Russian Wine Industry and Millennials' Wine Consumption Characteristics

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FEDERAL STATE EDUCATIONAL INSTITUTION OF HIGHER EDUCATION NATIONAL RESEARCH UNIVERSITY

HIGHER SCHOOL OF ECONOMICS

Saint Petersburg School of Economics and Management Department of Management

Russian Wine Industry and Millennials' Wine Consumption Characteristics

Evgeniia Cheshko

In the field 38.03.02 Management Educational

program 'Management'

Supervisor

Management department lecturer S.V. Villo

Language instructor V.V. Pavlov

Saint Petersburg

2020

Abstract

This study aimed to describe the modern Russian wine business ecosystem in detail, to compile a portrait of Russian Millennials as a generation of wine consumers, and to compare and contrast the opinions of three main stakeholders on the question: Are Russian Millennials potential and current consumers of domestically produced wine? The purpose of this project was to verify the wine consuming patterns of Generation Y as well as to analyze Russian wine production. To study this issue, the methodology was composed based on Stakeholder Theory. Semi-structured in-depth interviews with the stakeholders of the wine ecosystem were used as the primary research method. Thus, this exploratory research presented new data on consumers for wine producers and marketers working in the ecosystem, thereby allowing them to create development strategies aimed at targeting a proper target audience for their products and increasing product awareness among their product's consumers. It is also proved that the work identified a number of reasons why Russian Millennials consume or do not consume Russian wine. Thus, both practical and theoretical contributions were made to the development of the industry.

Keywords: Millennials; Generation Y; wine consumption; wine business; wine industry; wine industry ecosystem; Stakeholder's theory

Table of content Abstract

Introduction

1. Theoretical foundation

1.1 Stakeholder theory and its application for the study

1.2 Millennials as cconsumers

1.3 Generation Y and wine consumption

1.4 Millennials in Russia: particular traits

1.5 Wine industry in Russia: an overview

1.6 Summary

2. Methodology

2.1 Research setting

2.2 Data collection

2.3 Findings

2.3.1 Russian wine industry

2.4.2 Russian Millennials' wine choices

2.4.3 How are Millennials as wine consumers perceived by wine industry ecosystem stakeholders?

3. Discussion

3.1 Limitations to the study

3.2 Practical recommendations

3.3 Future research

Conclusion

Bibliography

Appendixe

Introduction

Millennials today make up about 22% of the Russian population (Radaev, 2019). Consequently, they form a large consumer audience. Also, this Generation is highly influenced by trends (Atkin & Thach, 2012). One of these trends is the development of wine culture. Wine bars and restaurants with expanded wine lists are opening more and more, and wine is becoming the drink for social events just as much as it is a beverage that allows relaxing and having fun. However, the Russian Generation Y prefers foreign wines, rarely choosing Russian ones over them. This makes local wine production economically inefficient and depressed.

Unlike many European wine cultures, Russian wine culture is not something obviously existent. Moreover, local Russian wine businesses struggle to compete with foreign rivals. Such competition proves to be both practically and theoretically unequal, and small and medium-sized Russian wine businesses encounter significant complications when developing and running their work. Conditions created for growth and development are very limited. Besides that, the tax burden, the tightening trade and production rules, and intense competition from Western manufacturers keep growing annually. Moreover, the current crisis has put the industry in the conditions of even more unpredictability and economical insufficiency. Hence, this study aims to conduct a deep analysis of the Russian wine industry and to construe the factors influencing Millennials' wine habits, wine preferences, and wine choices.

The main goals of this research are 1) to analyze the wine industry ecosystem in detail; 2) to identify the characteristics of wine choices Generation Y in Russia makes; 3) to compare and contrast the perception of Russian Millennials as domestic wine consumers from three major stakeholders in the wine industry ecosystem. These aims lead to the formulation of the following research questions:

RQ1. What are the main features of the modern Russian wine industry?

RQ2. What are the characteristics of Russian Generation Y as a generation of wine consumers?

RQ3: How do different stakeholders of the Russian wine industry perceive Millennials as modern wine consumers?

Since the answer to the before-mentioned research questions requires not only the essential “Yes/No” response, but also its further justification, a qualitative exploratory study will be developed. To reach the goal mentioned before, the following objectives have to be fulfilled:

1. To examine the literature on the following aspects: Theoretical foundation for the project; Millennials' traits as consumers; wine consumption patterns of the Generation Y; Millennials' in Russia specifications, an overview of the wine industry in Russia and country-of-origin effect and its specifications for wine market;

2. To analyze the wine industry in Russia in detail (its history, wine brands represented on the modern market, financing, and investment in the industry, etc.);

3. To develop the methodology of the research precisely (to create semi-structured interview guides, to find specialists to talk to);

