Geography

Size : 17 075 400 km²
Russia is the biggest country in the world, crossing nine time zones. A quarter of its territory is considered part of the European continent, the remaining three quarters being in Asia.
GMT+3 in winter, GMT+4 in Summer (at Moscow and Saint Petersburg)

Borders: Finland, Estonia and Latvia to the Northwest; Belarus to the West; Ukraine to the Southwest; Georgia and Azerbaijan to the South, Kazakhstan, Mongolia and China to the Southeast.

Population: With 142.8 million people in July 2006, Russia has one of the largest populations in the world.
The population is in decline (in 1990 there were 147.7 million people).
Natural increase: -0.4%

Ethnic origin of population:
Russian: 81.3%
Tatar: 3.7%
Ukrainian: 3.0%
Other: 12.0%

Population density is very uneven – three quarters of the population live in European Russia (25 people per km²) and in Southwest Siberia. The average population density is 8.4 people per km².

Official language: Russian
However, more than 150 languages are spoken within the Russian Federation.

Religion: Russian Orthodox is the predominant religion in Russia.

Most of the country is too cold, with winter temperatures of –15 to –30°C and a very short growing season. Only in Southern Russia, between the Black Sea and the Caspian Sea (the Kerch Strait, Krasnodar, Stavropol and the Don river valley) enjoy climatic conditions suitable for growing vines. Russian winemaking takes place in this area. There are three main regions: Krasnodar, Dagestan and Stavropol. In fact, to the South of Dagestan (in the North Caucasus) vines have been cultivated for 2000 years.



In Russia, viticulture began fairly late at the end of the nineteenth century. The Church began to use a syrup-based wine, originally imported from the French town of Cahors, then produced at Massandra in Crimea. This cheap local Cahors (Kagor), is still a favourite Russian drink at parties. At the end of the nineteenth century, Prince Lev Sergeievitch Golitsyne brought the recipe for Champagne to Russia, discovered 200 years earlier by the Champenois monk Dom Pierre Périgon. He began production at Abrau-Durson and Massandra, in Crimea, over more than 500 hectares of vines with Champagne seedlings and kilometres of cellars hollowed from the mountain. With the technical assistance of some Champenois winemakers, the Prince succeeded in producing a “Champagne” which in would win the prize for the best Champagne at the Exposition Universelle in Paris in 1900. Today, this “Champanskove” is a mellow, sweet wine, as cheap as vodka and very popular with women.

In the 1980’s and 90’s Gorbachev’s ‘anti-alcohol’ campaign led to the destruction of part of the Russian wine industry. Today, around 70 000 ha of vines are cultivated (31 700 in Krasnodar, 19 700 in Dagestan and 9 300 in Stavropol in 2006).

Rostov was also an important wine-producing region, but the number of vineyards has decreased from 12 700 ha in 1990 to 4 800 ha in 2005.

Tab 1 : Vine producing land (ha)

Year	Russia	Total Eastern Europe
1991	135 000	1 085 900
1992	127 000	1 032 900
1993	118 000	998 500
1994	103 000
1995	103 000	970 600
1996	95 000	955 026
1997	90 000	927 918
1998	85 000	896 850
1999	82 000	875 499
2000	80 000	861 781
% Total	9.3	100

 Source : Wine and Spirits Intelligence Services Ltd.

Wine growing was restructured by re-planting, particularly in the region of Kouban. The Russian industry uses around 120 grape varieties (40 for table grapes and 80 for wine production). The white varieties are generally of better quality than the red.

The main European varieties are Chardonnay, Sauvignon Blanc, Aligoté, Reisling, Pinot Blanc, Pinot Gris and Sylvaner for the whites and Cabernet Sauvignon and Merlot for the reds. Of local varieties, the following deserve a mention: Rkatziteli, Severny, Cabernet Severny, Stepnyak, Fioletovi, Ranni and Loukoumski. These are the grape varieties which have a shorter growing period and are resistant to the cold and to fungal infection.

