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We regard these trends as robust, since there is a high base from last year when the consumption of alcohol rose during pandemic-related limitations, while people’s purchasing power is stagnating and excises were hiked. The recorded alcohol consumption in Russia has declined for the last ten years (a blended 4% decrease) to reach 9.5lt of pure alcohol equivalent in 2020 per person above 15 years old. The main pressure on consumption in Russia came from tightening regulations, including rapid excise increases (15% CAGR in 2010-20 for vodka, wine, and beer), the introduction of monitoring systems for production and retail, as well as minimum prices. For 2021-24F, we factor volumes in Russia being flattish, largely implying stable development conditions, with excises in-line with CPI (4% per annum).
The market is undergoing a volume transformation with a mix redistribution between vodka and wine. In the last ten years, retail sales of vodka have declined at a 5% blended rate, while wine has remained generally flat. Thus, the share of the latter in overall consumption has increased from 11% to 15%, while vodka has declined from 45% to 36%. We consider the trend to be sustainable in the medium term and expect the share of wine to add 3.5pp to 18% by 2025F, while vodka’s contribution is to decline 2.8pp over the same period, to 34%.
9.1.6 Agriculture sector news
Agriculture, a key growth driver in 2020, this year became one of the laggards in September due to the weaker harvest. According to Rosstat, in September, the volume of agricultural production in Russia continued to decline – in August, output fell 10.8% y/y, while in September the decline deepened to -5.8% y/y. A slowdown was also seen in the construction sectors (in September, the volume of construction increased by a meager 0.1% y/y vs +6.2% in August) and transport freight turnover (+5.1% y/y in September vs +6% in August and 9.3% in July).
Sovecon, a leading Black Sea agricultural markets research firm, on Monday cut its 2021 estimates for Ukraine's corn crop and Russia's wheat crop. The company lowered its estimate for Russia's crop total by 0.1mn tonnes to 75.5mn tonnes and cut its Ukraine corn crop forecast by 1.2mn tonnes to 38.4mn tonnes.
Analysts are chewing through Rosstat’s recent release of a detailed breakdown of Russia’s production and the big surprise was that agricultural production tumbled by 10.1% year-on-year in August.
The state has poured billions of dollars into developing the agricultural sector in recent years as part of its efforts to create food products that were previously imported from the EU but are now unavailable due to the tit-for-tat sanctions Russia imposed on European agri-business in 2014 following the annexation of the Crimea.
That has led to both a boom in grain production where Russia is now the world’s biggest exporter, and the appearance of a food processing industry
125 RUSSIA Country Report November 2021 www.intellinews.com