4. To conduct the interviews with the three main stakeholders of the issue (wine experts, Millennials, wine industry representatives);

5. To analyze the interviews;

6. To assess the evidence collected;

7. To draw conclusions based on the evidence collected.

The background of this study seems interesting since there was a very limited number of studies that have yet explored this particular issue in the context of a particular country. However, there are limitations to these research methods. The first limitation exists due to the fact that respondents will be chosen for interviews based on cluster sampling. Thus, there is more risk in the sample as a chance that the respondents will not be able to reflect on all the aspects of the issue. On the contrary, they may express drastically different points of view. The second limitation is the lack of scientific literature on the topic. As mentioned earlier, such studies were carried out a very modest number of times and mainly abroad (e. g. Williamson et al., 2016; Foroudi et al., 2019). This fact imposes the following limitation: the theoretical foundation includes a certain number of media sources, taken to reflect the completeness of the question, which may lead to the misinterpreted information existence due to the high subjectivity of some media sources. In addition, the last limitation may be that the factors having to be introduced as a result might appear applicable to a particular region. It might not reflect the situation in the whole country.

The novelty of this work, as well as the practically based opinions from all three parties- participants involved in the industry (producers, consumers, and professional evaluators), will be significant for the modern business. A detailed study of the problem may lead to further transformation of positioning the product on the wine market. Moreover, the results of the following project will be relevant for the Russian wine producers willing to increase their profits, as well as the prestige of wine culture in Russia in general.

The structure of this work is defined by the corresponding objectives. The research will contain three main parts in addition to the introduction and the conclusion. The first chapter of the study, named “Theoretical Foundation,” will be devoted to the previous studies conducted in the field and aimed to identify the research gap needed to be closed by the ongoing project. The second part will describe this work's methodology: 1) reviewing the literature and media sources on the wine industry in Russia according to some characteristics, such as environmental conditions, investments, and history, and 2) carrying out in-depth semi-structured interviews. Representatives of three sides of the issue will be selected as respondents for the in-depth interviews: the Russian wine producers, Russian Millennials, and wine experts. The methodology section will include the analysis of all the data collected as well as the answers to the research questions stated at the beginning of this project. In the third part of this work, named “Discussion,” the limitations for the current research will be discussed, practical recommendations for the practitioners in the wine industry will be developed, and some ideas for future research will be proposed.

1. Theoretical foundation

russian wine industry millennial

The wine industry in Russia is the industry that has been talked about for decades. Some may call it flourishing and prosperous, whereas some may affirm its stagnation and economic despair. However, it is noteworthy saying that the wine business in Russia has a long and rich history, and this fact alone can help to provide positive projections. Clearly, returning to the wine volumes produced in the times of prosperity is inconceivable without high awareness of the modern consumer, his needs, wants, and aspirations. The current Russian consumer differs much not only from the previous generations, but also as a cohort framed by one specific country (Teague, 2015). This is why, in this research, the whole study is turned to a separate social group, Millennials (or Generation Y), which represents this social cohort of modern consumers (Laruelle, 2019). This consumer group is determined by the year of birth from 1978 to 2000 (Mueller at al., 2011). It is worth mentioning that the Generation Z, which follows the Millennials, also belongs to the group of “would be” target audience for wine products. However, only a part of it can be described as “potential wine consumers” due to the legal age restrictions for the alcoholic beverages' consumption existing in the Russian Federation.

In order to study the Millennials' attitude towards domestically produced wines and to analyze the wine industry ecosystem in general, I pose the questions:

1. What are the significant characteristics of the modern Russian wine industry?

2. What are the features of Russian Generation Y as a generation of wine consumers?

3: How do the opinions of wine experts, Millennials, and wine industry's representatives contrast in the perception of Russian modern wine consumers?

It is noteworthy that the range of scientific literature within the topic is quite modest. While Russian authors did not seem to pursue such studies, there is only a very small number of international studies devoted to this topic.

As mentioned above, the scientific literature discussing the wine preferences of Generation Y is rarely found. Due to this reason, this review will also explore the traits of wine industries adapted for Millennials' wine consumption in countries other than Russia. The reason for this decision is the lack of particular information within precise territorial scope.

1.1 Stakeholder theory and its application for the study.

The term “stakeholder” for the first time appeared in the scientific literature in the 1960s (Friedman, 2006). It was then defined as a group of people in front of whom the management of the organization is supposed to be responsible (Parmar et al., 2010). However, further practitioners worked on improving its performance in theory, which is now considered one of the fundamental and compelling approaches in strategic management and marketing. Stakeholder theory is a theory in management, claiming that any business is highly influenced by all the participants of its ecosystem (Wu, 2019; Parmar, 2010). The concept of the business ecosystem itself was first introduced by Moore in 1993. It was described as a set of components of different levels and importance, which are united by the common aim and are facing the need to handle the changeable business environment. In his work, the researcher explained that many primary and secondary parties might be representing stakeholders in the business ecosystem. They may be identified as suppliers, leading producers, competitors, and other associations such as governmental structures, competitors, and professional associations.