In 2006, 338 000 tonnes of grapes were produced in Russia. The average yield was 4.82 t/ha. However, the essential point of production is the bottling of products brought in at random and wine from secondary vinification. The bulk brought in from Europe or Chile is spiked or mixed with leftover the seeds and pulp in wine factories far from the zones of production to make sweetened wines. There is no legislation in Russia to prevent this practice.

There are no reliable statistics on wine production, producers only declare a part of the volume they produce.

Tab 2 : Development of wine production in Russia (1000 hl)

Source : O.I.V.

Commercial Russian wine is most often young. Only two winemakers produce wine aged in the storehouse or in the bottle.

Russian producers are trying to enlarge the amount of medium quality wine available. But they are losing their share in the market: in 2005, 25% of wine was imported. In 2006, Russian production was down by 60% compared to 2005.

The national authorities have showed their interest in viticulture by visiting the great French wine-growing regions, particularly Bordeaux. The Minister for Economic Development and Commerce has announced that in conjunction with the Minister of Agriculture, the law project on wine, which will allow Russia to become a ‘great wine-growing power”, has been drawn up and will be adopted in 2007. The minister also thinks that the production of wine in Russia “needs special regulation”.

The sustained growth of wine consumption in Russia has led to the purchase of foreign wine-making businesses. Since 2001, this phenomenon had become much more frequent, and Russian businesses have bought up most of the wine companies in Moldova and Georgia. The amount of wine produced on CEI territory under the control of Russian businesses will continue to increase in the years to come. There are also many Russian producers whoa are beginning to offer consumers new, good quality Russian brands of wine – for example, “Grand Cru Est”, or “Bon Vin”.

Russia exports very little, because of its small production and the quality of its wine. Exported wine represents less than 1% of imported wine.

Tab. 3 : Russian wine exports

Historically, Russia has a culture of drinking spirits rather than wine. This situation leads to an annual consumption of more than 15 litres of pure alcohol per person per year, showing that alcoholism is a serious problem in Russia. In fact, 20% of the population suffer from problems linked to alcohol abuse, since certain social groups see vodka as an antidepressant. For 100 roubles (about £2 or US$4) you can buy a bottle of French table wine, or three bottles of vodka.

Two serious problems have been noted, one linked to the quality of the alcohol and one to fiscal fraud. A billion litres of vodka is “hidden” or illegally produced. This represents an enormous loss for the State (around the same amount as the annual budget for agriculture) and is also the primary cause of alcohol poisoning through alcohol containing impurities harmful to the health. Russian Ministry of Health statistics suggest that impure alcohol causes 40 000 deaths per year.

The global alcohol market was estimated to be at 13.2 billion litres in 2006 (according to Euromonitor). The annual increase of 12% in value for the last five years shows a preference for higher quality alcoholic drinks. Wine represents 7% of alcoholic drinks consumed in Russia (as against 68% for vodka and 22% beer). Russians drink 9 billion litres of beer, 1.5 to 2.5 billion litres of vodka and 100 million litres of brandy, cognac and other strong drinks per year.

While Russia still has the highest level of spirit consumption in the world, the consumption of wine is increasing rapidly and consistently. Spirit consumption is declining. The 15% increase in spirits tax in January 2003 has encouraged Russians to drink less spirits and more wine. This is also linked to increased health awareness and reinforced state quality controls. In Russia, wine is considered a ‘good’ alternative to spirits, which are the preferred drink of the older generation, and is also an external sign of social success. According to a study carried out in Saint Petersburg, consumption of vodka fell by 8% between 1998 and 2002, while consumption of wine grew by 8% in the same time period.

In Russia, wine would seem to be a ‘social indicator’, particularly in contemporary Russian society. Since the end of the communist era which enriched some Russians, wine consumption has increased: the consumption of sparkling wins in Russia increased by 62% and 72 % between 1993 and 2002 respectively. In 2005, an increase in sales of standard wines (+6%) and decrease in sales of strong wines (-8%) can be seen.

