Lend your money and lose your friend, says an old proverb. The Russian Finance Ministry risks losing friends in the wine industry with its proposal to impose a new excise on producers, and then compensate them for their losses.
The Duma is considering higher excise rates on wine and spirits, both local and imported, and is likely to approve them in the northern autumn. From January 2020, the excise tax is expected to rise to 30 roubles (50 cents) per litre of still wine, and to Rb40 per litre of sparkling wine. The previous rate was equal to Rb18 per litre of still and Rb36 of sparkling wine. Russian producers of wines with Protected Geographical Indication or Protected Denomination of Origin status pay only Rb5 per litre and Rb14 per litre. Many of them fear the coming tax increase will be a serious challenge, in spite of a promised accompanying tax deduction.
“Any increase of the excise tax will be directly projected onto the shelf price, and wine consumers are very price-sensitive in Russia,” says Igor Samsonov, CEO of the Satera winery. “Wine will become less competitive a category, especially if compared with beer or other drinks containing alcohol.” He estimates that medium-priced wines of Rb350-700 ($5.50-$11) will become 15% to 20% more expensive.
Andrey Grigoryev, managing partner at the Double Magnum wine consultancy, presumes the total excise taxes paid by Russian wine market operators may rise to Rb9bn, but consumers will pay up to Rb20bn more because the shelf price will inevitably be multiplied by mark-ups.