Russian Wine Makers Set Up Vertically Integrated Companies...

Russian wine companies are buying vineyards to create vertically integrated alcohol holdings as imports of cheap wine sharply decline and customs duties on wine materials from Moldova are rising.

These are the main trends of the Russian alcohol market in 2001. Last summer, wine makers were actively buying vineyards in the Temryuk region of Krasnodar territory. The largest buyer was Chelyabinsk's ARIANT trade and industrial group, which bought seven agricultural companies. The plant of secondary wine making of the ARIANT group, which cost $30 million to build five years ago, makes 1.3m decaliters of wine per year.

Two agricultural firms were bought by the Detchinsky winery in the Kaluga region, which has an yearly capacity of 1.5m decaliters. One of the best farms fell under the control of MILSTREAM, a small company from Moscow, which makes bag-in-box wine under the Milstream and Lazurnaya Dolina trade marks. Yearly output is 400,000 decaliters. The OCHAKOVO plant of soft drinks bought one agricultural firm.

As a result, wineries are expected to reduce their production costs, which will save up to R3 per bottle, according to their forecasts.

As the Russian vodka market remains stable (annual consumption is 215m decaliters), wine consumption grows by 20-30% every year. The capacity of the market is 250m decaliters per year. Up to 65% of the target audience are females, with sweet wine accounting for 60-65% of total sales. The consumption of cheap wine is markedly falling.

KOMPANIA