According to Russian wine unions, the Russian wine market is currently “one of the strongest in the world”, with a current growth rate of 12% per year. Specialists estimate that wine sales will increase by 50% in volume by 2009 and predict an average market growth of between 20 and 30% a year for the next three years (Euromonitor). Middle of the range French wines should appeal to still more Russian enthusiasts.

Russia is certainly one of the lost dynamic wine markets in the world and opportunities are numerous. The Russian wine market is currently comparable to the Chinese market (7% per year). However, while the Chinese drink mainly cheap wines, Russians are buying more and more high quality and expensive wines each year.

As discussed above, a considerable increase in consumption and sales of wine can be observed in Russia : in 2003 growth was more than 15%; in 2004 it increased by 25% and the latest studies for 2005 suggest growth of 12%. To compare, the largest wine markets, Great Britain and the USA, have an annual growth of 4% and 206% respectively. The total value of the market in 2004 was around 3 billion dollars, of which imports were worth more than 1 billion.

Wines with a high concentration of sugar are available on the Russian market, but also top of the range wines, prestigious appellations well known in France, Spain, Italy and the New World. According to the latest trend of the wine market, notably the increase in demand for good quality wines, French wines are in an advantageous situation. However, one cannot ignore the fact that French wines face strong competition from wines from other countries.

In the 1970’s, wine consumption in Russia stood at around 15 litres per person per year. From 1985, following the anti-alcohol campaign, a total collapse of wine consumption can be seen which would be accentuated by the beginning of perestroika in 1990. The main reasons for this are the low income of the population and the high cost of wine. In the middle of the 1990’s in Russia, half as much wine was drunk as in the 1960’s, and six times less than in the 1970’s. The end of the 1990’s marks a turning point and the beginning of continuous growth in wine consumption.

According to the expert estimations, in the next 4 to 5 years, the Russian market should experience continuous growth, tripling in size. All studies agree that consumption of around 14 to 15 litres per person per year can be expected. It should be noted that such a level of wine consumption is standard for most European countries which are not traditionally wine-producing countries.

In 2005 Russia consumed a billion litres of wine per year, or six litres per person per year (20th place in the world).

Tab. 5 Development of wine consumption in Russia

As yet, there is no real culture of wine drinking in Russia, although with increasing consumer spending power and propositions from new countries, one is beginning to emerge. A large proportion of regular wine drinkers are women and young adults (under 34 years old). Almost 55% of the population of between 20 and 44 years old say they drink wine occasionally and 41% drink it regularly. Women drink more wine than men: 39.7% of women against 25.8% men. On the other hand, more men drink regularly than women.

Tab. 6. Frequency of consumption

Frequency of consumption	Percentage
2 or 3 times a month	20 %
Once a month	27 %
Less than once a month	53 %

Source : Komkon

Wine is still not commonly drunk, Russians drink it for a particular occasion and rarely as an accompaniement to a meal. Furthermore, in Russia, eating out in restaurants is not common other than in Moscow and Saint-Petersburg.

Tab. 7 Places wine is drunk

Place wine is drunk	Percentage
At home	85 %
Bar or restaurant	8 %
Place of work	3 %
Other	4 %

Source : Komkon

Price, sugar content and prestige are the most important factors affecting the choice made by the consumer. The range of wines in Russian shops is very diverse. On the current market there are more than 1200 producers and more than 15,000 brands.

Confidence in the producer as to choice of wine is now a key factor, because until recently many poor quality wines were found on the market. The name of the producer represents a guarantee for the consumer, more so the higher the price of the wine. Sparkling wines (Russian “Champagne” or Ukrainian and Italian sparkling wines) are associated with special occasions.

