Local wine is no longer ‘sweet, cheap and intoxicating’, but abroad is still more popular | KyivPost
When Ukrainian tech entrepreneur Eugene Shneyderis made his first bottle of wine, he didn’t think he would ever be a wine producer. In 10 years, the Beykush cellar of Shneyderis has grown into a reputable brand that produces nearly 30,000 bottles of wine per year.
Going from rural vineyards near the southern town of Mykolaiv to wine shops and restaurants in big cities hasn’t been easy for a small business like Beykush. For reference, Mykolaiv is located 480 kilometers south of the capital, Kiev.
For years, local winemakers have suffered from the heavy Ukrainian bureaucracy and lack of state support. Local customers did not believe that Ukraine could produce good wine and preferred popular European brands which are generally cheaper.
This discouraged Ukrainian entrepreneurs from investing in the wine sector. As a result, only 130 local businesses have a license to produce wine, compared to over 46,000 in Italy. But those who have decided to take a risk are trying to remain optimistic about the future of the industry.
“Ukraine is perfectly suited for making very good wine,” said Christophe Lacarin, a French winemaker who owns vineyards near Odesa, the Black Sea port city of 1 million people located 500 kilometers south. south of Kiev. The regions of southern Ukraine enjoy a favorable climate for growing grapes, while many local winemakers can turn the harvest into a high-quality drink.
To support them, the government must adapt laws to the needs of small businesses, while Ukrainians must be patriotic and start buying more locally produced wine, Lacarin said.
When Ukrainians choose a wine for a date or party, they prefer to buy a bottle of Pinot Grigio from Burgundy rather than Sukholimanske from Odessa.
There is a stereotype, especially among the older generation, that “anything imported is better than local,” said Anna Gorkun, CEO of Inkerman winery and founder of 46 Parallel Wine Group.
Ukrainian wine shops are full of European imports. On its website, the wine merchant Fine wine sells 519 bottles of Italian wine and only 57 bottles of wine produced in Ukraine; Online Store Fine wine has 3,151 bottles of French wine and only 75 bottles of Ukrainian.
The share of Ukrainian wine in large supermarket chains decreases too much. In 2020, only 27% of the wine of the Auchan store chain was Ukrainian, and 26% – in the Retail group, which includes the popular supermarkets Velyka Kishenya and Velmart. Compared to 2017, this is a decrease of 6 to 10%.
In 2020, the Ukrainian wine market suffered from COVID-19 and the record low grape harvest, according to Alexander Sokolov, CEO of analysis firm Pro-Consulting. This was followed by a 20% increase in wine imports from Europe which further hurt the industry, according to Sokolov.
Imports increased last year because the Ukrainian government lifted import duties on wine from the European Union following the country’s obligations when signing the association agreement with the EU in 2014. Ukraine imported US $ 85 million worth of wine from the EU in 2016; in 2020, that figure climbed to $ 180 million.
For foreign producers, benefiting from tax breaks and public investment, Ukraine is a profitable market. It is easy to cross the country’s borders due to the zero import duty and the lack of strict control over the quality of imported wine, said Volodymyr Kucherenko, director of Ukrvinprom, an organization that supports and protects the interests of winegrowers. and local winegrowers. And while the national wine can compete with European quality, it cannot surpass it in price, Sokolov said.
Foreign producers, backed by government support, can sell a bottle of wine for $ 3 even when its cost of production is higher. Ukrainian producers sell fine wine for an average of $ 5-7 a bottle.
Locals set higher prices for the same quality because they don’t receive as much financial support from the state as European winemakers, according to Lacarin.
The government should protect local producers, by limiting the access of imported products to the county, according to Kucherenko.
“If there is more Ukrainian wine on the shelves than imported wine, there is a chance that the situation will change,” Gorkun said.
In the past, 140 documents had to be submitted to register a winery, a tedious and expensive process that put small producers at a disadvantage.
Through a grueling registration process, the government wanted to control the wine market and protect it from illegal producers. Such a bureaucracy, however, has only opened the door to corruption; the police could visit a winemaker for the slightest mistake.
“One unnecessary step, one bad letter on the excise stamp and you can be sued,” Shneyderis said.
