform, looking out over his 650-ha vineyard, one of the largest in Russia. It’s mid-October in southern Russia and already the wind is finding its way under jackets and collars.
“We’ve done a lot of work on the vines,” says Titov, of the rows stretching to the hills. The only problem they’ve had so far is that grapes at the far end once got burnt. “There’s a firing range nearby.”
It’s fortunate they only lost a small amount of fruit, because demand for wine grapes is outstripping supply. It’s only one of many problems facing the fledgling Russian industry – and yet there are signs that things are beginning to change.
Living Russian history
Titov, young and red-haired, is immaculately groomed. As he walks around the property, people part before him. It’s not just that he’s the CEO who pays everybody’s salary, it’s also that he’s charismatic in his own right. And that Abrau-Durso is the flagship winery of Russia, whose management is helping shape the sector.
Abrau-Durso, within easy reach of Black Sea coastal resorts, has always been a place for aristocrats. Founded in 1870 by Alexander II, it was created to supply the royal household with the sparkling wines they loved so much. Agronomist Feodor Geiduk had searched Russia for the right place, and found it on the shores of the paint-box-blue Lake Abrau. The czar’s vision was finally realised after 1896, when Prince Lev Golitsyn – who also founded the Novy Svet and Massandra wineries in Crimea – brought both digging equipment and French wine specialists to Abrau-Durso, and punched tunnels through the hills to make wine cellars.
Despite the Russian Revolution, Abrau-Durso continued to function; in the 1920s, its winemakers created Sovetskoye Shampanskoye, or 'Soviet Champagne’, which became wildly popular. But although Abrau-Durso survived the revolution, it was gutted by the anti-alcohol reforms of Gorbachev, who ordered that vineyards be uprooted. By the turn of this century, a facility that would have been a national icon elsewhere, had become dilapidated.
A saviour appeared: petrochemicals trader Boris Titov, whose SVL Group bought the winery from the state in 2006. A reported $20m was poured into revitalising the winery, and Champagne winemaker Hervé Jestin was brought in to improve the winemaking. Jestin now oversees the production of up to 28m bottles of sparkling wine, and is gradually introducing biodynamic reforms to the winemaking and vineyards.
“He freaked out the other winemakers,” says Pavel Titov about some of Jestin’s attempts to channel the moon, “but his wines are always the best ones in the line-up.”
Abrau-Durso also acquired a distribution company in 2008 – “when Beluga Vodka got acquired by Synergy, their own distribution house fell off and we acquired that off the street” – and purchased Champagne house Château d’Avize from LVMH in 2010. “That primarily started as we wanted the PR,” says Titov. “The purchase paid off, because now we’re not the weird Russian winemakers that nobody knows about, but the guys who produce wine, including in Champagne. It’s a noble niche.”
In 2010, “we entered the project Usadba Divnomorskoe, which has 30 ha of vineyards. It’s one of the first examples of a Russian winery with a really high potential,” says Titov. The company also took a 51% stake in a winery in Vedernikov, which specialises in Russian indigenous varieties.
After Boris Titov became Russia’s Business Ombudsman in 2012, he withdrew from the winery to avoid a conflict of interest. His son Pavel, treasurer since 2008, became CEO.
Abrau-Durso has also opened its own retail stores, plus a wine bar in GUM, the famous Moscow department store. “I wouldn’t call it a very commercial project, because the place is expensive, the branding was expensive and everything was expensive – and you can’t put your prices too high,” says Titov. “But it’s a great marketing opportunity for us, given there are no other marketing channels.”
That’s because Russia does not allow the advertising of alcohol.
A new era
Having shrugged off its communist legacy, Abrau-Durso now sparkles in all senses of the word. A parade of brides in lavish gowns swish their way to photogenic spots by the lake, while day-trippers enjoy boat or helicopter rides. Up to 150,000 visitors a year come to experience the guided tours through the winemaking facilities, and to taste the smartly branded wines. There are yoga classes on a vertiginous cliff top; hiking and biking around the hills; treasure hunts in the wine tunnels; excellent food in the restaurant; and a spa offering lavish sparkling wine treatments. There’s even a fairground, complete with carousel and booths selling traditional crafts, while the ramshackle stalls that once cluttered the parking lot have gone.
“We built the booths to get rid of the mafia,” says Titov, explaining that the parking lot was once the fiefdom of a woman, who made it her business to shake down stallholders. Now she’s gone and the stall holders have picturesque, rent-free booths.