Red wines are the most popular (see Graph 3), being culturally more accepted in Russia. However, the latest studies show that white wines are becoming more and more popular and represented 43.6% of total volume sold in the first trimester of 2004. The increase is much greater in the large cities (Moscow, Saint Petersburg etc.), where a wine-drinking culture is developing.

In 2006, the total volume of wine sales was 296 million litres for red and 244.2 million litres for white.

The market for rosé wine is small in Russia, unlike in Eastern Europe. In Russia, the rosé share of the market remains at 5% and there is no reason to imagine it will grow at any time in the near future.

Russian wine consumption is centred on sweetened or Madeira wines, enjoyed by women from low-income background. One of the peculiarities of the Russian wine market is the fact that the most sought after wines are often “half-sweetened”. In the first trimester of 2004, they made up more than two thirds of the sales volume (see Graph 4). The remaining third was shared between dry and semi-dry wines, respectively 20.7% and 11.3% of the total volume. Contrary to the expectations of analysts, who counted on an increase in the consumption of dry and semi-dry wines, the proportion of half-sweetened wines has not fallen, but even increased slightly in 2004. This dynamism can be noted in all price ranges.

A rapid and noticeable increase in the sale of wine packaged as Bag-in-Box or Tetra Pak can be observed (see graph 5). This type of packaging is most popular among consumers with less purchasing power. Moldova, Russia and Argentina offer this type of packaging in one, two or three litres.

In the 1970’s in the Soviet Union, there was a limited choice of alcoholic drinks. In the shops only local (Russian, Moldovan, Georgian, Azerbaijani and Bulgarian) wines could be found, only about ten different brands in total although the level of consumption was fairly high.

Russia is currently going through a neo-protectionist phase: 65 – 85% of alcohol consumed is local, the Russians protect their market. This country is going through a period that the USA experienced towards the end of the 1970’s and 80’s: the consumer, even if he is discerning, is also submerged by an increasing number of brands. Grape variety seems more simple to Russians than geographic origin.

More than half the volume of wine consumed is of local origin, or comes from a former USSR region or member state. Dagestan, Ukraine, Georgia and especially Moldova supply cheap wine, often with added sugar. Moldovan wine is often chosen because of the attractive decoration of the bottles. In the same sector, French table wines can be found in Russia, with a sugar content of up to 35g per litre which are often used by Russian importers to lead consumers to dryer, better quality wines. Middle of the range wines are currently increasing their share on the Russian market.

Wine produced in Russia (though usually from Moldovan grapes) are drunk by 20.5% of the population. Third place goes to Georgian wine (18.2%). Georgia offers known denominations such as Kindzmarauli or Saperavi. French wine is chosen by only 2.5% of Russians, but their volume is significant compared to other European countries.

In the cheap wine sector, the main regions of production are Southern Russia (Kouban, Stavropol, Daguestan) and countries like Moldova (the leader in this sector). The middle of the range is represented by Georgian, Italian and Spanish wines. French wines are generally medium and top of the range. French and Spanish wines sell best in Moscow, while Moldovan, Georgian and Bulgarian wines are drunk in the provinces.

In the last few years, the Russian market has merited particular attention because of its rapid growth – more than 20% a year in terms of both volume and value.

In 2006, red wine did best on the Russian market, representing around 60% of imports.

Countries exporting to Russia

As mentioned above, the choice of which country to buy from is generally made with regards to which price band it belongs to.

Tab. 8 Imports of wine to Russia 2001 – 09.2006 (in value, million US$).

