Scarcely a day passes without Russia or its president hitting the international headlines. Earlier last year, an edict that was initially thought to prevent Champagne producers from printing the name of their region on labels received widespread coverage in tabloids that usually have little time for wine news.
A speech about wine by Vladimir Putin on December 16th received rather less attention, however. In it, he instructed the Russian government to "gradually increase the minimum proportion of Russian wine in the ranges of retail chains and restaurants, including through their priority offerings".
The president takes a close interest in wine. In 2015, a year after the annexation of Crimea, home of Ukraine’s finest vineyards, he famously took his friend, former Italian president Silvio Berlusconi, on a tour of the region’s vineyards and cellars. A highlight of the visit to the Massandra winery was the sharing of a bottle from its cellars of 1775 Jerez wine that had been brought to Crimea by Count Mikhail Vorontsov, during the reign of Catherine the Great.
It is also widely believed that Putin has personally persuaded wealthy investors to put money into wine projects, including in Crimea. So, it is not surprising that he might want to encourage the domestic industry.
Making the new laws work however, is proving rather tricky, as those who know and understand the Russian wine industry and have heard its winemakers’ annual complaints about the lack of grapes for wine production fully realise.
What is really happening to Russian wine?
The uneasy heritage of the Soviet Union and the Russian market
Russia is a wine-consuming and wine-importing country. According to Deloitte’s 2019 CIS report around 60% of Russians say wine is their favourite alcoholic beverage, with only 36% naming vodka, sales of which have halved since 2005.
Although Russian winemakers produce wine in the southern regions of Krasnodar Krai and Rostov Oblast and the Crimean vineyards that, since the 2014 annexation, Russia considers its own, Russians drink significantly more wine than they produce.
According to a Wine Intelligence report, wine consumption volume in Russia grew at a 13.2% compound annual growth rate from 2015-20. Per capita consumption doubled and value grew even, faster at a compound rate of 20.9%.
These estimates are admittedly higher than those from other sources, but few would disagree with Wine Intelligence’s decision to move Russia, to the world’s 10th most attractive still wine market in the world – a jump of 23 places from its previous ranking.
A unique system
Russian winemaking differs however from most other nations, thanks to the system its industry inherited from the Soviet Union era. The production process is separated between ‘primary’ and ‘secondary’ wineries. The main goal of Soviet winemaking was to provide large volumes of wine for its citizens. As with food, the focus was on quantity and low prices rather than quality. To optimize logistics and cost, still wine was produced at ‘primary’ wineries in the areas where the grapes grew. Further operations - bottling, secondary fermentation for sparkling wine, distillation for brandy - took place at secondary’ wineries closer to the consumer. Even in the 2010s a significant number of the largest sparkling wine producers were located not only in the Krasnodar region, but also in Moscow and St. Petersburg.
In the Soviet era, wine bottled in one facility might often taste quite different to examples packaged elsewhere bearing the same label. No one noticed or cared. Wine was imported in large volumes from Iron Curtain countries, sometimes, even in the case of Hungarian Tokaji, in return for petrol on a litre-for-litre basis.
After the collapse of the Iron Curtain, the ties with these bulk suppliers were severed. ‘Secondary’ wineries switched to cheap imported bulk from Spain and South Africa that could be labelled and sold as ‘Russian provided it was bottled in Russia. So, wines from La Mancha regularly switched nationality on the bottling lines of Saint-Petersburg.
Not everyone was happy about this situation. Producers of genuinely Russian wine angrily alleged that a leading ‘Russian’ sparkling brand, produced as much as 90% of its wines from imported bulk.
In 2019, it appeared that the government had listened to these complaints. In the December of that year, it introduced a new wine law whose wording was even harsher than the producers of genuine Russian wine had expected. Beginning in June 2020, all wines produced with imported bulk, musts and concentrated musts had to be labeled as ‘wine beverages’. And be displayed separately from wine in retail stores.
Then came the paradox. In a country whose grape harvest, even in its best years, could satisfy only half of its own needs, wine and brandy production only slightly decreased instead of collapsing. In fact, the law directed the spotlight onto a problem previously hidden in the shadows. No one in Russia, including the main alcohol regulation body, appears to knows what a quarter of Russia's wine and brandy is really made of. This investigation is the first attempt to use analysis of official data, to bring together information from several organisms to reveal the volume of Russian wines and brandies that seems to be produced literally out of thin air.
How does Russian wine production relate to the volume of Russian grapes?
The task of calculating the volume of Russian wine production is not as easy as it may seem at first glance. Data from various agencies often do not correspond to each other and sometimes lack basic credibility. For example, in 2020, when the use of imported bulk wine was under a de facto ban, the main regulator of the Russian alcohol market, Rosalkolregulirovanie (RAR), recorded the production of 334,000hl of Russian wine in the Leningrad region, where even cucumbers have to be grown in greenhouses. (Note. Russian data records all wine volumes in tons. For the sake of clarity we have converted these to hectolitres at a rate of 1 ton:10.18 hl)
To understand the situation today, it is necessary to start from 2019, when imported bulk could be used to produce Russian wines and brandies. According to the Ministry of Agriculture, the total grape harvest that year was 678,000 tons. Assuming that every Russian grape was used for wine rather than for the table, or for juice, and that heavy extraction yielded 70 percent juice, it would have been possible to obtain 4.831m hl of must. Whatever the quantity of Russian grapes that that ended up in fermentation vats, official data show the country importing 1.165m hl of bulk wine. (The OIV figure, however, is 3.5m hl)
In 2019 Russian winemakers produced 3.339m hl of still wine and1.344m hl of sparkling wine which would seem to fit in with our calculations
They also produced 2.947m hl of wine beverages, which must legally contain at least 50% of wine and thus required another 1.473m hl of bulk.
