Gowling WLG (International) Inc - Russia
In early July, the international alcoholic beverage sector was alarmed by news coming from Russia regarding changes in wine and spirits legislation.
On 2 July 2021 Russian President Vladimir Putin signed amendments to the Federal Law on State Regulation of Production and Turnover of Alcoholic Products, effective immediately. The new law stunned the industry by taking the previous, single ‘sparkling wines (champagne)’ category, and splitting it into two: a broader sparkling wine category for imports, and Russian shampanskoye for products made in Russia.
Moreover, the new legislation introduces the category of ‘Russian cognac’ for brandies fully manufactured in Russia and produced with Russian grapes.
The spirits industry was initially rattled by worries that only local Russian manufacturers of sparkling wines would be allowed to use the name shampanskoye – the Russian word for champagne – but not foreign producers. It was also reported that after a transition period of seven years, the word ‘cognac’ could only be on labels of beverages produced in Russia.
However, more careful consideration of the law showed that things were not as bad as media initially reported, though it does seem to create unfair conditions that could affect foreign wine industries.
From Soviet times, there has been a Russian equivalent of ‘champagne wine’ – shampanskoye – on the Russian market. For decades, Russian consumers were accustomed to the product names ‘Soviet champagne’ and ‘Armenian cognac’ with no connection to a specific French region. Meanwhile European countries and later the European Union continued in their efforts to limit, for example, the use of the word champagne/shampanskoye to only that originating from the French region with that name.
The new version of the Russian law indicates sparkling wine as a type of wine and ‘Russian shampanskoye’ as one of its kinds. Similarly regulated are the new categories of ‘wine of Russia’ and ‘cognac of Russia’.
It is still unclear whether current foreign champagne producers will be allowed to continue using the Cyrillic ‘шампа́нское’ on their labels. However, French producers will have the right to use the name ‘champagne’ for products coming from that respective region, while all foreign products will be obliged to use the marking ‘sparkling wine’, which was not the case before.
The new changes seem somewhat biased with respect to non-Russian champagne producers and importers: they are now financially and technically challenged to re-label their products, adding references to sparkling wine, in order to comply with the law and with no allocated transition period. Russian producers are under no such obligation.
Another issue is that Russian consumers traditionally consider sparkling wine as lower-end and shampanskoye as premium.
As the Russian Patent and Trademark Office recently explained, the idea behind this is that the Russian equivalents of the names shampanskoye and cognac have become commonly used in Russia with respect to certain types of products, and therefore are not misleading for Russian consumers. It also confirms that using the Latin champagne and cognac still can only be performed by the rights holders. Yet the law remains ambiguous regarding French producers, and it is totally unclear regarding others (eg, Californian producers).
The new legislation is aimed at reviving Russia’s sparkling wine and brandy industries and supporting domestic producers.
A deeper understanding of the new law will come over time. International and Russian producers will ideally work out a mutually beneficial solution. Meanwhile, the extent to which the amendments will affect champagne and cognac producers importing into Russia remains to be seen.