Country	2001	2002	2003	2004	2005	2006 (01-09)	% change 2001-2005
Moldova	151.6	139.9	173.7	199.6	212.3	47.5	8.8
France	34.0	44.2	55.9	61.0	78.1	69.6	23.1
Georgia	26.3	26.7	34.5	38.8	65.3	16.8	25.5
Bulgaria	5.8	12.3	19.7	27.9	46.5	34.9	67.9
Spain	7.9	10.8	16.3	25.3	41.5	60.4	51.7
Italy	10.6	13.7	20.0	24.9	36.2	32.4	36.0
Ukraine	13.5	9.6	14.4	16,5	22.1	15.4	13.1
Argentina	2.0	3.5	16.0	12.2	17.8	21.3	72.8
Chile	2.8	5.1	7.8	11.3	16.0	15.0	54.2
Germany	4.4	5.9	8.1	9.9	13.9	18.6	33.3
Uzbekistan	4.1	3.6	3.3	0.8	5.4	5.6	7.4
Hungary	2.1	3.4	3.0	3.6	4.5	4.8	20.9
South Africa	0.4	0.7	0.9	2.0	2.8	2.5	63.3
USA	2.0	1.6	1.7	2.4	2.6	2.0	7.3
Cyprus	0.4	1.1	1.3	2.1	2.4	0.5	59.8
Australia	0.5	0.7	1.1	1.7	2.1	1.4	42.4
Other	5.9	3.9	5.0	5.3	6.9	6.9	3.9
Total	274.4	286.7	382.5	445.2	576.5	355.6	20.4

Source : Russian customs.

The banning of wines imported from Moldova and Georgia in March 2006 has disrupted the Russian market’s stable growth and development.

Among the pretenders to the vacancy on the market left by the embargo on wine from these two countries are traditional wine countries like France, Italy and Spain, but other competitors have also leapt into the breach: Argentina, Chile, and Bulgaria. The best placed are Argentinean and Chilean New World wines. They have the same price range, between 100 and 200 roubles per bottle and therefore have a good chance of pleasing the same market. Furthermore, these countries are almost the only ones to be able to ensure stable delivery for such a quantity of wine. Since 2002, the range of New World wines has grown. It has now reached 70% of certain importers such as Marine Export. Bulgaria, which has lately shown excellent indicators of growth, can also claim to have a durable stake in 25% of the market.

Georgian wine has always been dear in Russia, with a price range falling between 250 and 400 roubles a bottle. French wines of about the same level exist, but for them it’s the lowest price. The consumer who bought Georgian wine will therefore from now on choose a French wine without having to spend more. But here the second factor comes into play, that of sugar content. Essentially, Georgia exports sweet or semi-dry wines, whereas French producers trade mainly in dry wines. France will therefore have to modify the variety of wines it offers, or undertake a vast publicity campaign to convince the consumer. These two solutions are not very tempting and would involve a large loss of time.

France is the second largest exporter to Russia in terms of value and 450 French businesses work with this country. French wines benefit from a very good image in Russia society and are better and better known in their diversity as Russian wine lovers become more knowledgeable.

France is a popular destination with better-off Russians with high purchasing power. It benefits from a very good image which includes certain factors of the French lifestyle – fashion, good wine etc. This consumers often look for French wines when they return from France. During their trip they discover new appellations and wine-making regions: Côtes de Provence, Languedoc-Roussillon (which has a very good reputation in Russia) or they might be looking for a Sancerre or a Chinon.

It is only recently that the Russian preference for sweet wine has been questioned : French Champagne and foreign imported dry wines generally are effectively much more expensive than the traditional Kagor and Champanskove, whence their success with the new Russians. Today, in Russian, it is possible to find French wine sold for two or three times what it would be worth in France.

Between 2000 and 2004, French exports of AOC wines increased by 52%. In 2005, exports of French wine to Russia increased by 28% in value compared to 2004 and Bordeaux, for example, saw their exports to Russia increase by 12% in volume. France is also an important bulk producer of wine.

The appellations Champagne and Cognac are often misused in Russia. Moreover, it is on Cognac sales that France makes the most money, compared to any other brandy. It is advisable to make use of a local importer, if only to discover the best distribution networks, official channels, rules and tactics of the Russian economy.

Channels of distribution for wine

The range of imported wines in Russian shops is diverse and varied. The Russian consumer, not coming from a great wine-drinking culture, is easily lost. Today, to sell a new brand on the Russian market it is not enough to find an importer or distributor: you have to think about communication as soon as you think about entering the market.