In 2015, local authorities accused Shneyderis of producing illegal wine and seized his equipment. After the incident gained public attention, the tax department closed the investigation.
Lacarin spent almost 10 years trying to get a license to sell wine in Ukraine. Following numerous requests, in 2018 the Ukrainian parliament simplified the process of registering a small or medium-sized vineyard – a producer who produces up to 100,000 liters of wine from grapes, berries or grapes. honey that he grows or produces himself.
It was a godsend for small winemakers, Lacarin said. But now local businesses face another bureaucratic challenge: excise stamps, labels that prove taxes have been paid. Developed European countries do not have excise stamps.
“In the rest of the world, wine is an alcoholic drink made from fermented grapes. In Ukraine, this is the product you can be sued for, ”said Shneyderis.
The excise tax is laughable: $ 0.0004 per liter and also separately $ 0.007 for a stamp. Economically, it doesn’t make much sense. In 2019, the state spent over $ 800,000 to make the stamps, but only got $ 72,000 from the excise tax. But if the winemakers make a mistake in the documents, they risk a huge fine.
“Wine is food. There is no logic in imposing an excise tax on food, ”Gorkun said.
Rather than focusing on bureaucracy, experts said the government should help local businesses speed up wine production which declined dramatically after Russia’s 2014 invasion of Crimea, the main wine and producing region. from Ukraine. According to Ukrvinprom, Ukraine lost 26,400 hectares of vineyards after Russia annexed the peninsula.
Besides the supply of grapes, Ukraine has also lost control of its best vintage vineyards, including Massandra, Novy Svit, Inkerman, Koktebel.
In January, Russia sold the Crimean Koktebel for $ 1.4 million. In 2020, she sold Massandra for more than $ 2 million to the branch of the Russian bank controlled by one of Russian President Vladimir Putin’s allies, Yuri Kovalchuk.
Gorkun’s Inkerman had to abandon three factories, cellars and 3,500 hectares of vineyards when the Kremlin invaded Crimea. At that time, Inkerman was the best in the local market and planned to expand overseas and even launch its IPO. But the plans were canceled.
“Our main goal was to save the customer and the brand image,” Gorkun said.
To continue doing business in Ukraine, Inkerman registered a new company in Kiev which now works independently from the Crimean company. Inkerman lost a substantial part of its market because it could neither import Crimean grapes nor sell their wine there. The company still controls nearly 8% of the market, producing nearly 4 million bottles of wine per year. Ukraine Inkerman does not own any vineyards in Ukraine. Instead, he buys grapes from local farmers.
“There is no need to invest in our own vineyards,” Gorkun said. “We prefer to give the opportunity to develop and maintain production to winegrowers who have already invested.”
Last year Gorkun took on another business – she launched a new wine brand called 46 Parallel. It targets the younger generation.
“We believe that millennials and people born in the 2000s will be more tolerant of Ukrainian products,” she said.
Unlike their parents, born in the Soviet Union when the most popular wine was “sweet, cheap and heady,” Millennials are trying to build a culture of drinking wine that is more like that of Europe. They prefer dry wine to sweet or semi-sweet.
Wine consumption is still low: a Ukrainian consumes 3.5 liters of wine per year compared to 62 liters in Portugal, 50 liters in France or 44 liters in Italy, according to Ukrvinprom.
These countries have a centuries-old wine history, while Ukraine started producing fine wine only 10 to 15 years ago, according to local sommelier Anna Eugenia Yanchenko. “Ukrainian wine needs more time to reveal and demonstrate its charms,” she said.
According to Yanchenko, Ukraine can already be proud of two local grape varieties – Odesa’s Black and Telti Kuruk.
“These varieties are the future of Ukrainian winemaking, or at least the beginning,” she added.
Another thing that will drive Ukrainian winemaking forward is the rise of small businesses, Lacarin said. Compared to the big producers who target the average Ukrainian who buys wine from the supermarket, the smaller companies produce more expensive and high-quality wine.
Small producers can also take more risks, experiment with production techniques, grow grapes without pesticides. For a great winemaker, one mistake can cost dozens of acres, said Shneyderis.
“It was not the supermarkets that made the French wine industry glorious, but small shops that produce expensive and elegant wine,” he said.