wine imports more than doubled from 1996 to 1998, thus increasing their share over total wine and spirit imports from 71 to 83%;

this change was fully due to the growth in the import of wine with an alcoholic content below 14%, which almost tripled in the analyzed period thus reaching 8.5 mln liters in '98. This segment covers nowadays the bulk (88%) of the country wine import, and is the one with the best potentials for further growth;
imports of fortified wine show, to the contrary, signs of “fatigue” since they decreased from 1.2 mln liters in 1996 to 1.1 mln liters in 1998, with the strongest fall (-5%) in 1998; imports of sparkling wine remained marginal: after the 1997 positive variation, import of this product fell back below the threshold of 100 thousand liters in 1998, less than 1% of the country's wine total import. Since domestic demand for these products remains stable, the decrease in imports can find an explanation in the growing ability of the only big local producer (Riga Vinss, see the company's fiche in Annex 4 A) to successfully counteract external competitors. Riga Vinss's dominant position is indeed a high entry barrier into the Latvian sparkling wine market, thus severely limiting competitor’s possibility to penetrate it with significant volumes; spirits import grew 4% in 1997, whilst remained stagnant in 1998, under 2 mln liters. Among super-alcoholics, only cognac and vodka -though this latter at a lesser extent, showed a positive performance all over the triennium. This lead these two beverages combined market share to grow from 23% in 1996 to 32% in 1998. Whisky import increased sharply in '97, but remained unchanged the following year. Brandy import levels do not change since 1996, thus showing signs of market saturation. As for liquors, they lost in 1998 an hefty 25%. Among soft alcoholic drinks, the ones with an alcohol content below 8% decreased 42% from 1996 to 1998, whilst the demand for those with an higher alcohol content increased 19%.
 

As expected, average price increases in a progressive way as we move from dessert wine (USD 3,7) towards less sweet products. As standard deviation values show, dessert and sweet wines are concentrated at the bottom levels of the price range, while dry wines are more widely scattered among various price levels (see Graph 3). Therefore, it is clear that quality of sweet wines is mainly low, while for drier products it can vary from low one for table wine to very high for top of the market products. Specialty stores wine prices were found by the investigation higher (21% on average) than in supermarkets. Highest differences in prices have been noticed for sweet and semisweet wines, while only marginal variations have been recorded, on average, for DOC or reserve wines (see Graph 4). As for geographic origin of wines, the information provided by interviewed operators and the one coming from retail survey shows the following (see Annex 5 A for further details):

French wines: they are considered as "top" products in the market. They are mainly purchased by consumers with a spending capacity ranging from high to very-high and are mainly referring to red (dry) and sparkling wines ("Champagne" kind). Indeed, dry wines cover by far the largest share (75%) of French items considered being the best seller products on the Latvian market, although also the remaining wine kinds are well represented in the importers’ lists and in the shops shelves. Usually consumption of French wines takes place during meals -both at home and at restaurants, or celebrations -for Champagne. It is estimated that currently 70% of French wines belonging to higher quality are going for restaurant consumption. French wines have already fully gained consumer‘s trust and are paid good prices even though not always their price/quality relationship is seen by distributors as a fair one. On the basis of the retail investigation, French wines - with a retail price average of USD 14,2 per 0,75 liters bottle, 75% higher than the general average, are by far the most expensive items available on the market (see graph ). The same holds true when only table wines are considered: French "vins de pays" cost on average USD 5,5/bottle, as compared to a USD 3,5 general average for the category. Although products from this country can be found in all price intervals used to segment the market -with the exception of the cheapest one (USD 2-4), most of them fall inside the highest price intervals - see Table 4 below. Due mostly to their expensive prices, consumption of French wine is not expected to growth significantly over the coming years: they will indeed continue to be consumed by a restricted consumer "elite", unless less expensive wines will be introduced; German wines: they were among the first ones introduced when this market opened up to deliveries alternative to the traditional ones from Eastern Europe. As it could be expected, they were mainly white; semi-sweet and sweet wines. Their prices ranged from low to middle. During the last few years, products originating from Germany are reported to have lost market shares due to their reported low quality. Indeed, only one interviewed operator (Baltic Wines) quoted to still import wines from this country. Nevertheless, quite a good amount of German wines can still be found on sale among retailers. These products are considered to be for consumers with middle-low spending capacity and their sales are expected to continue the negative trend they followed during the last couple of years. All the items from this country recorded within the retail survey are table wines, and fall in the "middle-low" price class (USD 4-6). Their average price (USD4,4) is the lowest among wines with an EU origin; 

