Views of the Russian market

Alessandro Campatelli, Carlos Delage, Dirk Niepoort, Miguel Roquette
Alessandro Campatelli, Carlos Delage, Dirk Niepoort, Miguel Roquette

The Russian market went into a downturn in late 2014, compounded by European sanctions. As a result, international wine companies and organisations abandoned it. Five years later, the market has recovered somewhat, with Russian consumers showing a particular interest in high quality, good value wines. James Lawrence asked some notable wine producers about their experiences in Russia.

Carlos Delage 
export director, Compañía Vinícola del Norte de España, Rioja, Spain

CVNE is a historic producer of Rioja; we entered the Russian market approximately seven years ago. We are pleased with our progress overall; Russia is a market that has developed in recent years, yet there is still much room for further growth and expansion of distribution. Encouragingly, the market is becoming more sophisticated day by day – Russian consumers are thirsty for wine knowledge. Particularly over the last two to three years, we’ve enjoyed a surge of interest from Russian consumers. Indeed, Russia and Eastern Europe are doing very well in the global context. This is a market with great potential.

Of course, if you want to build a premium brand in Russia, then you need to start in the upmarket on-trade. Interest and knowledge then develop, encouraging the consumer to purchase higher-priced wines in retail. The restaurant sector in Moscow is very dynamic, with a multitude of events, tastings and widening consumer engagement with premium imported labels. However, while Moscow is clearly the epicentre of demand, the other Russian regions are actually key for us – this is where we invest significant time and resources building our brands. Moscow is saturated, and people enthusiastically drink across all Russian regions.

But like any commercial venture, there are risks involved. CVNE carries the burden of risk in Russia; this market demands a great amount of attention and hard work, with no guarantee of results. The cultural and legal differences between Russia and Western markets are considerable – if you fall asleep then you’ll miss the train. I implore brands to do extensive research and find a reliable distributor. Time and patience are key here.

Alessandro Campatelli
general manager and oenologist, Riecine, Chianti Classico, Italy

Riecine entered the Russian market in 2011, following the estate’s purchase by a Russian couple from Moscow. We use the importer Simple, one of the best in Russia. The EU/Russian trade embargo was very problematic for wine brands, but the market is growing again after the embargo was relaxed. The recovery has been steady and Italian wines are doing quite well. 

But more importantly, I have observed significant changes in the market over the past five years. Consumer knowledge and interest has increased; people are more curious about our history, the winemaking process and the nature of organic/biodynamic viticulture. I would say the market is growing at the rate I expected. Our success is partly due to the nationality of the owners of Riecine, in addition to the major consumer demand in the Russian market for Italian boutique labels. In my experience, both the on-trade and retail sectors are thriving. This is an exciting and dynamic market, with Millennial sommeliers now being held in high esteem – the cult of the sommelier is growing in Russia and they are powerful influencers in terms of shaping trends. Geographically, Russia basically has two big urban areas where the consumption of wine is 80% of the total: Moscow and St Petersburg. Despite the competition there are opportunities here, although the questionable reliability of the small/new importers is a concern – tread carefully. A lot of new importers are entering the market and not all of them are competent and organised. Also make sure that you have a strong physical presence in Russia – it’s vital to attend the most important wine fairs and events.

Miguel Roquette
export manager, Quinta do Crasto, Portugal

We started exporting to Russia in 2014, entering into a partnership with our distributor Vinoterra. In my brief experience, the Russian market is growing, albeit growth is relatively slow in the premium and super premium segments. Russians are enthusiastic consumers of alcohol and I’ve noticed that a growing number of consumers are trading across, or up, from spirits to wine. The luxury on-trade is doing well for premium imported brands, so too are wine bars a vital avenue for sales. Indeed, from our perspective the on-trade sector is far more important than retail and is growing at a faster rate. Sommeliers and importers are more savvy, knowledgeable and committed to quality than ever before.

Moscow in particular has seen an explosion of new venues opening over the past five years. New international restaurants, higher standards of services and bar launches across the big cities are helping to raise the level of Russian hospitality, with a newfound emphasis on quality. Target markets for any brand include Moscow, St Petersburg and Voronezh – focus on the large urban areas. Of course, as always, it comes down to finding a reliable importer to work with. 

Many people also enquire as to the risks inherent to the Russian market. I would describe Russia as both a dynamic and immature market. Some brands may get ‘lost’ in their importers’ portfolio, perhaps because they are too small for the market. Sometimes importers lose interest and there is a high risk in terms of obtaining/giving credit and receiving payments. Both cultural issues and legal/bureaucratic hurdles can present obstacles.

Dirk Niepoort
owner, Niepoort, Portugal

The first bottles of Niepoort arrived in Russia in 2005, when conditions were so very different. The price of petroleum was higher, the economy was stronger, and consumers were more receptive to trying Portuguese table wines.

Today, I see a market that is stable rather than growing rapidly, yet there is huge potential for growth - especially for port wine and Douro super premium brands. Interest in port is growing, perhaps taking over from the historic interest in Portuguese unfortified red wines. However, I cannot deny that the market is not currently yielding big rewards for Niepoort and, of course, I want to see faster growth in sales. But I feel it is important to take the long view. I really believe in the potential of Russia as a market for imported premium Portuguese wine and we consider it a strategic market for our company. 

In terms of sectors, both the hospitality and retail industries are thriving in Russia today. Overall wine knowledge is increasing, although I would still categorise Russia as a traditional market, with a lack of consumer knowledge about Portuguese wines. It is vital, at least for Niepoort, to invest in regular promotional activities and wine tastings. The market is undoubtedly dominated by Moscow and St Petersburg, with Moscow leading the way in sustaining a buoyant and dynamic on-trade.

However, brands should tread carefully. I have noticed that many firms in Russia close shortly after they start trading. The availability of credit is a problem in this market and the main risk to imported labels. Choose your partners wisely and do some research first before signing anything.  Ultimately, businesses need to practice the four ‘p’s’ in Russia – patience, persistence, good product and good price.

James Lawrence

This article first appeared in Issue 1, 2020 of Meininger's Wine Business International magazine, available by subscription in print or digital.

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