In 2019, Ukrainian wine enterprises paid UAH 1,507 billion in excise duties, UAH 300 million in VAT, and UAH 700 million in retail taxes to the state budget.
Viticulture and winemaking is an area in which about 200 people are currently employed. man It also provides employment to the industries that serve it: logistics, retail, HoReCa, consulting. The winemaking industry is also inextricably linked with glass, paper, and cardboard production — packaging, labels, production of accessories — muesli, corks, etc.
Nevertheless, the capacious and promising Ukrainian viticulture and winemaking industry, while overall sales in the "wine" category are growing, is stagnating. Thus, in the period from 2014 to 2018, according to the State Committee of Statistics, the total area of vineyards in Ukraine decreased by 6 thousand hectares (from 49 to 43 thousand hectares).
Why is this happening? The reason, first of all, is that, despite the efforts of Ukrainian winemakers, the "Ukrainian wine" brand has not yet been formed. Other things being equal, the consumer sometimes chooses inexpensive import positions, preferring them to Ukrainian ones in the same price segment. Accordingly, sales of Ukrainian wines are not growing.
Such processes do not affect the industry in the best way: vineyards are uprooted, workplaces are reduced, and contributions to the state budget are reduced. If we do not change this situation, it will be difficult for Ukrainian viticulture and winemaking to survive. Even now, the majority of winemaking enterprises in Ukraine are unprofitable and need state support: today, as never before, a program for the development of the industry for the next 5-10 years is needed.
The criticality of the situation in the industry is also emphasized by the analysis of pricing: about 90% of still wine produced in Ukraine is sold at a price of less than UAH 100 per bottle. This is the price at which small and medium-sized wine businesses simply will not be able to get the opportunity to invest in development and promotion, to make a profit and produce quality wine, after paying taxes and bills of suppliers, distributors and networks.
So, the situation in the industry is not easy. For the production of quality wine (and we have such a potential), investments and capital are necessary, which, unfortunately, the winemakers themselves cannot generate on such a low-margin product. We, as manufacturers, do not wait for investments, and we understand that it is necessary to save, first of all, large enterprises, on which the well-being of entire regions sometimes depends. We also understand that it is unreasonable to expect monetary assistance from the state. Consequently, we see it possible to quickly implement several simple and effective actions described below.
Action No. 1: abolition of excise duty on still and sparkling Ukrainian wines. This will bring Ukraine closer to the norms and standards by which the EU regulates its wine markets, as well as make the Ukrainian product more accessible to the domestic consumer.
Action No. 2: re-establishment of a special fund to which deductions from the retail sale of wines will be made, as it was previously with a 1,5% fee. Currently, two excise taxes are actually paid: an excise tax confirmed by an excise stamp, and a sales tax. Instead of fully sending these deductions to local budgets, as is happening now, they should be divided: half will be left in local budgets, half will be sent to a special fund that will finance the systemic development of the industry: participation of winemakers in export exhibitions, planting of new vineyards , purchase of funds for their processing and Ukrainian equipment, financing of educational programs. From this same budget, it is possible to finance the development and support of the "Ukrainian wine" brand, the development of which is aimed at creating a positive image of Ukrainian wine in the domestic market.
Action No. 3: assistance in entering international markets. How can the state contribute to this? First of all, thanks to the creation of free trade zones. I will give an example: Ukraine has not yet implemented the Free Trade Zone Agreement with Turkey. Despite the fact that even now, during the quarantine period, Ukrainian citizens actively visit Turkey, often as tourists, and spend money in this country, we still do not have the opportunity to use the preferences provided by the free trade zone. For comparison, neighboring Moldova has successfully implemented such an agreement and, with a much smaller tourist flow, has already received the opportunity to export its wines to the Turkish market with zero duty.
From 2014 to 2018, the total area of vineyards in Ukraine decreased by 6 thousand hectares
Meanwhile, at Ukrainian diplomatic receptions, as a rule, non-Ukrainian wine is drunk. This practice must be changed, because there is a worthy Ukrainian product, and it is precisely this product that must be supported by all means, presenting it to potential importers and consumers in other countries.
These simple "exercises in three actions" will allow business to survive during the creation of a long-term strategy for the development of the industry, do not represent conflicts for all market participants - from manufacturers to final points of sale, importers and distributors, and also show the will of the state in the matter of creating an investment-attractive climate in this sector of the economy.
Anna Gorkun, Novoe vremya