Spanish wines: they have definitively been the most successful products on the Latvian wine market during the last 3/4 years, both in the case of red and white wines. Based on investigation results, they can currently be found in all market segments from "middle-low" (18% of the surveyed items) to "high" (23%), in the case of "reserve wines", and even in "luxury" group (5%). Their average price (USD 7,7) is slightly below total market average (USD 8,1) based on retail survey outcomes, and higher only to the German one for wines with an EU origin. Very satisfactory Spanish wine market performance is unanimously attributed to the excellent cost-produce quality ratio; the outstanding produce presentation -even for cheaper, "table" wine; the easiness in arranging and receiving supplies from this country and the good payment terms allowed by Spanish exporters. These wines, mainly sold in super-markets and other food-stores, have definitively set the pace for future wine market development in Latvia. Their consumption is expected to continue to grow in the coming future in all the segments they are in at the moment; Italian wines: performance of wines from Italy has not been as good as the ones from Spain. This was mainly due to the reported low quality of Italian products introduced into the Latvian market -generally sweet and semi-sweet products like the ones under the "Tonino" trade-mark. During the last few years, an attempt to re-position products from this country is taking place but this is facing difficulties due to the not so brilliant image acquired by Italian wines among consumers and distributors and fierce competition from other supplying countries -mainly Spain, but also Chile, Argentina, South Africa, USA and Australia. A quite good range of Italian products can now be found on the Latvian market, in all market segments, including sometimes top of the market segments -tackled by trade marks like: "Brunello di Montalcino", "Barolo" etc. With reference to the retail survey, Italian most sold products result to be dry red DOC wines (77% of total amount of wines from this country) and semisweet table wines, although at a much lesser extent. Average price is USD 9/bottle, slightly above the general average. Consumption of wine from this country is not expected to growth significantly over the coming future, although a couple of importers showed a keen interest in importing top-quality Italian products; "New World" wines: wines from South Africa, Chile, Argentina, USA, Australia, New Zealand have been the latest to be introduced on the Latvian market, in an attempt to widen importers produce portfolio and to gain market shares to competitors -selling French, Spanish, Bulgarian and Georgian wines. "New World" wines can be found in all market segments, and their purchasers are mainly consumers with a spending capacity from middle-low to high. Indeed, according to retail survey’s results, the majority (61%) of the items with this origin falls in the "middle-high" and "high" price ranges. This is mainly true in the case of Australian and Chilean wines, while USA and South African ones are more frequently found in the "middle-low" interval (USD4-6). The information included in the importers’ price lists shows that New Zealand market positioning mirrors the one of Australia and Chile, whilst Argentina positioning is closer to the one of USA, South Africa and Israel. Produces from “New World” countries cover a very wide range of both "fine" and "table" wines, with a general very good produce presentation. More and more these wines target dry red wine consumers segment, which is seen as the most promising segment to be explored in the coming future. A fierce battle to conquer market shares is anyway taking place in Latvia among importers/distributors of this kind of wines and it is difficult at this stage to forecast likely outcomes. Indeed, in the light of the current stagnation of the country economy, future market success of these wines -and ability to survive of the importers who back them up, will very much depend on the amount and quality of promotion among distributors and final consumers they will enjoy and fairness of their price/quality ratio. Also the size and solidity of the importer/distributor responsible of their introduction and marketing in the Latvian market will play a very important role in guaranteeing a future survival or success of these relatively new products; Eastern European wines: While New World and EU products can be easily found also within the dry segment, wines from East Europe and the former Soviet Union mainly gather sweet and semi-sweet wines, both whites and reds (see Graph.7 and the end of this section). In general, wines with this origin are bought by consumers with a low and middle-low spending capacity: the retail investigation shows that the bulk of them (70%) falls within the two cheapest price ranges, with 58% of them within the lowest one (USD 2-4) -see Graph.8, which shows how wines with a different origin are distributed among the various price ranges. Leaving aside Moldovan wines -which will be analyzed separately below, the situation of the Bulgarian, Romanian, Georgian, Hungarian