In general, trade is concentrated in the 33 Russian towns with more than 500 000 inhabitants. The amount of organised commerce in Russia (supermarkets, hypermarkets etc.) remains fairly low compared to the amount of traditional commerce. Paradoxically though, the area of supermarket floor space per inhabitant is much greater in Moscow than in Paris. France has an advantage over other distributors: it has historically been the first to enter the market.

Tab. 9 Share of the market of different distribution networks

Distribution network	Percentage
Supermarkets	52
Specialist shops	22
Local/corner shops	13
Markets	8
Bars and restaurants	4
Other	1

Source : Komkon

Super and hypermarkets remain the most important wine distributors. Supermarkets began to appear in Russia in 1994 - in 1997, Ramstore opened the first Russian hypermarket. Before 2001, it was the first foreign actor, with two large-area stores in Moscow. The 1998 financial crisis scared off many potential foreign investors, and obliged local operators such as the 7th Cont., Perekriostok, to become more accessible and favoured the creation of discount stores (Pyaterotchka, Koneika).

In 2001, Ramstore opened its third hypermarket, and Metro Cash and Carry made a remarkable entrance onto the market. A second Metro supermarket recently opened in Saint-Petersburg.

In 2007 the presence of foreign names in the food market is still weak, despite the opening of Stockman, Auchan, Marktkaup, Spar, Billa and Real. On the other hand, Russian brands are developing (super- and hypermarkets, discount stores and specialist shops).

Specialist shops (wine shops) began to open in 1998, there are currently 50 in Moscow and 15 elsewhere. These shops were opened by wine and spirit importers. They offer wines of middle and top of the range and address themselves to consumers with high purchasing power. Wine-sellers, unlike large supermarkets, cannot maintain a large range of products. A considerable quantity of wine is drunk in bars and restaurants. The number of medium and top of the range restaurants is increasing rapidly in Moscow, at the rate of around 2 new establishments a month.

It is very difficult to obtain an import licence. Licences for a year, for a limited quantity of alcohol do not exist, you have to buy a five month licence allowing the import of just 50 hectolitres of pure alcohol. These licences can only be obtained if one fulfils certain conditions. Likewise, licences are difficult to get hold of for retailers, who must submit to visits and inspections, the shop being equipped with an alarm and a safe, among other things.

The conditions of import to Moscow and Saint-Petersburg are very different, because different alws apply. The seasonality of wine sales is balanced between Moscow and Saint-Petersburg: In Summer, with the tourist season, Saint-Petersburg sells the most but in Winter, sales in Moscow are greater.

Price

The amount of money spent on food and drink is currently decreasing in Russia. The price factor is still important in the choice of wine for most Russian consumer. This is demonstrated by the organisation of the sale of still wine in price bands. The middle-range band is the seat of the most lively competition. Products are measured according to the quality/price relationship and especially on “absence of faults”. This is the most promising sector today.

It could be argued that there are five price categories on the Russian wine market (see Tab. 10). A high demand for expensive wine exists, and this sector is the most interesting for importers because it is one of the largest and has a continually increasing market share. The “premium” wine sector is also growing in Russia. For now, premium class wines occupy a small part of the Russian market, but growing interest can in this type of wine can be observed, notably from the wealthy, who are more and more interested in maintaining private cellars.

Tab. 10 Price bands of Russian wine (2004)

 

Price band	Price per bottle (0.75 l) in US$	% share in the market per bottle	% share in the market by price
Cheap	Up to 1.7	12.5	5.4
Medium	1.7 – 3.2	43.5	35.3
Expensive	3.2 – 6.3	37.2	42.1
Luxery	6.3 – 12.5	5.8	12.8
Premium	More than 12.5	1.0	4.4

Source : Komkon

In these price sectors French, Spanish, Italian etc. wines are represented (see Tab. 11). French wine has n image of glamour and luxery – for Russians, French wines are very sophisticated.