(OIV figures for that year baldly record production of 4.4m hl, and take no account of wine beverages).
A simple calculation reveals that, from 5.996m hl of wine, including bulk imports, the Russian winemakers managed to produce 6.157m hl of wine. The gap between the two figures is small enough to be insignificant. At least it would be if the Russian industry had not also had to produce volumes of another grape-based beverage: so-called Russian ‘cognac’.
‘Russian cognac’ and a big gap
While the 2019 wine law gave wine producers a grace period of six months to comply with the new import regulations, distillers of Russian brandies were allowed seven years, during which time they could continue to bottle imported distillates under the guise of Russian brandy. This popular product has historically been labeled as ‘cognac’ provided it has had at least three years ageing. Thus, French VS cognac under Russian law should be called brandy, while an Uzbek distillate, aged in Tashkent and bottled near Moscow, bears the proud name of ‘Russian’ ‘cognac’. Under the new law, however, all aged grape distillates will be referred to as ‘brandy’ for simplicity's sake.
How does brandy fit into the puzzle?
In 2019, the Russian Federation produced 936,156 hl of brandy. According to the Federal Customs Service, 337,518 hl of grape distillates were imported from Armenia, Azerbaijan, Spain and Uzbekistan. To make the equation correct, one must take into account that the distillate is imported with an alcohol content of 65-70%, which is diluted to the 40% in the final product. With one litre of 65% distillate yielding 1.725 litres of brandy, those 337,518 hl of distillate turn into 582,216 hl of brandy.
Therefore, it would appear that 62% of Russian brandy 2019 was made from imported distillates, diluted to consumer strength and bottled on Russian territory. This is confirmed by the legally required declarations by both producers and importers. These documents show how, for example Company X brings Azerbaijani and Uzbek distillates to Mytishchi near Moscow, where it produces popular ‘Russian’ ‘cognacs’.
The production of one litre of brandy requires 8 litres of wine. Thus, to produce the remaining amount of brandy, Russian distillers would need another 3.016m hl of wine.
If we add up all possible sources for Russian wine and cognac production, including Russian grapes, imported wine material and imported distillates in 2019, there is a total shortfall of 3.2m hl of unaccounted-for wine.
In 2020, after the new law was passed, volumes of imported bulk fell dramatically – from 1.166m hl to just 244,188. This reduction was reflected in a drop in officially declared Russian wine production – from 5.437m hl to 4.737m hl. ‘Wine beverages shrank too – from 2.947m hl to 1.099m hl. However a fall in imports of brandy – from 343,000hl to 208,000hl meant that the shortfall for the year was actually 31%, six percent higher than the previous year.
Once again, almost a third of the wine, 'beverages' and brandy produced in Russia in 2020 was produced from an unknown source, which, if official figures are to be believed, can be neither Russian grapes nor imported bulk wine or brandy.
What is ‘Russian’ ‘wine’ actually made from?
There is not enough publicly available data to identify specific ‘producers of wine from thin air’, or to name the main source of counterfeit wine on the Russian market. Nevertheless, several sources of counterfeit wine can be documented.
The most innocent counterfeiting is the production of ‘Russian’ wine from imported grapes. For example, a company may be engaged in the distribution of alcoholic beverages, producing vodka, liqueurs, and wine. The paperwork might say that the company produces Russian bulk wine which is bottled by another legal entity, but the raw materials could be sourced elsewhere. One company producing ’Russian’ wine in the 2021 harvest declared that it had imported of 3,160 tons of Cabernet Sauvignon, Saperavi, Montepulciano etc grapes from Azerbaijan.
This method falsifies the geographical origin of the wine, but at least implies that the wine is a product of grape juice fermentation. In other cases the evidence forces one to choose between fakery or a repetition of the Miracle of Cana. Thus, a number of companies in the Krasnodar region, that supply components for winemaking such as yeast, bentonite, etc., also import tens of tons of must concentrate, liquid anthocyanins and grape skin extract - presumably to ‘improve’ wine that has been adulterated with water and alcohol. Perhaps it is cooperation with such companies that explains how a vodka-producing company manages to make Saperavi and Cabernet Sauvignon in the less-than-viticultural region of Kingissep on the border with Estonia.
There are also illegal operations, such as the ZAO RPK Slavyansky facility in Krasnodar where 38,500hl of unlicensed ‘alcoholic and alcohol-containing products’ were seized in December 2021.
Real winners and real losers
News of this kind of official action are encouraging – like the similar ones that have been seen in China in recent years, but a lot more needs to be done before the Russian wine industry can claim the legitimacy it – and President Putin – seek.
There are a huge number of losers in the current situation. These include the 150m Russians who consume wines and spirits whose origins can’t be justified by the laws of logic or legality. But other victims include honest Russian winemakers facing unfair competition, and importers and exporters to Russia who face ever increasing administrative barriers.
Two years ago, the Russian government laudably passed laws to outlaw falsification of wine origins, and these have already had an impact on officially declared bulk imports. It remains to be seen how effectively they will end the annual miraculous creation of large volumes of wine and brandy in their county.
All of the data for this highly complex investigation was taken from the following official data published in Russia.
‘Overview of the Russian Alcohol Market’ by the Analytical Center under the Government of the Russian Federation
‘Statistical Compendium Main Indicators, characterizing the market of alcoholic beverages in 2018-2020, Federal Service for Alcohol Market Regulation.
On the harvest: Ministry of Agriculture
On imports of wine materials and distillates: open data from the Federal Customs Service
Our investigation also uncovered details relating to a number of companies and producers, but for legal reasons we have not named them in this report.