and Ukrainian wines differs depending on the country of origin and product considered. Bulgarian "Manastirska" (sweet, semisweet, both red and white) and "Kagor" (red dessert), sold at very competitive prices, gained very large market shares among low and middle-low spending capacity consumers. Indeed, retail investigation shows that all the 15 Bulgarian items surveyed fall within the "low" and "medium low" price ranges, whilst their price average (USD 2,9) is only higher than the Hungarian one, although the lowest among DOC (or collection) wines. Their presentation is seen as good, thanks to the radical innovation in bottle shapes and label appearance and contents made by their Bulgarian or foreigner (Bulgaria based) producer or foreigner (Dutch) bottler/exporter. Although "Manastirska" and -to a lesser extent, "Kagor", are still scoring as best sellers among most relevant retailers -multiple retailers and food shops, their sales remained flat over the last two years, thus making further increases in their consumption levels quite unlikely. Due to their poor quality level, most (but not all) of operators, in fact, expect these products to decrease their sales levels and may be even to disappear as wine knowledge will upgrade among Latvian consumers. As for these two products, also remaining Bulgarian wines -white and red, sweet, semi-dry and dry, show a good positioning among middle-low and middle spending capacity consumers -very often belonging to the ethnically "Russian" share of the Latvian population, which feels a kind of "nostalgia" for the "gone times" and for wines available on the market before 1989. More or less the same situation can be described for Georgian wines. "Kindzmarauli" (red, sweet) and "Kvanchkara" (red, semisweet), can -by far and large, be considered as the most recent "success story" on the Latvian market. Supported indeed by an heavy radio promotional campaign, these cheap wines were introduced into this market around 1,5 - 2 years ago and quickly gained market shares due to their good presentation, sweet taste and price competitiveness. Several interviewed operators referred to these wines' market performance as the key factor to have induced consumers during 1998 to shift more and more towards consumption of red wines. The marketing strategy followed in Latvia by Georgian operators have been able to introduce into this market differentiated qualities of the same wine -such as: "Kvanchkara", each with a different price level. Indeed, DOC "Kvanchkara" is sold at a retail price of almost 9 USD. This makes Georgian wines price average (USD 6,7 as results from the retail survey) as the highest one among Eastern European countries. What has to be seen as the best results of the quite astonishing marketing activity performed by Georgian and, to a lesser extent, Bulgarian wine producers/distributors, is the fact that they are widely acknowledged to have paved the way to wine consumption among consumers usually proner -for age, budgetary and cultural reasons, to beer and spirit drinking. It is indeed seen as quite unlikely these new consumers will now go back to old consumption styles the moment these product will disappear from the market. To the contrary, a good share of them -above all consumers nowadays low aged, is seen as most likely to progress towards an higher and more dry-oriented kind of wine consumption. Romanian and Hungarian wines fall mostly within the sweet and semisweet segments; are present on the market with a more limited -both in terms of trade marks and varieties, range of kinds than Georgian and Bulgarian ones and are usually low price products. As for Ukrainian wines -originating mainly from Crimea, they are usually placed at the bottom of the Latvian wine market. This is seen as caused by: inconsistency of produce quality; poor produce presentation; lack of promotion; difficulty in arranging deliveries from this country and high transport/logistics costs. Sparkling wines from Odessa plant seem to enjoy a better positioning than the one which -in general, have other Ukrainian wines. this is largely due to the own distribution network this plant set up and runs in Latvia and the good work done over past years on produce presentation, promotion and quality; Latvian wines: as said at above point 3.3, Latvia has got only one producing plant (Rigas Vini) mainly involved in production and selling of sparkling wines. These latter are produced from raw materials imported on bulk from France and Spain. With an average amount of 15 millions bottles of sparkling wines produced every year , Riga Vinss is the strongest seller of this kind of wine in Latvia. Its leading position within this segment is kept by a massive promotional policy -reported to be worth 250 000 USD/year, and run through local media. Riga Vinss is also engaged in massive exports of its sparkling wines to close or far away (US, Germany and Denmark) countries and sometimes -like in neighboring Estonia, managing to emerge also there as a leading seller. Riga Vinss is also importing -sometimes in bulk, and distributing wines and liqueurs from various countries in the world -see company ‘s fiche in Annex 4 A.