After working on the initial idea of "Stakeholder theory” introduced by previous researchers, Freeman (2010, p.15) wrote: “an idea that a business has stakeholders--that is, there are groups and individuals who have a stake in the success or failure of a business.” Further, this concept proved to be useful for the theory development as it explained that stakeholders not only contribute to the value creation of the business, but they may also directly affect the achievements of the business. Moreover, since the stakeholders were claimed essential partners in any industry, they became significant investors for the business development. Thus, having a better understanding of those groups, which affect or/and are affected by the organizations, may assist in improving business' performance (Friedman, 2006; Parmar, 2010).

Many researchers posed the questions of what groups of people can be considered stakeholders (Tullberg, 2013). Employees, suppliers, customers, and government are usually regarded as core stakeholders or any organization or even the whole industry (Duhman, 2006). In contrast, some theorists suggest that core stakeholders are employees, suppliers, customers, shareholders, and the professional community (e.g., Carroll and Buchholts, 2003). These are the groups of people having power over the internal processes in the business. Parmar (2010) also stated that stakeholders might vary in terms of the strength of their influence in the organization, meaning there can be primary and secondary stakeholders. Parmar (2010) specified primary stakeholders as the ones affecting the business directly, and secondary stakeholders as those partners whose influence has no formal justification or they are influencing the organization employing some third party. According to this research, each organization has the right to specify the weight on its performance by both primary and secondary stakeholders, thus, negotiating the status of a stakeholder following existing circumstances. What is more, according to Tullberg (2013, p.128), a stakeholder is always “both an influencer and a claimant,” which means the effect can never be equal for all the stakeholders, and stakeholders themselves are also dependent on the organization's performance. The current project reflects this thought. In this study, it is believed that the wine industry in Russia is represented by three main parties or stakeholders: customers (identified as Millennials in ongoing research), wine experts (professional community), and the industry representatives (employees and suppliers). These are the groups of people influencing the way wine industry ecosystem functions and the partners influenced by the industry “behavior.” The use of this theory to the current research is justified by the researcher's need to observe the stated issue from all perspectives.

1.2 Millennials as cconsumers.

Generation Y (also known as Millennials, Echo Boomers, Generation of the Internet) has recently been receiving much attention globally. The majority of studies consider this Generation as a group of young people who were born in the time frame of 1978-2000 (Atkin, Thach, 2012; Marinelli, Fabrizzi, Alampi, Sacchelli, Bernetti & Menghini, 2014; Mueller, De Magistris, Groot, Gracia & Miguel, 2011; Parment, 2013). There might be some divergences in the definition of this period; however, this research will take into consideration the identification introduced by the majority of the previous works in the field. Researchers usually claim that this existing Generation differs significantly from the previous ones (Mueller et al., 2011). In the 2019 consulting and audit brand Deloitte conducted a survey within Generation Y to obtain the general ideas of what are the main traits and features of this social cohort.

The final Deloitte report was based on more than 13000 responses from Millennials taken from 42 countries all over the world, including Russia. Here are the primary outcomes to be mentioned. Deloitte claimed five features of the Generation Y to consider. First, all the respondents expressed low trust in the economic and political institutions in their countries. They seemed to perceive traditional values negatively and mistrustfully. Second, in contrast with Generation X, Generation Y does not have illusions in terms of the outside world (workplaces, government, social media, healthcare, etc.). Again, they perceive the world realistically if not negatively. Third, if compared with Millennials' parents and grandparents, they value and appreciate experiences far more than all other opportunities given in modern life. They do not seem to strive for running their businesses or starting their own families; they are looking for new feelings, knowledge, and experience. Also, respondents rarely perceived business as an opportunity to influence the existing order of things. The last aspect worth mentioning is that for Millennials, values, and principles of companies around are more important than ever. Many say that they are ready to mitigate or even stop consuming a particular product if they disagree with the company's business policy or the values it shares.

It is noteworthy that the conclusions above fully embody the Generation of which we will speak. To confirm this, we turn to the research carried out in this area. Atkin and Thach (2012) conducted a study on young wine consumers in the US. They analyzed how the amount and the quality of information affects the consumption of some products by Millennials. The researchers identified «technology savvy» as the principal characteristic of this Generation. Besides, they claimed that Millennials tend to value integrity and commercial honesty a lot. Making a purchase decision, they pay attention to the company's image, brand's sustainability practices as well as the shared values. This study provides an essential insight into the consumer behavior of the Internet Generation.

