Russia?s market for luxury goods has bounced back from a lull during the global crisis and its big spenders are once again out in force. But rather than filling their baskets with pricey jewellery and beauty products, they are turning to fine wines and spirits.
Russians spent $5.3bn on luxury goods in 2011, accounting for about 2 per cent of the global market, finds a report from McKinsey, the global management consultancy.
Fine wines and spirits ? classified as any bottle priced above $70 ? accounted for 45 per cent of Russian spending on luxury goods last year. Fancy clothing came next, making up just over a third. Things like beauty products and luxury accessories were relatively insignificant.
That?s different from other Bric countries. Wealthy Chinese go for jewellery, for example, and Brazilians for?apparel.
The McKinsey report covers purchases made inside Russia, so it?s possible that Russians bought other goods overseas. After all, hulking cases of posh wine back from holiday is a bit of a slog, while a luxury watch or belt slips easily into one?s luxury luggage.
But there are sound economic reasons for Russia?s love affair with booze. In Europe, consumers begin buying significant amounts of luxury goods once their incomes rise above the ?50,000 to ?60,000 band. In Russia, the number of such people is still quite small ? about 10 per cent of Muscovites and 6 to 7 per cent of the total population.
?Wines and spirits are one of the affordable entry points to the luxury market,? says Alex Sukharevsky, partner at McKinsey. ?The more a country develops, the more luxury trends change.?
Traditionally, vodka is the favorite tipple in Russia but tastes began to change after 2000 as foreign wines and whiskies began flooding into an increasingly affluent market.
After a short lull during the financial crisis, sales of imported wine, whisky and cognac are growing again. But Russians have become more discerning about the quality of alcohol they drink, says Dmitry Pinsky, co-founder of DP-Trade, a Moscow-based importer of fine wines and spirits.
Russians who earlier bought wine as a status symbol are now looking for a good price to quality ratio. ?They are not just buying wine to demonstrate their wealth or for some other stupid reason,?Pinsky says. ?Now they are buying it to enjoy with food.?
Sukharevsky agrees that Russian luxury shoppers are getting far more discerning as the market matures.
?It?s a myth that the Russian consumer buys without any attention to price or value,? he says. ?Russians are as sophisticated as European shoppers, sometimes even more sophisticated.?
As Russia develops, luxury preferences will change, although wines and spirits are likely to retain their lead over other goods for some time.
DP-Trade sent most of the 800,000 bottles of wine it imported last year to wholesalers in 50 Russian cities. But the company is also expanding its own chain of luxury wine boutiques in Moscow, St Petersburg and Sochi, the Black Sea resort where Russia will host the 2014 Olympic Winter Games. Pinsky believes his shops are in the right place with the right product at the right time. ?Sales per square meter beat jewellery ? even with our crazy Moscow rents,? he says.
Related reading:
Inchcape confident of ?growth potential?, FT
Russia: ?apping? the elections, beyondbrics
Effort to re-engineer drinking habits, FT
Source: http://blogs.ft.com/beyond-brics/2012/03/21/russias-wealthy-turn-to-drink/
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