Updated August 25, 2008

   According to the results of 1H 2008, the vodka segment with more than RUR 100 a bottle, where the majority of the federal brands are presented, became for the first time larger than the "people’s" segment with less than RUR 100 a bottle, and the stake of the Top 10 of the vodka companies approached the mark of 50%, as calculated the agency Business Analytica. The regional producers have also faced the pressure of the federal companies: the investment bankers and market participants fix the growth of offers about the sale of the regional distilleries.

   The company controlling more than 10% appeared at the Russian vodka market for the first time. According to the data of Business Analytica (BA) for 1H, Russian Alcohol Holding occupies 10,9% of the market in value terms and heads the rating. The indices of the ex-leader – Veda Holding – dropped from the former 9,1 to the current 7,5%, and Synergy Holding entered the market for the first time and took the 3^rd place in the rating with 5,2% (2,6% in 1H 2007). In 1H only ten largest companies were controlling 48,9% of the spirit market. Previous year, their stake was only 44%, and as per the results of 2007 – 46,3%, according to the data of BA. In the end, the Top 10 will cross the market mark of 50%, head of Ad hoc department for management with BA’s clients Snezhana Ravlyuk is convinced.

   The stake of the federal companies is growing foremost due to the stake reduction of the smaller regional market players, Parliament Groups co-owner Sergey Kupriyanov is convinced. The companies spend many facilities on the promotion of the federal brands: Synergy is planning to allocate $70 million in the forthcoming season; experts estimate Russian Alcohol’s investments at $50 million annually; and JSC Omskvinprom has announced the sum of more than $20 million.

   The investments in the marketing are quite useful. According to the data of BA, in 1H 2008 the average price segment of vodka (RUR 100-130 for 0,5 L), where the majority of the federal brands are presented, has exceeded the "people’s" one (RUR 70-100 for 0,5 L) by capacity for the first time: 39,3% against 38,3% respectively. "The margin on the "budgetary" vodka is minimal, and you can’t reach considerable volumes and increase the market stake selling the premium one. It is obvious that more than a half of the large companies’ sales falls to this segment", the head of Rosspirtprom State Unitary Enterprise management of foreign relations Dmitry Dobrov explains. However, the rise of the average retail price for vodka is conditioned by the range of the external factors – excise rate growth, growth of production costs and purchase prices for grain, as he adds.

   The organic growth of the largest Russian vodka companies and the last public M&A deals – the sale of such companies as Parliament Groups, Russian Alcohol, and the sale of such brands as Myagkov and Beluga – resulted in the growth of offers among the regional players, as Sergey Kupriyanov marks. The managing director and the head of Renaissance Capital’s Spirits division Piter Vankhenke marks that lately he almost once in a week gets offers about the sales from the regional distilleries. However, the expert marks that it will be quite difficult for the majority of the regional companies to reach the attractive terms within the sale: they don’t have the up-to-date production technologies, prospective and profitable brands and the substantial market stake. Under these conditions, those producers that can be interesting for the investors have to assess their business realistically. So, the co-owner of the Russian vodka company heard that Samara region’s largest vodka distillery Rodnik would be sold, and the stockholders of another company started talks about the purchase of this production. "The deal fell through", complains the source. "The owners of the company with the only prospective and interesting brand asked more than $100 million, when the distillery’s real price is no more than $60 million". Rodnik owners refused to comment.

Top 10 of the largest vodka producers in Russia

Source: Business Analytica, the price data of the cities with more than 100 000 people.

Stakes of price segments at Russia’s vodka market

Source: Business Analytica, the price data of the cities with more than 100 000 people.