Travel Retail and Duty Free Business Intelligence    Saturday 01 November 2014

NEWS

SPIRITS & WINES: SPI drives international growth for ‘Stoli’ and Kremlyovskaya

Published: 10/03/04

10 March 2004; Source: ©The Moodie Report

By Trevor Lloyd-Jones

CYPRUS. SPI Spirits (Cyprus), the Cyprus-based international arm (domestic and duty free) for ZAO Soyuzplodimport (SPI), is seeking to appoint a distributor for Asia.

SPI Spirits international managing director Theo Papanicolau told The Moodie Report: “We are trying to set up new business in Asia and we are in the initial steps of creating something solid.”

The company handles the leading Russian vodka Stolichnaya and other brands with international ambitions such as Kremlyovskaya. Stolicnaya is the world's top-selling vodka brand and one of the most famous brand names ever to come out of Russia -with the possible exceptions of Sputnik and the Bolshoi Ballet.

The company is attending the Duty Free Show of the Americas later this month in Orlando but has decided not to exhibit in Singapore in May.

Another popular vodka trademark - Kremlyovskaya - is coming back to the Russian and international markets. SPI group, which controls international sales for Stolichnaya, Moskovskaya and numerous other vodka brands, acquired the Kremlyovskaya trademark and started production of this vodka at its own distillery in Kaliningrad last year. SPI has declared it intends to take Kremlyovskaya back to its leading position on the Russian market.

An agreement about the Kremlyovskaya trademark was reached in early 2003. The deal for an undisclosed sum is described as a multistage one, delayed by formal proceedings and the new plan was only made possible by the end of last year. The seller was an American company named Global Spirits Marketing.

Vodka marketers may recollect that two years ago Global Spirits Marketing put the Kremlyovskaya trademark on sale pricing it at US$60 million. But at that time it attracted no interest and potential buyers were frightened off by both the high price and long absence of the brand on the market.

If SPI manages to reanimate Kremlyovskaya, this would become a significant event in the vodka category. Until relatively recently Kremlyovskaya held the first place in vodka sales in Russia. In 1995 (when it was sold) it shipped five million decilitres (approximately US$200 million in value terms). At that time Kremlyovskaya also became the first ‘post-perestroika’ brand of Russian vodka sold abroad. SPI believes that Kremlyovskaya can reignite its good consumer reputation, because unlike other vodkas sold in early 1990s (such as Rasputin and Demidoff), it was never falsified. Much depends on the marketing budget dedicated to its revival.

“We have redesigned Kremlyovskaya and we are relaunching it,” said Papanicolau. “We are in the early steps of this relaunch. Distributors have been supplied with this new product and we are now working on the whole strategy for the Kremlyovskaya brand and taking their feedback.”

Full details of the marketing push for the super-premium brand are expected to be finalised by June 2004. “It is being positioned at the lower-price point of the super-premium category, as a pure authentic Russian vodka with some special characteristics in the spirit,” he added.

Meanwhile, in line with trends in the vodka category Stolichnaya has been growing its range of flavoured lines, adding Cranberi (cranberry) last year and withdrawing lemon to be replaced with Citros (citrus). In addition to standard Stolichnaya vodka (Stolichnaya Red), the flavoured varieties now include Stoli Ohranj (orange), Stoli Razberi (raspberry), Stoli Vanil (vanilla), Stoli Strasberi (strawberry), Stoli Persik (peach). Also included in the product line are Stoli 100 proof (Stolichnaya Blue), the super-premium Stolichnaya Cristall and Stolichnaya Gold.

“In duty free the Stolichnaya flavours are doing fine in some areas, but it is not big volume,” said Papanicolau.

Stolichnaya has been growing consistently faster than the vodka category, helped by the acquisition of the US trademark rights to the brand by Allied Domecq in 2001. According to AC Nielsen data, the Stolichnaya family has experienced +15.6% growth toward the end of 2003, nearly quadrupling the pace of the overall vodka category, and partly the result of new flavoured varieties. Growth of the famous Rigas Balzams brand is another aim of the SPI drinks group, which has been restructured with the creation of its own marketing operation formed as part of the full production cycle.

ZAO Soyuzplodimport (SPI) and the Cyprus arm is not to be confused with SPI's Russian state-owned competitors, including FKP Soyuzplodoimport and FGUP Soyuzplodoimport. The troubled history of Stolichnaya, James Bond’s drink of choice, is a story of Russia’s soul. The Stolichnaya brand claims to sell US$2 billion a year worldwide. Hence the interminable and bitter battle between the Russian Ministry of Agriculture and (the still partially state-owned) SPI Spirits.

The vodka has for some years been at the centre of an ownership battle in Moscow described as an “ongoing process”, a series of corporate skirmishes that feature a fugitive Russian tycoon – SPI chairman Yuri Scheffler – allegations of death threats, secret distilleries and impounded sea freighters. The Soviet Union sold the rights to the Stolichnaya trademark a decade ago, but now it seems the Russian government wants Stoli back on grounds of over-riding national interest.

"The Russian government is clearly trying to re-nationalize the vodka business," said Richard Edlin, the lawyer for SPI Group recently. "This is nothing but a naked asset grab."

See SPI at the Duty Free Show of the Americas in Orlando at suite number 30606 or for enquiries telephone +357 257 40055.