Wine2Wine: Ukraine – the treasure island of Europe

The focus of the 2021 edition was reflecting the multiple limits imposed over the last year. First of all, geographical borders: the advent of COVID-19 restricted import-export opportunities on a global scale, and in order to effectively restart activity, understanding the situation is of primary importance.

This year’s 2 full days’ hybrid format gave two different participation types to choose from: online, from the comfort of your home or office, or onsite, from the Palaexpo of Veronafiere.

On the 18th of October 2 speakers presented wine business landscape in Ukraine in the session: ”Ukraine – the treasure island of Europe”. As the event this year was in hybrid format, part of the audience participated onsite, the other had opportunity to follow the presentation online.

Representatives of the most reputable companies in their industries Pavel Glazov, Import Director of the importer and distributor Vinfort Ltd. and Veronika Busel, Managing Partner of the Wine Travel Awards, an international wine tourism award founded by Communication Media Group Drinks +, had an impressive reception to their topic at the wine2wine Business Forum 2021.

Speakers’ biographies:

Pavel Glazov, the Import director of Vinfort Company – one of the leading distribution companies in Ukraine. Having a legal background, Pavel joined the company more than 20 years ago and in 2008 progressively developed his career becoming the import director. With more than 20 years of experience in the Industry, Pavel has a deep expert knowledge of the Ukrainian and International wine and spirits market.

Veronika Busel is a Wine Marketing Manager, Wine Writer and a Managing Partner at Wine Travel Awards. She finished her Master’s Degree at the University of Bordeaux in Wine Marketing and Tourism, after that she has been collaborating with internationally recognized wine companies in Spain, France and Portugal. Parallelelly, Veronika became a wine writer and columnist for the leading wine specialized media groups in Russia, Ukraine and Belarus.

The speakers told the international audience about the situation on the Ukrainian wine market and about new tools that help to overcome the consequences of the pandemic.

This extraordinary story of a market with some categories growing 5 times in the last 5 years. During the presentation the audience was introduced to some impressive trends and tendencies in the Ukrainian wine market, as well as insights and market specifics from the experts. No one left the presentation without the answer to why Ukraine is the Treasure Island of Europe.

The name of the topic was chosen to underline the unique features and great potential that Ukrainian wine market brings to multiple international partners. At the same time, the presentation was not pretentious, it invited to discussion, addressing the multiple opportunities that appeared in the market in recent years.

Looking back, we must say that this strategy did work, as the presentation stimulated long discussions with the onsite B2B audience.

Market overview

“Why treasure Island? Or Eldorado? Ukraine, indeed is a country of wonders, a country of adventures, a country of challenges. Getting to the market looks like a gold rush – no guarantees, not always perfectly logical, but could become a key to the richness and prosperity. So, what are we about?! This is really the “treasure island” of Europe, this is Eldorado, you can win it all, or you can lose it all.” – Said Pavel Glazov.

Ukrainian market is not perfectly logical: while the GDP per capita and population numbers are going down, like from 45 mln in 2013 to 41 in 2020. If to talk about wine consumption it is 0,2 per capita in 2019, if to compare this numbers to Italian it is 4.5-4.6 (L. of pure alcohol) – it is almost nothing. If to check numbers of inflation and devaluation you can have a heart attack J always going up, increasing year-to-year. The figures of wine consumption are small, but stable, and the consumption of spirits are going down. (2014-2020).

After showed figures the normal question would be: why should I go to this market? What for?

And here some cons appeared, still illogical, but surprising and worth attention. When we see the imported wine trends, both for still and sparkling wines, everything goes up, and at a great rate. If to look at figures of imported still wines in 9LK , in last 5 years, from 2016 to 2020, the volume grew double, and right now it is 4,7 mln. 9LK. Talking about sparkling wines, the growth more than 5 times in 5 years. Started from 591 9LK in 2016 now it is 3,411 mln. 9LK. And this is impressive result to have a wine category that grew 5 times in the last 5 years.

The best news to Italian producers, numerous of those joined the presentation, is that Italian wines are driving this trend. For still wines it is more than 2,5 times growth in the last 5 years, for the sparkling wines happened something new, that never happened before: today we must state that sparkling wine category from Italy bypassed the local sparkling wine category.

This situation is very different from general trend in the Ukraine wine and spirits market: as usual, if there is a local product, it would be sold better that the imported one. There are only two exceptions: sparkling wine at the moment, and for the long time it was a vermouth category, specifically represented by Martini. Summing up, the Italian wine category is growing, even booming, and we expect that this trend will stay.