Velikova, Fountain, De Magistris, Seccia and Wilson (2013) explore similar issues. The authors discuss the importance of understanding the crucial role of Millennials as modern consumers. They explain the term «consumer socialization,» which appeals to the young adults learning and acquiring habits and principles relevant to their consumer behavior in both present and the nearest future. The researchers state that while peer influence should be taken into consideration when thinking of young consumers' formation, the crucial role plays the family contribution (Velikova et al., 2013). This and other thoughts are followed by some other studies.

The origin and social background of young consumers are stressed by some researchers. They are considered important factors influencing any type of behavior of this social cohort (e.g., Sogari et al., 2017). Millennials care about the appeal of the concept of the product they consume. When it comes to edible products (food and drinks), consumers of this social group are willing to look not only at the taste and quality, but also at what values this or that manufacturing company reflects and whether these values correspond to those the buyer is sharing. Within the before mentioned ideas, Charters, Velikova, Ritchie, and Fountain (2011) contributed to understanding the image of the modern consumers (Millennials). In addition, it is noted that often for this Generation, the “message” that the company carries may turn out to be more important than the product itself (Teague, 2015).

“They have a great thirst for knowledge,” claims Teague (2015, p. 3). Millennials are demanding consumers, and they pay attention to many factors and details. They want to know; they want to understand; they take the value of not only facts, but also opinions. They do not worry too much about ratings, but they need to hear someone's view on the purchases they make and the actions they perform. Besides, social motives are fundamental for consuming a product. It is also noted that Millennials differ from their predecessors in the tendency of willing to pay more for the products of better reputation and brands of higher social responsibility (Teagle, Mueller & Lockshin, 2010).

The preferences of Millennials are not always clear (Cliff, Bejaei, King & McArthur, 2016). Many researchers say that many factors determine these preferences. These factors can include both the socio-cultural background of the young Generation and their personal acquired tastes and knowledge about a particular product. However, some authors insist that preferences in a global sense largely depend on the nationality and origin of the younger Generation. For example, the beliefs of Millennials in the United States may not coincide with the views of the Generation Y in New Zealand (Mueller et al., 2011; Charters et al., 2011; Cliff et al., 2016). This remark is very valuable for this study. It provides a perspective for its development, as it shows that the Internet Generation in Russia, in theory, may or may not differ from Millennials in other countries. Another option is that the generation as it is may not vary much; however, as a consumer, it requires increased attention to particular aspects of production and marketing of products.

Last but not least, researchers note the robust influence the media makes on Millennials. Consumption is virally based on the sources of modern online media, while social media precisely is nowadays the most reliable purchase decision driver (Arnold, 2017). Millennials see, millennials feel attracted, millennials follow, millennials buy (Fuentes, Vriesekoop & Urbano, 2017). The authors believe that manufacturers should not only take into account the interests, needs, and requirements of Millennials, but also target their products precisely at this social cohort and mainly with the help of social media for them to achieve greater success. Atkin & Thach, 2012 expressed an exciting idea adding to the thoughts mentioned above. They noted that Millennials feel the trust to the products promoted online in a mode, which is «easy to read, attractive and accessible,» modern consumers relate more to the products that relate to them. Once again, the ideas above contribute to the image of Millennials that needed to be considered for this research.

1.3 Generation Y and wine consumption.

The previous part of observing the existing studies was dedicated to the consumer behavior of Millennials. Now it is evident that Generation Y is the generation mostly commercially perspective. Evidently, in the next 30-40 years, this cohort will be very influential in terms of consumption (Atkin and Thach, 2012). What can be seen now already is that this social group is open to purchasing wine and wine products (Cliff et al., 2016). Therefore, the wine industry should pay full attention to this social cohort.

In the first section of the literature review, it was indicated that Millennials tend to strive for getting the various life experiences. That is why it is believed that this Generation of consumers is very selective and picky in terms of wine. They want to try a wide wine variety, evaluate many products on the market, and only then compile their long-lasting wine habits. In one study, the idea was expressed that for Millennials, the process of getting acquainted with wine varieties is sometimes far more critical than brands, labels, and packaging (Mueller et al., 2011).

In 2016, a non-profit organization, Wine Market Council, conducted a study in which it revealed impressive results (Russia's wine game, 2014). It turned out that during 2015 alone, the Millennial Americans drank more wine than representatives of any other generation. In this study, the authors revealed young people's attraction for wine and also demonstrated some numerical indicators. Thus, for example, the researchers were convinced that at one time, each Millennial consumer drinks an average of 3 glasses of wine, preferring more expensive wines and associating the price with wines' outstanding qualities. Some other researchers come to similar conclusions about the increasing value of wine in the eyes of the Internet Generation. For instance, Fountain and Lamb (2011) also noted that the consumption of wine among Echo-Boomers has undoubtedly grown compared to the one of Generation X. The researchers stated that this generation representatives tend to consume wine less in the connection to special occasions such as birthdays or anniversaries. Hence, Millennials tend to drink wine mundanely just as much as on the special occasions. However, the same authors claimed that they were not able to identify the precise wine preferences of Generation Y drinking on a daily basis.