Tab. 11 Price sectors of wines by country

Origin	Average price (US$)
Italy, France, Spain, New World	12 - 25
Georgia, Moldova, Spain, Italy, France	3.2 - 12
Georgia, Moldova, Azerbaïjan	1.7 - 3.2
Russia	Less than 1.7

Source : Komkon

After the 1998 financial crisis, luxury consumption where the buyer was looking for Château Margaux, to an almost daily consumption but with a different quality/price balance (like a Saint Emilion Grand Cru for between 30 and 90 euros). The denomination “château” is greatly appreciated in Russia.

New legislation concerning the certification of products distributed in Russia

The law concerning “consumer safety” has allowed new rules governing the certification of products distributed in Russia to be created. The idea of “ensuring that the product conforms to established norms” has replaced the old idea of “certification”. It allows the consumer to be informed on the producer and the product.

Two regulating bodies, Gosstandart (State Standardisation Committee, www.gost.ru) and Rospotrebnadzor (Sanitary Survaillance Service, under the Ministry of Health, www.gsn.ru) decree the norms and rules of certification governing imported products.

All merchandise sold individually of in bulk on Russian territory, whether produced in Russia or not, must conform to these norms or the appropriate section of the law.

It is absolutely necessary to provide the following documents for certification:

GOST-R Certificate of Conformity (provided by Gosstandart). This is required for the merchandise to be taken onto Russian territory. It lasts one year for one type of product, its cost varies along with a number of necessary tests. Various Russian and foreign laboratories are able to provide it.

Hygiene Certificate. The epidemiological centre of Rospotrebnadzor establishes sanitary standards to which each product must conform. It is obligatory when selling any food or drink on the Russian market. It is provided by the same laboratories which furnish the GOST-R certificate.

The procedures for obtaining these certificates are generally carried out by importers.

The law as it relates to wine and alcohol commerce in Russia

The law relating to wine and alcohol commerce in Russia requires several authorisation such as

· Authorisation to sell
· Distribution licences

The state has reinforced control over the production, import and circulation of alcohol throughout the Russian federation since the law of December 2005. This new system, called EGAIS, is based on the sharing of information (electronically) between customs services, tax services and various partners in the alcohol market.

The procedures to register are long and complicated, new software has, since the law of July 2006 came into force, created disorganisation which the market has not withstood. Imports ceased temporarily and shops were empty. This system, supposed to half fraud and contraband, has proved ineffective for the moment. The numerous demands for the suspension of system have not cause the Russian government to yield, and shops in Moscow have full shelves again.

The best organised foreign providers and importers share the market.

Labelling

The following elements are marked on each product:

· Name of the product in the Cyrillic alphabet
· Name and address of producer in the latin alphabet, and of the exporter, the importer and the name of the country of origin.
· Volume (in litres)
· Brand (if applicable)
· Appellation of origin for wine, brandy, cognac and other spirits.
· Alcohol content
· Sugar content in grams per litre (apart from dry wines, cognacs, brandies, Calvados and flavoured wines). For Champagnes and sparkling wines, denomination must follow sugar content: crude, dry, semi-dry, sweet, semi-sweet.
· Storage conditions
· Composition: for drinks based on wine and brandy, as well as cocktails, indicate the type of ethyl alcohol and water as well as the main ingredients used. Cognacs produced traditionally are exempt from this rule.
· Date of bottling (for all types of wine) and packaging (only sparkling wines created by in-bottle fermentation, and wine aged or matured in the bottle). This information must be displayed on the label (front or back) or on another part of the packaging or on the bottle itself.
· Vintage (for vintage wines)
· Average age of eaux de vie for cognacs.
· Best before end date obligatory for all wine-based drinks, cocktails and other alcoholic drinks with 10% alcohol content or higher. All wines including grape-based wines, fruit wines, mead, cider and grape-based alcoholic drinks are exempt from this rule.
· Name of the company which bottles the wine (must be displayed on one side of the label, or on the cover)
· Reference to an interior standard
· Information on certification (No. GOST R 20560)
· Warning on the dangers of alcohol abuse