Consumption trends

“Why Ukrainian wine consumers are so much fond of Italian wines this is very complex question. For many years we observe this interest in post-USSR countries in general, this aspiration by Italy as a destination, rich in wine tourism offer, Italian products, specifically wine and gastronomy, and its lifestyle,”  – іaid Pavel Glazov.

Speaking about consumers and trends, unfortunately, there are not much researches going on on this topic, for the last 5 to 10 years, it could be related to number of crises that Ukraine had in this period. What we can see from the numbers of available analytics is that the consumption is changing. People are more interested in wines and wine consumption is growing. And some of the reasons behind are that boomers and generation X, who before used to drink more spirits, now are more interested in lower alcohol content products, so they switch to wines. The similar trend is among young generation, that prefers and switches to lighter and lower alcohol level drinks.

The other trend among young people is drinking less, as sometimes they are also limited with their purchasing power. However, though they do drink less, but they do it with more quality. And these facts also give high perspectives on the future of the wine industry in Ukraine.

Distribution channels

*Hereinafter are statistics on distribution and sales channels for Italian wines in the Ukrainian market, however trends are similar on all imported wines.

The majority of the market is operated by traditional importers. The market is quite open: no specific restrictions, no complicated license procedure, or quotes, like in neighbor country Belarus for example. Still there are number of specifics, f. e. if you import wines in Ukraine you have to adjust tax stamps, and you have to adjust them in advance before coming to Ukraine, which means that you need to have a partner in the country to help you with the procedure.

But now it is differentiating between traditional importers and distributors, who do the national distribution and cover up to 65% of the market, and the direct importers to supermarkets or specialized retailers – with coverage around 21% of the market. Moreover, the share of specialized retailers in the total import is 15%, which is a lot. And what happens is that sometimes the biggest importers of Italian wines are specialized retailers, that is why you should keep them in focus.

“For producers who decided to penetrate Ukrainian market the decision on distribution strategy is one of the first priority. Or you go to traditional importer, and then you will get some national coverage, but knowing distribution system it will take some time, or you can find good and professional modern retailer who would very easily make you good volumes, but then you would be limited to this specific retailer,”– said Pavel Glazov.

The other important side note is cancellation of the import duty. This is something that have been prepared and actively discussed in the professional community in the last 5 years. Since the beginning of 2022 we are going to have a full free trade agreement with European Union, which means that all alcohol import duties are going to be cancelled.

Especially it matters a lot for the sparkling wine category, because before the import duty was 1,5 eur per liter, so the difference is quite high, but that was reducing for the last 5 years in equal parts, and honestly speaking for consumers it won´t change much, because majority of operators have already adjusted their prices in the shelves, so now they will just recover their margins. But you have to keep in mind that since 2022, Italian wines immediately, especially the sparkling category, will have a huge advantage over the New World wines.

Sales channels

The modern trade is the biggest part – 43.5%. It includes the direct import, and also the best well -known names are distributed by the traditional importers. The share of specialized trade is huge – 34,2% (Italian wines), so lots of Italians wines became successful through this channel. HoReCa-10,3%, is recovering and growing again, not as much, like in the other Eastern European countries the share of HoReCa is quite small. Traditional trade – 7,7%, but it is only entry-level wines – and then what is important is the E-Commerce-1,5% which could be perceived a small, but 2 years ago it was nothing-up to the end of the year it could easily grow to 3 to 5%. It growth hugely, especially triggered by the Covid-19 era.

”E-Commerce is becoming a great tool for wine promotion, we need to keep watching this trend!”– said Pavel Glazov.

Future and perspectives

“So, I must say that Ukraine is quite developed market, the one you should have in mind. The potential is huge. Italy has a great image of being a wine producer and wine tourism destination. Italian wines are driving the category. Italians wines are in fashion. The market is relatively open. All the kind of wines are developing – entry level and premiun, still and sparkling, everything is growing and the potential seems very bright. The bad news is that many producers are already in the market and the competition is growing,” – said Pavel Glazov.

Speaking about innovations, future perspectives and positive trends and projects that appeared in the market in last year, Veronika Busel, the Managing Partner of Wine Travel Awards, introduced the project for the first time to an international audience as an efficient tool to regenerate from the Covid-19 outbreak.

This global initiative, was supported by our partners, Vinitaly Special Edition and to the Italian audience the warm feedback was received by the news that Olga Bussinello, well -recognized Italian wine industry leader joined a Wine Travel Awards as a partner and a member of jury panel member.

The nominee registration procedure you can find here.