Author: Natalya Krylova, Analyst IAC “VVS” (“VladVneshService”)
Five years ago Russian government started new anti alcohol campaign targeting reduction of alcohol consumption in the country. Official statistics shows if this project is successful.
According to fira.ru, in H1 2015 Russia brewed 3,687.45 million liters of beer, by 8.2% less than a year before. In absolute terms decline of production volume constituted 330.7 million liters. Beer production declines since 2007. Main reason is reduced consumption which is determined by a complex of factors: antibeer campaign, increase of excise tax, legal recognition of beer as an alcohol drink and respective ban on its sales by street vendors, small street kiosks, etc.
Prices were also important: in 2007 the average retail price of beer constituted 17.35 rubles per 0.5 liter (cost of container not considered) and in summer 2015 it reached 48 rubles, in other words in 8 years the average retail price of beer grew by 2.7 times. Production volume of champagne in H1 2015 constituted 2.49 million liters, by 19% more than in 2014. In this case we see “low base” effect. Production of champagne was declining since 2010 so by 2015 it reduced by 26%. In H1 2015 official statistics started to consider champagne manufacturers located in Crimea; besides, manufacturers of Northwestern Federal District and Southern FD recovered their production volumes. Similar situation is observed in segments of wine and cognac: growth is determined by low base effect plus consideration of production in Crimea.
In absolute terms production volume of champagne increased by 8.4 million liters. Production of wine grew by 17.2% in volume in H1 2015 to constitute 199.89 million liters (+29.4 million liters over previous year). Production volume of vodka constituted 274.6 million liters, by 4.2% more than a year before; in absolute terms production increased by 11.1 million liters. Production volume of cognac and brandy in H1 2015 constituted 31.35 million liters, plus 10.2% or 2.9 million liters over previous year.
Import of alcohol to Russia declines and main reason is ruble devaluation which un derpinned growth of prices for imported products. According to Federal Customs Service of Russia (FTS RF), in H1 2015 Russia imported 60.4 million liters of beer, by 55% or 73.8 million liters less than during the same period of previous year. Import volume of champagne and sparkling wine constituted 7.5 million liters, by 38.2% or 4.6 million liters less than a year before. In H1 2015 Russia imported 153.3 million liters of table wines, by 15.7% or 28.5 million liters less than in H1 2014. Import volume of vodka in H1 2015 constituted 3.9 million liters, by 74.3% or 11.3 million liters less than a year before. Import of cognac and brandy also declined in volume in H1 2015: it constituted 6.5 million liters, by 26% or 2.3 million liters less than in H1 2014.
According to FTS RF, in H1 2015 Russia exported 113.2 million liters of beer, by 15.2% or 8.7 million liters less than a year before. Export of champagne and sparkling wines constituted 341.7 thousand liters, by 5 times or 274 thousand liters more than in H1 2014.
Export of table wines also saw impressive growth: in H1 2015 Russia exported 1.9 million liters, by 20 times more than in H1 2014! This impressive dynamics is first of all related to the fact that Federal State Statistics Service of Russia (FSGS RF) and FTS RF started to include data on Crimea and Sevastopol into their reports in 2015; export of table wines from these regions in H1 2015 constituted 1.6 million liters.
Export of vodka from Russia constituted 16.8 million liters in H1 2015, by 42.8% or 12.5 million liters less than in H1 2014. Export of cognac and brandy during the review period increased by 3.5 times or 54.7 thou sand liters to constitute 76.8 thousand liters.
VISIBLE DOMESTIC CONSUMPTION
In H1 2015 visible domestic consumption (VDC)* of beer in Russia constituted 3,634.5 million liters, by 9.6% less than a year before. Today beer is too expensive and not trendy. On pure ethanol basis for every milliliter of ethanol in beer consumers pay 1.92 ruble; meanwhile one milliliter of ethanol in vodka costs 0.93 ruble which means more than 2 times price difference.
In absolute terms consumption of beer declined by 384.1 million liters; share of imported beer in consumption volume reduced from 3.3 to 1.7%.
VDC of champagne and sparkling wine increased by 6.2% or 3.5 million liters over H1 2014 and constituted 59.7 million liters. Share of imported champagne and sparkling wine in consumption volume reduced from 21.6 to 12.6%. Main driver of this dynamics was price: the average price of domestic sparkling wines is lower in comparison to imported products.
In H1 2015 VDC of table wines constituted 351.3 million liters, by 0.26% or 0.9 million liters less than a year before. Share of imported table wines in consumption volume reduced from 51.6 to 43.6%.
During the first six months of 2015 VDC of vodka in Russia constituted 261.7 million liters, by 5% or 12.4 million liters more than a year before. Share of imported vodka in consumption reduced from 6.1% to 1.5%.
VDC of cognac and brandy increased by 1.5% or 0.5 million liters in H1 2015 over H1 2014 and constituted 37.8 million liters. Share of imported cognac and brandy in consumption volume declined from 23.8 to 17.3%.
So, in Russia share of imported alcohol in consumption declines. The reason is not only reduction of import volume but also changes in the structure of Russian alcohol market caused by recognition of Crimea as one of federal subjects of Russia.
* VDC is calculated like “production + import – export”.