Titov admits that life in Russia is very different to London. “I studied corporate finance at Cass Business School. Straight out of school, I applied to some investment banks and my first employer was Merrill Lynch,” he says. That world is now a long way away. “The fact that 2,000 people are reliant on decisions I make is probably the most difficult thing. You sleep worse than you do in the corporate world, where the worst thing that can happen is not getting a bonus at the end of the year.”
Titov’s next plan is to improve Abrau-Durso’s infrastructure, with another hotel on the drawing board. “It will give this place a more united infrastructure. We’ve been able to build a piece here and a piece there, but it’s not enough.” Titov says he wants Abrau-Durso to be recognised as a mass destination, including by international tourists.
It’s definitely an attractive part of the world. Abrau-Durso is a short drive from the Black Sea coast, and the climate is warm and inviting in summer. Plus, the facilities are good: the Western wine judge who emerged from the spa raved about it. Better still, from a Western point of view, the low rouble turns an otherwise luxurious destination into a cut-price holiday. From a Russian point of view, however, the currency plunge has had serious consequences. Titov says it “kicked our butt”, although the company is still clearing a “14% to 16%” net profit.
“A major part of our cost of goods is foreign currency, because we don’t have enough Russian grapes,” says Titov, explaining that the winery relies on bulk imports for its cheaper range. “Obviously we did improve our competitiveness abroad,” he says, “but for the Russian market we became more expensive. We’re not looking at falling sales, but it’s less stable than it was. One month we could be flying 35% above our planned sales, and the next month we could sell hardly anything.”
The big issue facing Russian winemakers in general, he says, is that people are running out of money.
The wider industry
As Leonid Popovich rises to his feet, the packed room falls silent. President of the Union of Winegrowers and Winemakers of Russia, Popovich is presenting a kind of state of the union address at the fifth Russian Winemaker Summit, held at Abrau-Durso. He outlines the formidable challenges facing Russia’s wine sector. The first issue is lack of supply, with the industry needing six times the amount of grapes now grown in Russia. Unfortunately, vines are effectively blocked from entering the country, because quarantine authorities are adept at finding diseases every time they examine them. “If we haven’t got grapes, how can we make vineyards? That’s the question,” he says. Further, Russian authorities still put wine in the same category as other alcohols, and heavily regulate its production.
Popovich details the onerous taxes and bureaucratic processes imposed on winemakers, which make it almost impossible to get licenses. “The taxes for winemaking are unreal and we struggle.”
Up to three-quarters of wines bottled under Russian labels are simply bulk wine that’s been re-badged, or local wine fleshed out with bulk wines. There is as yet no appellation system, and Popovich wants to see special labels created, to help guide consumers to authentic products. Wine tourism needs to be encouraged, chateaux need to be built, and wine routes developed. Above all, Popovich and other speakers reiterate, Russia’s winemakers and growers need financial help and good credit terms.
There were also reports of momentous changes, a consequence of adding the historic wine territory of Crimea to Russia. Crimean wine producers used to the Ukrainian way of doing things found themselves buckling under the onerous demands of Russian bureaucracy, with some wineries reportedly closing. In response, the government relaxed some of the regulations, which has made life easier for the Russians themselves. Not only that, but the Western sanctions imposed on Russia in the wake of the annexation have fuelled a patriotic passion for local goods, at the same time as the devaluation of the rouble has meant consumers can no longer afford European wines. For the first time, Russian (and Crimean) wines are appearing on fashionable Moscow and St Petersburg wine lists, adding lustre to an industry that’s struggled to throw off the legacy of Soviet winemaking.
Indeed, more than 500 people milled in the downstairs tasting room to try the wines of the 46 Russian (and Crimean) wineries represented. Since Meininger’s last visit in 2013, the wine quality has improved dramatically. It’s not always easy to tell which wines are genuinely Russian, because of the reliance on imported bulk, but even so, there were sound, commercial wines on offer that at the current exchange rate would be hot bargains in the average Western European supermarket.
At the party that evening to announce the winners of the Russian wine competition – judged by a bevy of wine stars, including Tim Atkin MW, José Peñín and Anatoly Korneev, co-founder of the distributor Simple – the mood seemed buoyant. Cheers erupted and glasses were raised as winners were announced, particularly when Abrau-Durso’s Imperial Cuvée won the Best Sparkling category.
Afterwards, everyone went down to the lake, to watch the inaugural performance of the 60-foot-high fountains, complete with light and music show. As fireworks exploded, Russia’s economic problems seemed far away. But as impressive as Abrau-Durso is, for the moment it is largely an anomaly in Russia. Pavel Titov has been thinking about that, too. “We would like to become a larger distribution house, maybe to distribute other labels as well,” he says, adding that his ambition is to take Russia into “the worldwide landscape of winemaking.”
