Russian vodka sales to soar

Published: 23 July, 2008

RUSSIA (Bloomberg): The value of Russia's vodka market is set to increase 5.8% annually over the next five years.

Russia's spirits market has been the fastest-growing after India since 1999 and will expand by 6% to 7% annually in the next five years as rising wages enable consumers to switch to "more expensive, previously unaffordablespirits," said Renaissance.

The average wage has also rose 15% in June, sparking a similar increase in retail sales.

Growth in sales of higher-priced vodka will more than offset a drop of 2% to 3% a year in spirits consumption caused by a declining population and as some Russians switch to beer and low-alcohol drinks.

The most expensive vodkas sell for 550 roubles (10.72) compared with less than 70 roubles (1.36) for the cheapest brands.

Rennaisance estimates the market share of so-called "premium" and "super-premium" vodkas will increase to 5% by 2011 from 2.3% in 2006.

Vodka makes up more than 90% of all spirit sales.

Illegal bootleg spirit sales, which make up about 40% of the total market, will slide to as little as 20% by 2011 after the introduction of a system to control alcohol production, distribution and trade.

Russia's seven largest spirit makers will raise their market share to about 80% by 2011 from 32% now as they buy smaller rivals and expand production capacity, Renaissance said.

Synergy, a local vodka maker, plans an initial public offering this year to raise funds for takeovers. The company is Russia's No 7 vodka producer by sales, according to Renaissance.

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