The tendency of Millennials perceiving wine as a drink for any type of both formal and informal events is highlighted by many modern researchers as the developing one. The generation representatives agree on the growth of wine consumption among their peers and them, stressing the beverage itself as «sophisticated, classic, sacred, pleasant and quality product» (Marinelli et al., 2014, p. 122). The research of Marinelli et al. (2014) revealed that Generation Y perceives wine as a drink that brings them closer to «elite,» which means the aesthetical pleasure associated with the higher social classes. Teague (2015) disagrees with this conclusion and argues that Millennials are not committed to the brand and luxury of this drink. This study introduces intriguing insight: manufacturers want to understand what Millennials need and what they want to consume daily. However, whatever it is, Millennials are likely to get it in the nearest future because now they have more purchasing power and ability in the industry than any generation before them. This means that wine producers and wine businesses are trying to "tune" their marketing strategies for these costumers. In modern digitalized business, it is called targeting the audience.

One more consumption pattern Millennials represent is that as young wine consumers, they seek to add value to their wine consumption. In other words, even those young people who do not have sufficient skills for a professional assessment of the wines' taste qualities tend to try to get to know the wines they consume better with the help of the Internet or the social media platforms. The study of Cliff (2016) explains that Millennials enjoy the aroma and deep color of wine, just as much as the stylish and meaningful design of the bottle. This work also studies wine education and its impact on the younger generation. The conclusions seem impressive: Millennials are glad to take up wine education; besides, their ability to evaluate the beverage with indicators by which professional sommeliers rate wines improves significantly during the study. This research is useful for the current project since it highlights the Millennials' ability to learn how to evaluate wine and, thus, deepen their knowledge in wine culture in general.

Speaking about Millennials' perception of different types and origins of wines, it is worth mentioning the precise reasons why Generation Y drinks wine. The study of Thach and Olsen (2006) reveals the five major of them relating to: 1) taste; 2) ideal combination with food; 3) way to relax; 4) providing the drinker with pleasureful «buzz»; 5) nice drink to have in public or with family. The least popular responses were dedicated to respondents' desire whether to educate themselves or to improve some health issues. These findings are interesting and useful because they reassure those who believe that wine can go out of fashion or be perceived solely as a drink for fun. For the same reasons, this work is significant for the ongoing study.

In connection with the increasing current global trend in sustainability, it is worth speaking about its influence on the studied Generation's wine purchase intention. Also, the power of online media in this area cannot be underestimated. Thus, it is often now when these two trends are implemented throughout each other. Global history proves that all new technologies are always involved in society with great difficulties, cultural barriers, and a long time. However, the modern consumer has a unique opportunity to perceive new trends such as sustainability through the online space and thereby quickly implement them having the connection with other trend followers and setting the following path for themselves. In connection with wine, the study shows that Millennials appeared to be more susceptible to renewable energy and energy in general than to issues, connected, for example, to certification for wineries and wine producers themselves (Sogari, Pucci, Aquilani & Zanni, 2017; Atkin & Thach, 2012). These results are impressive because they reveal the increasing value of company image and its social contribution in the perception of Millennials.

The types of wine that young people prefer buying can vary both within the same country (regions), and for different nationalities (Liu & Murphy, 2007; Fountain et al., 2011). Despite the fact, that the majority of the research provided above state that the wine industry, if willing to succeed, should target Millennials specifically, some claim that there is still a very modest number of wine characteristics or the information about it, that Generation Y precisely searches for (Atkin & Thach, 2012). In these terms, wineries and wine producers may want to focus on how they provide their wines with recommendations from friends and families of the target audience (Mueller, 2011; Parment, 2013).

Millennials love to simultaneously learn and perceive reality through the prism of the online world. It is worth noting that in the same way, they learn about bars and restaurants where they can try new or, conversely, keep buying already known and loved types of wine (Fuentes et al., 2017; Teagle et al., 2010). Besides, there are undoubtedly some subjective factors such as previous knowledge or past involvement, that always play a significant role in wine consumption. However, some argue that Millennials are much more assured in their understanding of wine than the previous generations. However, this may seem strange, given the modest period of experience of this social group (Teagle et al., 2010). Moreover, the Internet Generation is currently learning to value wine. It seeks to get rid of the thought that not everyone can truly appreciate the beverage because not everyone can professionally evaluate its qualities (Marinelli et al., 2014). Thus, more and more young wine consumers tend to open new opportunities in evaluating wine and broadening the knowledge about local and international wine cultures.

