June 10, 2023

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Russian President Vladimir Putin attends a session of the St. Petersburg International Economic Forum (SPIEF) in Saint Petersburg, Russia, June 4, 2021. Sputnik/Vladimir Smirnov/Kremlin via REUTERS

Russia hits European liquor makers. Pass a severe law

Albeit the changing arrangements of the Alcoholic Products Act were introduced to Parliament in 2017, they didn’t speed up essentially until 2021. President Vladimir Putin marked the correction on July 2, and it went into power 4 days after the fact.

Like champagne, it’s just Russian

After modifications, instead of the term “sparkling wine (champagne)”, which was formerly used by importers to name their products, it is now referred to as “sparkling wine, including Russian champagne”.

In practice, all foreign products have become “sparkling wine”. Because “Russian champagne” can only be made in Russia. The word “champagne”, intended for French production, will remain on branded labels.

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The new law immediately sparked a reaction from LVMH, owner of Dom Perignon and Veuve Clicquot brands. A luxury goods company has announced that it is holding all shipments to Russia.

However, it soon abandoned the boycott, immediately after the LVMH group announced that it would abide by the requirements of the law.

The authors of the law emphasize that it is primarily about standardization of requirements and support for the Russian wine industry. Businessmen accompanying Vladimir Putin are involved in his intensive development.

examples? In 2020, the company of Yuri Kovalchuk, who is considered a friend of the president, bought the famous Crimean winery Massandra. In 2017, Kowalczuk Structures acquired the Novyi Swiet factory in the annexed Crimea – one of the oldest wine establishments on the peninsula.

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The president himself said in January that after his resignation he could go into winemaking, “not as a business, but as a way of doing business.”

The story is complicated by a number of other issues

The new law also introduces other changes – problematic from the producers’ point of view. It also introduces changes to the way wine production is classified.

Importers will have to re-apply for certification of their products in Russia. what does that mean? Samples of their products must arrive in Russia and undergo laboratory tests for each of them. The changes will affect about 20,000 wine brands.

The new law also includes the name “cognac of Russia”. Only alcohols made from Russian grapes are worthy of this term.

Here, too, it creates a problem for foreign producers. The name “Cognac” is a reserved name for brandy produced in France, in the Charente department.

The issue of using both names was discussed in Russia after its accession to the World Trade Organization (WTO). At that time, in 2013, the Federal Alcohol Regulatory Service assessed that the names of alcoholic beverages written in Cyrillic letters indicate the type of production, and not the place of origin. Russia, for its part, does not intend to question France’s rights to the names “cognac” and “champagne” – the regulator explained at that time.

According to the data of the economic press, 50 million liters of imported sparkling wine and champagne are imported into Russia every year. Of these, only 13 percent come from France. The share of LVMH in such shipments does not exceed 2 percent, which means that this branded champagne is consumed by no more than one million Russians.

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