Wine making and viticulture site

The consolidated brand as the entrance ticket for the Russian market

In the world the tendency on consolidation of the most significant participants of various branches of economy has entered into the force. The idea about consolidation of the Moldavian wine makers is in air, especially considering heavy situation of the branch.
The cancellation of an interdiction of import of wines into Russia is inevitable. Western participants till now with fear look at Russia and are not ready to take a place of Moldova. Thus consumption of wines is growing up and demands expansion of assortment and increase of volumes of production.

Because of increase of the prices for oil and the general growth of economy, Russian consumer market grows unbelievable. Certainly, separate segments of this market, such as the market of articles of food and the alcoholic market grow also. For the period of 2002 – 2005 the volume of the market of articles of food and alcoholic drinks has grown more than for 110 percent. For the period 2005 – 2007 annual growth of the market is predicted at a rate of 19 – 20 percent.

Annually company A.T. Kearney publishes GlobTal Development Index according to which Russia is included into the three of leaders on appeal of the retail market among emerging markets.

Experts allocate favorable factors and risk factors for investment in the trading industry of Russia.

    To favorable factors, the following have been attributed:

  • The accelerated development of retail trade and growth of a share of modern formats;
  • Change of consumer behaviour;
  • Regional and foreign expansion;
  • Development of consumer crediting.
    Key risks for investors in retail trade of Russia there are:

  • Competition for the commercial real estate, caused by their lack, which causes high cost of their rent and purchase;
  • Imperfection of logistic and chain of deliveries;
  • Shortage of qualified personnel;
  • Administrative barriers.

The Russian market of wine is attractive to foreign manufacturers not only because of growth of the consumer market, but because of a lot of events which became the invitation for wine makers from Romania, Bulgaria, Spain, France and other traditional wine powers:

1) In 2005 wine production in Russia was reduced with 20,9 percent; vodka and liquor production in 2005 was reduced with 6,4 percent;

2) Because of cold winter of 2005-2006 production of grape wines in 2006 will be reduced with 24,9 percent;

3) Because of actions of Rospotrebnadzor the import of wines from Moldova and Georgia in Russia is stopped, but it have occupied 59 % of the market of Russia in terms of volume or 49 % in cost expression is stopped.

The way of conquering

For the control of a situation over the market and as for realization of activity irrespective of large importers it is more preferable to organize a marketing network independently (“direct import”).

 

Advantages of indirect import Disadvantages
of indirect export
Advantages
of direct import
Disadvantages
of direct import
– Decrease in costs on selling due to a synergy
– Getting off cares of the organization of selling
– Concentration of efforts on manufacture
– Reduction in risks from marketing activity
– Opportunity of a fast recoupment
– Isolation from market processes
– Absence of a feedback with consumers, ignorance of their inquiries
– The big dependence on actions of intermediaries
– Expansion of independent selling
– The control over the local markets
– The control over observance of the marketing program
– Enhanced attention to the commodity nomenclature of selling
– Long-term relations with end users
– Necessity of an extensive knowledge in the field of the foreign market
– Necessity for competent experts
– Additional risks and costs
– Increased requirements not only to the goods but also to marketing
– Necessity of performance of the broad audience of functions on the organization of selling

 

In our opinion to combine advantages of direct and indirect distribution it is possible by creation of own affiliated distributor and a retail network with insignificant use under conditions of outsourcing of the Russian importers and distributors. Thus manufacturers can consolidate, create the single distributor in Russia and to introduce in the market the unique trademark (something like “Български Вина”, “VinMoldova” and so forth).

Thus manufacturers will keep the individuality (trade marks and labels), assortment and names of wines, but can bear together charges on:

  • advertising;
  • retail shops opening;
  • registration, licensing, authorisation, certification and others.

The import of a product through the uniform distributor under a national trade mark will allow to transfer the positive attitude to the country (if those is present), to its sea and mountain resorts, picturesque places, to the slavic population or something else, on the products sold under this mark.

Denis Shtirbu, partner
KSB Partners LLC,
Moscow, Russia, 2006