1.4 Millennials in Russia: particular traits.

The section above was dedicated to the generation of Millennials as a global social cohort in general. However, it is worth remembering that many qualities, characteristics, or the consumption patterns of a particular social group might be dependent on the living location as well as the culture of that or another country this generation representatives reside from. In other words, it is easy to assume that this Generation in Russia may be somewhat different from its peers abroad. This section will reveal whether Millennials in Russian differ from the global description of the cohort and, if so, what exactly are those differences.

Thirty million residents of Russia belong to the Generation Y (Laruelle, 2019). This figure is about 22% of the total population of the state. It is not surprising that some authors call this Generation a generation of trends and social changes (Radaev, 2019; Fedorenko, 2019). This generation, by being numerous, can influence the development of the country in any sector, the economic one included, which means that Millennials have to be economically and commercially approached thoroughly and accurately. Laruelle (2019) argues that the Internet Generation representatives are much more similar to each other in different countries than their predecessors have ever been. The author says that all Millennials from different countries and continents are identical in many aspects, such as, for example, dependence on public opinion, promotion of a visualization culture, difficulties associated with planning their future. What is more, Generation Y in Russia, just as its peers abroad, seeks to take care of the environment, often thinks globally, and not within the framework of one country or a particular territory. The author also notes that Russian young people are suspicious and distrustful of traditional institutions, including the institution of governmental power, they are not too political (which does not mean, however, apolitical). This Generation, according to the author, is inclined to implement the slogan "Do it yourself." Laruelle says: «In these ways, Russian members of Generation Y ... are no different from youth elsewhere» (p. 2). In this mentioned research, the author proves the similarities Russian Millennials share with all other generation representatives around the world. This work seems to be very influential and relevant as it gives the future researchers an understanding of what is the portrait of the Millennials in Russia and what are the behavioral patterns Russian Millennials have in common with their foreign peers. Besides that, since the researcher himself is being a representative of the Internet Generation, the conclusions drawn by the author of the research provided before-hand can be personally confirmed.

Generation Y in Russia is the first social cohort for many years, for which financial security and freedom in life are equally important (Radaev, 2019). It is also noted that the Russian Internet Generation, like the self-titled one around the world, is affected by the online reality (Fedorenko, 2019). However, in the offline world, Millennials still tend to listen to the opinions and advice of their families and friends. This reflects the need of this Generation for external evaluation of their actions and choices. The Generation of Russian Millennials is equally a generation of influential consumers. Taking all the aspects mentioned above into consideration, it is worth making an important conclusion for businesses and commercial industries: Russian Millennials want to know what exactly they consume; they want to be involved in the way the products put and positioned on the market. In addition, they want to consume the products aesthetically and realizing that the consumption of a particular product will bring them approval from friends and relatives.

1.5 Wine industry in Russia: an overview.

Russia had begun to produce wine back in the 1800s, which means that local wine history can be counted by centuries now, and, consequently, there must be many lessons learned by the local wine producers so far. However, what is seen now is that the industry is currently going through tough times. Studies show that wine production volumes in Russia are fluctuating yet having a recent trend for declining since 2011 (e.g., HorecaMagazine, 2016). It is, for example, that in the period from 2015 to 2017, the turnover of Russian wine production decreased from 5.4 to 3.2 mln hectoliters per year (Rudenko, 2019). Thus, the year 2017 hit the negative record since 2007 (RBC, 2018).

To contrast the volumes in global wine production, the following numbers will represent the wine production in some countries other than Russia. In comparison, in 2018, the wine production volumes in Russia were about 5.5 mln hectoliters, whereas in China, they were 9.1 mln hectoliters; in the USA, 23.9 mln hectoliters; and 54.8 mln hectoliters in Italy (Barnes,2019).

Both the domestic wine production and the sales are declining markedly, although local wine prices continue to rise (HorecaMagazine, 2016). There are some problems in the Russian wine industry that are becoming evident, but it is not always possible to understand their cause (Higginson, 2017).

The wine industry in Russia currently causes great controversy among its observers. Some may consider it to be promising, and some just ask not to deny a large number of complicated problems. The primary difficulty that the wine industry in Russia faces is market instability. Change of political moods, sanctions, counter-sanctions - all these factors could not but affect the process of consumption in the country (Rudenko, 2019). Due to the mentioned reasons, recently, people have begun to turn to domestic products more often, which consequently means they started paying more attention to their quality. However, imported wines continue to be more popular among Russian citizens of the Generation Y (Rudenko, 2019). Some attribute this to an increase in the price of domestic wines (Kommersant, 2017), while others claim a low level of image and a lack of awareness among Russian consumers (Radaev, 2016).

