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Russia could be "big prize" for wine sector says tobacco chief

Published:  04 December, 2013

The wine trade should follow the lead of the tobacco industry and target Russia as a key market for the future, according to Ian Johnstone of British American Tobacco.

Speaking at the recent Wine Vision conference in London, Johnstone shared BAT's experiences and lessons in tobacco retailing in Russia and Eastern Europe at Wine Vision and said there was much the wine and drinks industry could learn from its experiences.

Russia, he said, was the big prize. It is BAT's second largest market by volume worldwide and its fifth biggest in terms of profit. "The growth potential is huge," he added.

Johnstone said the tobacco industry differed from the wine industry because Eastern Europe is already a mature market for tobacco products. "We've already gone through the boom," he said. 

But he warned the drinks trade that it would not be free from regulation in Russia or across Eastern Europe. Whilst regulation currently lags behind other countries like Australia and the UK, they are fast followers, said Johnstone.They relate to moves in markets such as Canada, Britain and Australia and tend to follow quickly. "Politicians come up with rules quite quickly and sometimes you do not have time to comply," he said. 

All advertising of tobacco products - traditional advertising, consumer promotions, one-to-one communications and online - is banned, said Johnstone. However, there is a lack of clarity on how regulation is applied and there are heavy penalties in Eastern Europe if you break the rules.

Understanding the boundaries and penalties of non-compliance and what regulators want and how to apply the rules is key, he said. 

Johnstone advised wine suppliers to work with retailers, where sensible, to get to grips with regulation and to get other interested bodies to represent them if they can't do it themselves.

Johnstone said BAT's corporate and regulatory affairs department was a central cog in its operations in Eastern European development and it operates a mandatory code of conduct for all company employees to ensure compliance.

Johnstone advised companies focus on a few lines. In Russia, for instance, BAT sells nine brands but focuses on three. Value brands are always there but there is more innovation on premium lines, he said. 

Fighting illicit trade is the biggest competitor, he added.