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Consuming less but better: high spirits for Russia’s premium alcohol market

Consuming less but better: high spirits for Russia’s premium alcohol market

Continuing premiumisation

The world’s biggest alcohol market keeps on moving! Pushed by increased government regulation and a consumer interest in a more healthy lifestyle, the volume of the market is declining rapidly: according to official sources (Ria Novosti 2013) the alcohol consumption per capita declined from 18 to 13.5 litres between 2010 and this year. Yet, on the other hand, the spirits market is still growing in terms of value.

And although it is no longer only about the very high end, as was the case a few years ago, we still see the middle and premium segment growing at the expense of cheap booze. A good time to take stock and ask some leading spirits marketeers in Russia what their expectations are for the near future.

Changing consumer values

Everyone confirms Russia’s growing taste for premium, but emphasizes that there is a shift in underlying motivations: Russians initial love with bling is being replaced by a taste for stylish subtlety and traditional values. The trend is from material values to more human aspirations: family, friendship, love and responsibility. New Russian rich consumers seem to be keen to acquire the finer things in life in a less brash or superficial manner.

Yet, material possession and status remain more than averagely important to Russians. As Cyril Claquin from Pernod Ricard Russia phrases it nicely: “There is still a social need for showing off, but the codes for showing of have evolved in a more elegant way”.

The growing interest in premium spirits is also coming from a growing middle class that is more and more able to afford itself some luxury. Rodion Shokhirev from Diageo Russia explains “Russian middle class consumers are looking for value for money; at the same time they are eager to try new categories and seek aspiration in more premium brands”.

Maria Roschina from Bacardi Rus confirms this: although consumers are now more savvy and realistic than a few years ago, “Russians are in heart and soul less price driven than Europeans: more ready to spend without thinking and tending to live for the moment.”

The splashing out on premium spirits is in particular noticeable when entertaining guests. Compared to other countries, Russia’s drinking culture has a strong social context, says Cyril Claquin. Consumption of alcohol mostly occurs in groups, and most often at home (or at the dacha): family events, socializing with friends: Russia has a strong toast culture. Joel Lambert from Moet Hennessy Russia agrees: “Russians receive a lot of guests at home. And when you receive, you receive well: offering the best drinks paired with food”.

Changing appetites

Apart from the trend towards more premium spirits, there is also a shift in terms of type of alcohol consumed, above all amongst the Russians in their twenties and thirties. Bored with the traditional drink – vodka – which has too many negative associations with the Soviet past and alcoholism, this younger generation is either looking for less strong options (such as wine and beer) or for ‘new’ western (premium) spirits, which appeared on the Russian market about 10 years ago and are considered to be more qualitative and refined.

Especially whisky, rum and tequila have increased in popularity rapidly, despite the fact that people had to get used to the taste. Maria Roschina: “A lot of people drink whisky because it is modern, not because they like the taste that much: they often mix it with cola”. Nevertheless, the ‘education process’ is evolving. According to Joel Lambert there is already a lot of knowledge: “We went from cheap whisky with cola to fine whisky to ‘de lux’ crafted single malt. This last category is booming and showed double digit growth in the past 3 years”.

Russian’s keep having a preference for stronger alcoholic drinks. Although the beer consumption doubled between 2005 and 2010, it has now stagnated and the expectations for further growth are modest. The status of beer is low: a famous Russian saying claims ‘beer without vodka is like throwing money to the wind’. Beer was only acknowledged officially as an alcoholic drink early 2013: before that all alcoholic drinks under ten per cent were considered as soft drinks.

The wine consumption is steadily growing, especially imported wines. According to investment bank Demeter Group, the average Russian drinks about 7 litres per year, so there is still huge potential. Also here the choice is getting more sophisticated, yet sweet wines keep dominating. This is also explaining the growth of Martini Asti and semi-sweet sparkling wines – rooted in (sweet) Russian champagne. Joel Lambert acknowledges that it is not easy to change from sweet (cheap) sparkling wine to champagne, nevertheless he predicts a bright future for champagne, as it fits very well with Russia’s drinking habits around celebrations. Moet Hennessy’s goal is to double the champagne business in 5 years.

Local adaptations

As mentioned earlier, Russians like a sweeter taste than in the Western world. Next to that they are – in particular the younger generation –open for new experiences. Alcohol producers well capture these trends. Recently Diageo introduced Shark Tooth: a rum developed specifically for the Russian market. Adapted to the taste profile of Russians and positioned in the low price segment, aiming to recruit new consumers into the rum category.

Similar considerations got Bacardi to launch its new blend Martini Spirito – a strong spiced taste and aimed at men – firstly in Russia, elaborating on the successes in Russia of spicy flavoured spirits as Bacardi Oakhart and Diageo’s Captain Morgan Gold Spiced.

Moet Hennessy believes less in specific products for the Russian market: “Russians have a high level of education, travel a lot, read a lot: they are more sophisticated than many European consumers. You don’t have to develop something specifically for them” says Joel Lambert.

All the same, for the moment the Russian spirits consumer remains different from his Western drinking mate. Generous, looking for the best and willing to spend, brand focussed, curious, eager to learn and always wanting the latest. Na zdorov’e!

 

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