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. Last Updated: 07/27/2016

Vodka Market to Grow on Elite Brands

VedomostiRussia's spirits market has been the world's fastest growing after India since 1999 and may grow 7 percent by 2011.
The value of Russia's vodka market will increase 5.8 percent annually over the next five years as consumers choose more expensive brands, Renaissance Capital said in a report released Monday.

The $15.2 billion market may reach $20.5 billion by 2011, analysts led by Viktor Dima at Renaissance Capital wrote in the report. Sales of alcoholic drinks in the country totaled $37.5 billion in 2006, with spirits accounting for almost half the total, the investment bank said.

"Consumers will continue to trade up to premium brands as their real incomes grow," Dima wrote. "Vodka is more than just an alcoholic drink for Russians, rather it is a historical drinking habit that has become part of the cultural tradition."

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

The country's average wage rose an annual 15 percent in June, sparking a similar increase in retail sales.

Growth in sales of higher-priced vodka will more than offset a drop of 2 percent to 3 percent a year in spirits consumption caused by a declining population and some people switching to beer and low-alcohol drinks, the Renaissance analysts wrote.

Renaissance estimates that the market share of so-called "premium" and "super-premium" vodkas will increase to 5 percent by 2011 from 2.3 percent in 2006. Vodka makes up more than 90 percent of all spirit sales in Russia, the report said.

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