It should be noted that Russia is still a big player in the world wine market, but so far, there have been almost no legislative measures to help wineries exist and flow (Kommersant, 2017). Excise taxes for wine-makers are rising, and licenses cost a lot of money. It turns out that small and medium-sized wineries are faced with a choice: whether to increase the cost of wine or to lower its quality (with a decrease in the cost of consumables) (RBC, 2018).

The process of making wine is very complicated, and the ingredients in this beverage make quite a large number, despite the generally accepted opinion. Evidently, grapes are the first and principal components of wine production. However, in Russia, there are not too many regions where grapes grow. The areas are the Krasnodar Territory, Crimea, Stavropol Territory, Dagestan, and the Rostov Region (Rudenko, 2019). These regions are historically wine-producing territories with great grapes growing potential, and they are going to be described in the next part of the ongoing research. Large wine- producing companies and wineries also exist in Russia (e.g., Abrau-Durso, Lev Golitsyn, etc.). They are going to be listed in the methodological part of this project. However, it is difficult for medium-sized businesses to enter the industry as the entry costs and risks are too high, and the wine business itself is long-goal oriented in terms of bringing first profits (Hatiashvili, 2020). Also, equipment to produce wine is often bought from abroad merely due to the lack of such technical solutions in Russia. The same applies to ingredients and needed additives for wine production. Hubble (2017) believes that to make their wine cheaper, producers tend to sacrifice the quality and buy the most inexpensive wine mixes from abroad. Besides, some claim that often small wine businesses do not produce wine at all, as written on the bottle labels. They say that the cheapest wine products and ready-made wine mixtures are bought in bulk from other countries and are only bottled on the territory of the Russian Federation. This is the opinion that the big part of the population shares (Pertseva E., 2018). This is usually caused by ubiquitous economic difficulties. Small wine businesses do not tend to be cost-effective, which is why they have to survive by all means (Rudenko, 2019).

Experts say that the problems of the wine industry in Russia are technical (non-adaptive pricing, inability to work with production waste, imported raw materials), marketing-related (there is no image or proper positioning and promotion of Russian wine brands), and external (lack of import of Russian wine products, low-cost reputation of domestic business, low level of wine culture in the Russian Federation (Stambler, 2018; Sarkitov, 2007; Korneev, 2018). Undoubtedly, this whole range of problems contributes to the poor image of the industry among modern consumers outside the professional community. What is more, by being unsolved, these difficulties continue the uncertainty the wine industry has to survive through continuously.

There are a lot of barriers to the prosperity of the wine industry in Russia. However, does this mean that this commercial sector is hopeless? Not at all. «Industry experts generally agree that Russian wines have potential, driven by a new generation of wine-drinkers with higher levels of disposable income» (Hubble, 2017, par. 7). This potential can be explained both by the fact that the bar and restaurant culture is prevalent among modern young Russians (which can become a way of promoting Russian wines) and by the fact that a vast number of famous, prosperous and robust wine industries exist and function all over the world. They set the pace, which means that when forming a new wine culture or re-developing the existing one, one can take into account previously made mistakes and follow the trodden path.

1.6 Summary.

This study focuses on the Russian Millennials and their attitude towards the Russian wines. It is visible now that the modern wine business in Russia is currently going through some difficulties. These problems and challenges are unexpectedly hidden. These are the issues connected to positioning on the market, equipment transportation, advertising, legal performance, etc. It is suggested that these difficulties can be resolved following the path of successful wine models running all over the world. Moreover, although there is quite a limited and modest amount of scientific literature on this topic, it was learned that the modern wine consumers are mostly represented by Millennials both in Russia and abroad. It is this Generation that reflects the highest hopes of wine producers in many countries, including Russia. This Generation develops wine habits that, once known, can be easily used to capitalize on. That is why when producing and promoting Russian wine, it is worth being accurate to the consumption characteristics of the social cohort and considering the aspirations, needs, and desires of this group.

As mentioned before, there is a modest number of research in the wine industry in general. While in the wine industry in Russia, there seems to be no such research. The same regards analysis of wine choices of Millennials in Russia. However, independent media has recently been discussing this for a long time in both online and offline environments. This seems to mean that the modern population of the country has an interest in wine and the industry.

Wine culture in Russia is growing and gaining momentum; however, imported wines are still increasingly dominant (Rudenko, 2019). That is why the local wine industry now has to focus on its development, and more importantly, it has to understand what image of wine will be liked and appreciated by Russian Millennials. For this reason, it is crucially important to understand the factors affecting Russian Generation Y wine choices and how the Generation is perceived by wine producers. The questions wine producers need to pursue answering are about Millennials' preferred kinds of wine, wine types to be likely further recommended to the families and friends and spread a word on social media about. This proves the need to understand the reasons preventing Russian Millennials from buying domestically produced wines.

