In 2019, Russia was the world’s ninth largest importer of wine in both volume and value. However, the Russian Ministry of Agriculture is focused on making wine production one of the key branches of agriculture in the country. While domestic wine production is growing, so have wine imports. In 2020, an increase in excise taxes, a decrease in real incomes, and the restrictions on the food service sector due to COVID-19 led to a 10 percent drop in wine sales compared to 2019. The new ‘Federal law on viticulture and wine-making in the Russian Federation,’ aims to support domestic wine producers by reducing the amount of counterfeit wine sold, under the guise of Russian wine, support domestic producers, and introduce a number of new regulations that could potentially impact the largest bulk wine suppliers in the Russian Federation.
Production and Vineyard Area
In 2020, the Russian Federation harvested 474,000 tons of grapes, 30 percent less than in 2019, and in January-August 2020 produced 6.4 million hectoliters (HL) of wine products, 16.9 percent less than in the same period of 2019. One reason for the decline in the grape harvest was the dry weather in the main regions where grapes are cultivated in the country. At the same time, conditions affecting the quality of grapes was exactly the opposite. The weather in 2020, although dry, was not as hot as 2019, allowing the grapes to ripen more evenly, and the low humidity helped grapes avoid fungal diseases.
The Russian government’s implementation of ‘the law on viticulture and winemaking in the Russian Federation restrictions on use of imported grapes and wine materials for wine production stimulated planting of new vineyards. In 2020, the plan was to increase the area of vineyards by 7,000 hectares, which is comparable to the increase in 2019. In 2020, the total area of vineyards in the country was 80,000 hectares. However, to fully supply the country with grapes, at least 250,000 hectares are needed, which will take more than 15 years to achieve.
In 2019, Russia imported 1.1 million HL of wine materials. Imports came primarily from Chile, Argentina, Australia, and Spain.
High-quality nurseries will become one of the most promising types of business over the next decade in Russia. This is because of less-available imported plant materials due to the growth of exchange rates, and the government also discussing a proposal to subsidize vineyards planted only with Russian materials. The new law on viticulture and wine making is expected to create new restrictions for imported wine and wine materials as well as barriers for domestic producers to increase the volume of wine production over the next seven years (the average indicator when the vine begins to bear fruit). A 10-15 percent rise in prices for domestic wines is projected for the second quarter of 2021. Overall, these factors are expected to lead to an increase in wine imports.
A third of Russia’s vineyards are located in southern Russia’s Krasnodar Region, which remains the leader in wine production in the country, occupying 45.3 percent of the market. From January – November 2020, the region produced 1.3 million HL of wine (an increase of 1.3 percent from 2019). The Krasnodar Territory has all the climatic conditions necessary for the cultivation of grapes: fertile soil, sufficient heat and moisture. The region hosts 65 specialized viticulture farms and 150 small businesses engaged in winemaking. In 2019, more than 2,000 hectares of young vineyards with a total area of 25,000 hectares were planted in the region.
Direct 2019 U.S. wine exports increased by 39 percent in volume (2.43 million liters) and by 19 percent in value ($9.71 million). FAS Russia research has found that some U.S. wines enter Russia directly, but some are also transshipped through Europe. Read more HERE.