Russian Wine Imports in 2023: A Year of Growth and Challenges

In 2023, Russia imported 320 million liters of still and fortified wine, marking a 4.4% increase compared to the previous year.

This data, provided by the Luding Group and available to RBC Wine, highlights a dynamic year for wine imports, shaped by geopolitical and economic factors. 

Surge in the First Half, Decline in the Second

The most significant growth in wine imports occurred in the first half of 2023, with a remarkable 43% increase compared to the same period in 2022. However, this upward trend did not persist throughout the year. The second half saw a 17.5% decline relative to the same period in 2022, influenced by increased duties and sanctions. This shift underscores the complex landscape that importers navigated in 2023. 

Impact of Duties and Sanctions

Several key regulatory changes in 2023 and previous years have significantly influenced wine imports:

1. EU Sanctions (March 2022): The EU banned the supply of wines to Russia priced above 300 euros per bottle. Despite its limited impact, this measure set the stage for future restrictions.
2. Increased Duties (August 2023): Russia raised the duty on wines from "unfriendly" countries from 12.5% to 20%, with a minimum duty of 1.5 euros per liter. This change disproportionately affected lower-priced wines, sometimes resulting in effective duties of 100-200%.
3. Excise Tax Changes (May 2024): The excise tax on still wine rose from 36 rubles to 108 rubles per liter, and for sparkling wine from 47 rubles to 119 rubles. Russian producers using local harvests could reclaim these taxes, putting imported wines at a distinct price disadvantage.

These measures, particularly the increase in excise taxes, have significantly impacted the market, making imported wines less competitive and favoring local producers. 

Trends in Wine Imports

Despite the regulatory hurdles, certain trends emerged in 2023:

• Sparkling Wine: Imports of sparkling wine grew by 2.9% to 73 million liters. Italian sparkling wine remained the dominant import, though its volume decreased by 2%, while French imports increased by 20%.
• Import Sources: Italy, Georgia, Spain, Portugal, and France were the top exporters, collectively accounting for 71.6% of all wine imports. Notably, while shipments from Italy, Spain, and France decreased, imports from Georgia rose by 12%, making Georgia a significant player in the Russian market.
• Consumer Preferences: Semi-sweet white sparkling wine remained the most popular among Russian consumers, although brut is gaining popularity. In terms of still wine, semi-sweet red dominated sales, with dry and semi-dry wines also seeing increasing demand.

Future Outlook

The outlook for wine imports in 2024 is cautious. Experts predict a decline in imports due to the compounded effects of increased duties and excise taxes. The market is expected to see a significant shift towards local wines and wines from "friendly" countries such as Argentina, Chile, and South Africa, which face fewer trade barriers.

Shifts in Market Dynamics

The shift in import dynamics is expected to benefit local producers and certain foreign suppliers:

• Local Producers: Russian wines are likely to increase their market share, potentially exceeding 60% by the end of 2024 and approaching 70% within two years.
• Friendly Countries: Countries like Georgia, Argentina, Chile, and South Africa are expected to gain a larger share of the market as distributors seek alternatives to wines from "unfriendly" countries.

Price Sensitivity

The increase in duties and excise taxes has already led to higher prices for imported wines. Wines that once retailed for around 350 rubles have seen prices double. This price sensitivity is pushing consumers towards more affordable Russian wines or other alcoholic beverages.

Conclusion

The Russian wine market in 2023 experienced significant growth in the first half of the year, followed by a decline influenced by increased duties and sanctions. As regulatory measures continue to impact the market, local producers are expected to benefit the most, while imports from "friendly" countries may fill some of the gaps left by decreased imports from traditional European suppliers. The coming years will likely see a continued shift towards domestically produced wines, reshaping the landscape of wine consumption in Russia.

Source: RBC Wine