This information must be in Cyrillic on the label or packaging. If the packaging does not permit this, the necessary information must be displayed on a label;

Important point : The amendment of 23/02/2006 of government law No. 80 has introduced the obligatory display (on the reverse of the label) of the following information:

· Ingredients, additives, GMO’s
· Energetic value (in Kcal)
· Nutritional information (proteins, glucose, lipids etc.).

Customs and VAT for alcoholic drinks in Russia

VAT for all alcoholic drinks in 18% of the total including

· Value declared at customs
· Custom rights
· Total excise duty

The State Committee of Customs determines the number and position of customs posts authorised to regulate alcohol imports to Russia. After checking the accompanying documentation (invoicing) customs officials must make a partial examination of the merchandise before it is transferred to a customs terminal.

The customs inspector controls the documents accompanying the merchandise. The importer has to make a customs declaration in which he indicates the value. He will then make a bank transfer to pay the various taxes and duties. The merchandise is only cleared when the customs account has been credited.

All merchandise must be released in the three days following the deposition of the declaration, without which the file cannot be completed. The importer can speed up the procedure by furnishing in advance all documentation required by customs, and taking merchandise to the warehouse.

Tax and excises

Five excise labels exist in Russia varying with type of alcohol:

• Wine
• Fortified wine
• Champagnes and sparkling wines
• Alcoholic drinks more than 9° but less than 25° proof
• Alcoholic drinks more than 25° proof

A distinction is also made according to the maximum volume of the container

• Less than 0.1 litres
• Less than 0.25 litres
• Less than 0.50 litres
• Less than 0.75 litres
• Less than 1 litre
• More than 1 litre

Excise labels, 26 by 90mm in size, should be put on all bottles which are more than 90° proof. To obtain these labels, and before sending them to the exporter, the importer must offer financial guarantees or deposit a sum equivalent to the volume of the alcohol being imported in a customs account. This sum is calculated based on:

• 2.1€/litre for still wine
• 14.5€/litre for Champagne
• 8€/litre for cognac or armagnac

An excise label costs 1.53 roubles all taxes included, or around 4.5 cents per euro. The importer pays all excise duty.

New excise labels imposed by the state must be in Russian, with a barcode containing certain information:

• Number of the software version EGAIS which allows information to appear on the label
• Number and date that the customs application was made
• Number of the label in the demand
• Identification of the importing company (name, address, country from which the product originates, identification number, number of the business importing alcohol into Russia) ; name and nature of the imported product, alcohol content, volume of the container, attestation that the product conforms to quality and safety standards, authorisation to use a commercial brand on Russian territory.
• Five computer created security cryptograms.

In addition to the information on the barcode which allows the identification of any bottle in Russian territory, the excise label must also carry the following details:

• Name of product
• Nature of product
• Alcohol content
• Volume of the container
• Name of the producer
• Country of origin
• Indication of Special Economic Zone status (SEZ) for all products destined for import and free circulation in the territory of a SEZ.
• Number of the request to be registered in the EGAIS file (unified registration system of volumes of production and circulation of ethyl alcohol or alcohol containing product) and number of the excise band in the request.

Putting in place these new barcoded excise labels has disturbed supplies during the summer of 2006. In the second half of 2006, although they haven’t been sold since 1st July, most importers still use the old excise labels they have in stock to register their traditional references or to re-register bottles of wine.

The French version of this dossier was created by

VESSELIN TENTCHEV
TENTCHEV CONSULTING
10 RUE BONNARD
34000 MONTPELLIER
FRANCE
TEL : +33 (0)467653143
EMAIL TENCONSULTING@AOL.COM

Translated into English by Vitisphere.