Given all of the above, the objective of this study is to answer the question: What are the characteristics of Russian Millennials as wine consumers. The research gap is the following: there is a lack of works exploring the Russian wine industry ecosystem, and there are only a few modest works that depict a portrait of Generation Y as the wine consuming generation in Russia. Moreover, the comparative analysis of the opinions about the modern Russian wine consuming cohort by both the wine producers, wine experts, and the consumers themselves, does not seem to have been conducted in Russia. In this study, I intend to close this gap.

2. Methodology

There are three overall objectives of the study. The first one is to describe the wine industry in Russia within its whole life cycle, from grapes' growing to brands' promotion, while the second objective is to compile a portrait of Russian Millennials as wine drinkers, which would assume their wine choices, their wine consumption characteristics, and their wine habits. Last but not least, the third objective is to compare and contrast the existing opinions of what are the future perspectives for Russian wine, and who are the consumers of the locally produced Russian wine. These objectives aim to address the current research gap primarily as well as to develop the findings of the previous research and elaborate on them for future studies. To lead the research, three research questions were posed: they can be found above in the dedicated section. These research questions are outlined sequentially in order to follow the path of the study.

2.1 Research setting.

The main focus of this study lies in the wine industry in Russia in general. Hence, the research must set the current circumstances (social, cultural, and economic sites), in which the study is conducted. In the research setting chapter, the history of the Russian wine industry will be represented, modern wine regions and wine brands in Russia will be named, and other conditions such as industry financing and weather conditions within wine production will be regarded.

The history of the wine industry and recent governmental regulations in the field.

When it comes to speaking of Russia as of an alcohol-consumer, the country has historically been considered a vodka-drinking country. However, Russia has its surprisingly long and interesting history of producing wine, which originates from ancient times (Borden, 2014). Some regions in the Russian Federation, such as Dagestan or Crimea, had had their rich history of wine-producing for centuries (Wikipedia contributors, 2019). Experts say that tsar Mikhail was the first one willing to have a winery at the royal court (Borden, 2014). Nevertheless, «the beginnings of a proper wine culture in Russia are rooted in the times of Peter the Great and Empress Elizabeth II during the 18th century when Russianbi acquired a taste for Champagne and fine wines from Europe» (Londonwinecompetition.com, 2019). There is a legend saying Peter the Great once noticed the ground suitable for grapes growing and decided the Empire needed to build the wineries he once saw on foreign lands (Rogatko, 2019). Hence, the commercial volumes of wine production have started to grow in the Don region, when the technologies once only implemented in France were taken and executed on the grounds of the Empire. The popularity of the new domestic beverage had increased, and the wine-makers in the Don region started to prosper (Wikipedia contributors, 2019). The Russian Empire hit the volumes of wine-producing of more than 2.2 mln liters per year (Wikipedia contributors, 2019).

The 19th century had become the century in which the production of Russian wine started increasing in commercial volumes (Krymove, 2018). Unexpectedly, the Crimea region had become one of the most contributing to the domestic wine production territories (Politforums.net, 2018). Lev Golitsyn is now considered one of the first and the most potent wine-makers of these times. Having studied the French wine culture and being acquainted with the European principles of grapes growing, he set the new vineyard on the coast of the Black sea and called it “The People's Champagne” (Borden, 2014; Londonwinecompetition.com, 2019). The winery quickly got its audience and started growing. The sparkling wine itself was something new to that day's wine consumer; hence, the success of the brand was enormous. Londonwinecompetition.com (2019) describes the first beverage as “a delightful, slightly sweet, fizzy wine that conquered the salons and ballrooms of the Russian nobility and was served to international guests.” It is noteworthy that the winery still works today and is frequently mentioned when it comes to talking about Russian wine-making in general.

The 20th century had brought many struggles to the Russian wine business, as well as to any other commercial sector existing in those times. Russian Bolshevik Revolution in 1917 led to many wine- producing families escaping from the country striving to save the businesses falling apart (Londonwinecompetition.com, 2019). The following events coming, such as Iron Curtain Falling, economy transitions, and vineyards' privatization, did not contribute to improving the situation. Moreover, in 1985 the then-Soviet leader M. Gorbachev initiated the company banning the alcohol production and consumption, which was supposed to be the measure of increasing the health of the population, but proved to be disastrous for the economy, thus, for the wine industry in Russia in particular. What the history called the Dry Law was initially started as “On Measures to Overcome Drinking and Alcoholism and to Eradicate Bootlegged Alcohol” Law (M^czewski, 2017). After being stimulated for growth, the Russian wine industry was becoming to be encouraged for extinction. The prices were raised in 2-3 times, and those citizens caught consuming alcohol were strictly prosecuted (Gvozdenko, 2020). Only in the 1990s Russian wine industry had started to recover slowly, focusing more on the quality of produced wines, knowing the reputation had to be got back by all means (Londonwinecompetition .com, 2019).