Andy Morton

Comment - CEDC Pays Price for Past Debts

By | 8 April 2013

CEDC is on the verge of become wholly-owned by Russian Standard

CEDC is on the verge of become wholly-owned by Russian Standard

When Central European Distribution Corporation confirmed yesterday (7 April) that it is set to file for bankruptcy in a US court, it marked a new low for the company whose crippling debts will likely see it become wholly-owned by one of its main competitors, Russian Standard.

It was all so different in 2008, when one set of quarterly results showed net profits up by 77% and sales climbing by 57%. The rosy numbers were in part due to the company's new interests in three spirits operations that year - Russian Alcohol Group, the Parliament vodka brand and the Whitehall Group. At the time, with buoyant trading conditions in all of its markets, the acquisitions were seen as sound business - a riposte to the fast-growing Russian Standard, which had doubled its global sales in the past three years.

However, as the financial crisis hit, the debt CEDC had taken on to invest in the three - eventually deadweight - Russian companies would lead the company to its Chapter 11 filing in Delaware this week.

There were other factors, too, not least the Russian Government's increasingly strict alcohol policy, which since 2008 has cracked down on advertising and introduced tax increases that some have estimated will cut vodka consumption by a third

CEDC also found itself adrift in a mid-priced market where consumers were either moving up to premium labels or, as I wrote last year, dropping down into the non-taxed, illegal market of illicit stills and moonshine hooch.

Now, the company appears to have strong support for its rescue plan, with the vast majority of its note holders agreeing to the bankruptcy and other measures, which aim to clear US$665.2m in debt from CEDC's balance sheets. (The support, however, was just shy of the 99% CEDC required to have the plan accepted without recourse to the bankruptcy courts, just-drinks understand.) Previous filings from the company have also affirmed organic growth in its Polish operations, and improved underlying trends in Russia, CEDC's two main markets.

just-drinks also understands that CEDC's operations outside of the US are not intended to be affected by the bankruptcy filing, with business carrying on as usual. A source at the company highlighted statements from Russian Standard owner Roustem Tariko maintaining that he wants to keep CEDC as a complete company, allying fears that he will break it up and sell it off.

After all, as a fellow spirits business, Russian Standard is what can be termed a “strategic investor” in CEDC, not an equity firm looking to pick over the bones of a failed enterprise.

CEDC may be about to fall into the hands of a former rival, but it should still be around to fight its corner in the robust Eastern European vodka market.

Expert analysis

The Future of the Spirits Market in Russia, to 2016

The report provides the latest, highly detailed information on dynamics in Russian Spirits market, providing marketers with the essential information to understand their own, and their competitors’, position in the market and the information to accurately identify where to compete in the future.

Sectors: Emerging markets – BRIC, Mergers & acquisitions, Spirits

Companies: CEDC

View next/previous articles

Currently reading -

Comment - CEDC Pays Price for Past Debts

There are currently no comments on this article

Be the first to comment on this article

Related research

Central European Distribution Corp (CEDC) in Alcoholic Drinks (Poland)

Russian investor Roustam Tariko, the owner of Russian Standard, gained full control of CEDC in April 2013. The new owner is expected to focus more on the Russian market. This, in turn, could mean less attention devoted to the Polish operations; it is...

Rtds/High-Strength Premixes in Poland

Polish consumers’ need for convenience, strong preference for sweet flavours and interest in refreshing beverages all contributed to the success of beers mixed with lemonade classified by Euromonitor International under RTDs. The trend towards conven...

Spirits in Poland

2012 saw increased sophistication and diversification within the spirits category, despite concerns associated with the economic slowdown. A considerable group of Polish consumers follows Western trends, reflecting strongly aspirational tendencies an...

Related articles

TRAVEL RETAIL: Russian Standard readies Travel Retail-only vodka pack

Russian Standard has released a travel retail exclusive bottling of its namesake vodka brand that is targeted at the gifting occasion.

UK: Stock Spirits eyes IPO as springboard to spirits buys

Stock Spirits will use its recently-announced initial public offering (IPO) to target acquisitions in new Central and Eastern European markets, the company's CEO has told just-drinks.

UK: Oaktree Capital readies Stock Spirits IPO

Oaktree Capital is set to launch an initial public offering for its Stock Spirits division.

just-drinks tagline

Not a member? Join here

Decrease font sizeDecrease font sizeDecrease font size Increase font sizeIncrease font sizeIncrease font size Comment on this article Email this to a friend Print this page