Fine Wines/Champagne and Spirits in Russia

PROSPECTS

Improving performance, driven by luxury whiskies as affluent consumers appreciate brand heritage and status attached to this drink

Fine wines/champagne and spirits recorded an improved performance in both current value and retail volume terms in 2019, a trend that is predicted to continue into the forecast period. While generally the country has a tradition for drinking vodka and cognac, sales amongst premium alcoholic drinks continued to be driven by demand for luxury whiskies in 2019, which recorded the strongest performance overall.

Rising unit prices rarely a deterrent for demand amongst most affluent Russians

Russia experienced economic uncertainty towards the end of the review period, leading to volatility for the local currency, and notable price increases for imported drinks such as luxury whiskies, including single malt Scotch whisky. This economic environment led to unfavourable financial conditions for aspirational mid-income consumers who may have previously looked to fine wines/champagne and spirits as affordable luxury.

Introduction of legal sales through internet retailing from 2020 likely to support further growth for category

Although grocery retailers remained the dominant official distribution channel for fine wines/champagne and spirits in 2019, illegal sales of these goods through the internet continued to gain momentum, despite it being forbidden to sell alcoholic drinks online directly to the final customer. Official regulations state that consumers were only permitted to order elite alcoholic drinks through online stores over the review period, but they must collect them at physical stores.

COMPETITIVE LANDSCAPE

International brands continue to dominate due to high consumer awareness and diversified portfolios

International players continued to dominate fine wines/champagne and spirits in 2018, due to high brand awareness, recognition and diversified brand portfolios. Moët Hennessy Whitehall Rus OOO strengthened its leadership of a fragmented competitive environment, offering a strong assortment of brands within cognac and champagne.

Strong performance by luxury whiskies benefits Pernod Ricard

Pernod Ricard Rouss ZAO continued to gain value share in 2018, in addition to recording double-digit current value growth. The player offers a range of products and brands including luxury whiskies (blended Scotch), Chivas Regal 18 YO and Chivas Regal 15 YO, in addition to its cognac Martell XO Supreme.

Affluent Russians perceive imported brands to offer the highest quality, supporting their greater status in society

International brands of fine wines/champagne and spirits appeal to more affluent Russians, as they typically perceive them to offer the highest quality compared to local brands, therefore displaying their greater wealth and status. While aspirational Russians may seek to purchase luxury brands in times of economic prosperity, a harsher climate dictates that they are more likely to purchase local vodka or brandy, due to the greater presence of domestic manufacturers in these categories.

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