Wine importers ask the government not to raise import rates
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The increase in duties on wine imports discussed by regulators worries alcohol distributors. The companies have warned the government that the initiative threatens to increase prices for local wines, suggesting as an alternative to abandon the zero duty on popular wines from Georgia. Winemakers are confident that this will not be enough to protect the domestic market.
Large alcohol importers have approached the government with concerns about the discussed increase in import duties on wine from the current 12.5%. Kommersant was told about this by three sources familiar with the letter. It says that the initiative was a consequence of the situation in 2022, when, due to the strong ruble, a temporary surplus of imported wines formed on the market. The companies believe that the problem will disappear before the end of the year due to the sale of stocks and currency fluctuations.
As the authors of the appeal note, the increase in duties will not lead to an increase in sales of Russian wine, the supply of which is limited by the area of vineyards, but may encourage winemakers to raise prices. Alexander Lipilin, executive director of Fort wine trading company, adds that the initiative also threatens to reduce the quality of local wines due to lack of competition, and may also lead consumers to switch to other alcohol.
Meanwhile, the letter notes, now zero import duty applies to Georgian wines, which became leaders in imports in the first half of 2023. Georgian wines are the main competitors of Russian wines, and the increase in duties on them to 12.5% will create fair market conditions and provide additional revenue to the budget, the authors of the appeal point out. They also offer additional support for winemakers through tax incentives. The government press service did not provide a comment. The Ministry of Economy told Kommersant that they would consider applications upon receipt and, if necessary, hold additional consultations with market participants.
According to the data of market participants available to Kommersant, in January-May 2023, the import of still wines in the Russian Federation increased by 44%, to 12.65 million decalitres year-on-year, excluding the EAEU. Georgian wines accounted for 19.1%, 18.5% – for wines from Italy, 16.2% – from Spain, more than 7% each – from France and Portugal. Imports of sparkling wines over the period increased by 47%, to 2.93 million decaliters, with Italy, France, Spain, Portugal and Georgia becoming the main suppliers. WineRetail estimated the volume of wine stock at 16 million decalitres, which is twice as much as last year.
Pavel Titov, President of the Abrau-Durso Group of Companies, says that the increase in import duties will solve the problem of the presence on the shelves of imported wine with a wholesale price of €1 per 1 liter, which competes only at the expense of low prices. According to him, there are no prerequisites for the rise in price of Russian wines with the increase in duties. On the contrary, Russian winemakers today are often unable to sell products on promo, as chains give priority to cheap imports under their own brands, Mr. Titov points out.
Aleksey Plotnikov, Executive Director of the Association of Viticulturalists and Winemakers of Russia, notes that even a possible doubling of import duties on wines is unlikely to lead to an increase in retail prices by more than 10%, so it is not worth talking about a significant impact of the initiative on the business of importers. Fanagoria CEO Petr Romanyshyn says that winemakers need comprehensive and permanent measures to protect themselves from a glut of imports. “We need to plan the growth of vineyards on the horizon for at least 30 years, so that every time we do not solve the problems that have arisen in a fire mode,” he notes. Kuban-Vino agrees that the situation has become more complicated for Russian wine, but points to the need to preserve the consumer’s right to choose.
Alexander Stavtsev, head of the WineRetail information center, says that the crisis was caused by a cooling in demand for high-quality wine and complicated business conditions. In 2022, the chains feared supply disruptions and a shortage of local wine, contracting large volumes in advance, and due to the increase in delivery times from 40–60 days to 200 days or more, imports continue by inertia. And Russian winemakers, the expert continues, have increased production, expecting a reduction in imports, and are experiencing problems with sales. As Mr. Stavtsev notes, the problem requires finding a balance of interests and additional marketing measures to stimulate demand for local wines.
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