international bottle size (75 cl) should be adopted; labels should be appealing to final consumers in terms of graphic and design. All indications should be in English, with the back label carrying also a sticker with basic information in Latvian -this is a pre-requisite to sell the produce on Latvian market. Very often this is taken care by the distributor/importer itself; bottle capsules should be used, along with some other small promotional material (small tags around the bottle necks) to provide further explanation on wine characteristics or/and wine consumption; and clear statement about the quality of wine, highlighting if it is a "table" or "origin certificated-DOC" kind of wine. Produce presentation -along with produce quality, is -after price, the criteria most frequently quoted by interviewed operators as the most relevant criteria in eventually motivating them to get supplies from Moldova -see company's’ fiches in Annex 4 A.

difficulty to receive samples prior to signing any purchasing contract. Moldovan sellers are either reluctant to send them or take too long to arrange them. Furthermore, not consistency between samples and final deliveries are seen as one of the most prominent obstacle when purchasing wine from Moldova; difficulty to arrange transport from Moldova, either by road and rail due to lack of carriers or space on cargo-train; high transport costs to cross Ukraine and Bielorussia, due to both bureaucratic and security matters; difficulty to cross Ukrainian and Bielorussian borders, due to the heavy amount of bureaucratic procedures to go through; pilferage of transported lots and undue payments to be made to speed up operations or simply to be able to cross borders.

terms of payment: no interviewed operators is prepared to pay before 30 days from the moment they receive goods. Sometimes payment can be delayed up to 90/120 days for products particularly slow in their sales performances. These are payment terms usually agreed upon with the other current suppliers; pre-payment: Tammi is prepared to pre-pay produce only for the first purchase, whilst Grape would do only over amounts above the agreed credit terms. All remaining interviewed operators showed a clear, negative attitude towards this matter; arrangement of transport and custom clearance at Latvian borders: apart from Rigas Vini which would prefer transport to be arranged by the seller, all other interviewed operators said they can deal themselves with these matters. Documentation needed to import wines/spirits into Latvia include: customs declaration; original of the contract signed among parties; certificate stating health conformity; samples: they are always required before signing any purchasing contract. This is also because local authorities need to carry out produce analyses before allowing a certain importer to introduce a product into Latvia. This is used to verify correspondence of what stated in the supplier/importer documentation with real contents of analyzed products; bulk delivery: only Riga Vinss -for obvious reasons, showed some interest on this; exclusivity of produce distribution in Latvia: it is usually preferred and sometimes requested. This is seen as a way to undercut the high competition existing on this market and to secure returns from any advertising/promotional campaign developed for a specific product; minimum size of delivery: usually, one 22" container; back-up actions: when required, they refer to either promotional/advertising campaigns which cost would be entirely paid by suppliers or shared with local distributor or to free amount of goods to be used for organizing free tasting among Latvian wholesalers/retailers and, finally, consumers at retail outlets.