Comment - Whither Stolichnaya…
By Patience Gould | 10 April 2008
Pernod Ricard's success in landing Absolut vodka has cast doubt over the future of Stolichnaya, currently marketed internationally by Pernod but which the French company will now be looking to offload. Prior to the Absolut deal, Pernod had been seeking to buy Stoli but the complicated issues over the brand's ownership hampered those ambitions. Now, writes Patience Gould, the logical solution would be for Beam Global, which was pipped to the Absolut prize by Pernod, to make a move for Stoli.
Pity poor Stoli! The brand has weathered the years of the Iron Curtain, several wars and allied to all of this has endured these turbulent days of rationalisation in the global drinks industry, not to mention numerous changes in its distribution.
All of which, one would imagine, would have stretched the brand equity to breaking point. Indeed there are not many spirit brands on the block that could have endured such treatment. But somehow Stoli marches on - well not exactly.
For pro-Stolyites there was a collective sigh of relief when the Russian voddy landed up in the Pernod Ricard camp - a company with proven strengths in both brand building and brand recovery. But clearly the three years of talks between SPI, the Cyprus-based owners of the trademark outside Federal Russia, and the Russian government over ultimate ownership of the Stolichnaya brand would have tried the patience of Robert The Bruce.
Stoli arrived in the Pernod Ricard camp following the company's takeover of Allied Domecq - the voddy's previous distributors - and the French multinational's excitement at the prospect of ultimately owning an international vodka brand was palpable. The French group was adamant that it would be successful in gaining ownership of the Russian icon. From the outset the plan was to own it outright. As the French company stated unequivocally at the time: "We have the same deal as Allied Domecq - except that the Pernod Ricard objective is to own it."
However, during the protracted negotiations with SPI it was announced that the Swedish Government was putting V&S - that is Absolut - up for sale. Pernod Ricard openly said it was also after the Swedish drinks producer and on paper the signs were not good for Stoli. The chopping and changing of distributors over the years has taken its toll. Its annual case tally of 3.3m is no match for Absolut's 10.73m (PASH Beverage Research) and while both brands' heartland is the US, the Swedish voddy enjoys the greater critical mass, so vital for Pernod Ricard.
So the $64,000 question is whither Stoli now? Pernod has confirmed that while it will continue to market the brand for now, it will be giving it up in due course owing to anti-trust issues, so Stoli is once again looking for a new home. The really neat answer would be for the brand to move straight into the Fortune Brands-owned Beam Global Wine & Spirits stable. The US group was the favourite to win V&S, particularly as both were partners in the international distribution company, Maxxium, but there were ongoing doubts over money and clearly Pernod Ricard had the extra financial clout to win its glittering prize.
For Stoli, the Beam option would be a fortunate - pun quite intended - solution. Aside from its undoubted strength Stateside, Beam has been expanding its portfolio and developing an array of spirits brands globally. Now along with its flagship Bourbon Jim Beam, the company boasts among others the Teacher's Scotch whisky brand, now trundling along very nicely in India, acclaimed Islay single malt Laphroaig and of course Courvoisier Cognac.
The word out on the street is that Pernod Ricard intends to "get Absolut out of Maxxium" just as soon as possible, within the next three months apparently, and while that may seem like indecent haste, any untoward delay would undoubtedly dent the brand's momentum, not just Stateside but internationally too where the vodka is making positive progress.
If this is indeed the case it would leave a gaping hole in the Maxxium portfolio, which unless filled with the likes of Stoli, could herald change at the beset distribution company. "It may even lead to a breakdown - or at least a change in operations whereby the top ten international Maxxium outfits remain, leaving other distribution options around the world up for grabs," says one industry pundit.
However, even though the Beam option makes sense for the brand, the headache of ultimate ownership still remains. But even here there could be a solution. "Clearly it's a no-go with the Russian government but it's entirely possible that they sell off everything internationally, except Russia." Well pigs could fly as they say - but if Beam shoe-horned Stoli into the Maxxium empire as a quid pro quo it would seem to be the most logical step forward, allowing the ownership discussions to rumble on and on.
One thing is for sure: Stoli does not deserve its chequered international history. At least under the Pernod Ricard flag, the brand has been put on a positive path. Aided and abetted by an international advertising campaign under the "Choose authenticity" banner it is now available in 83 markets around the world. Crucially too the brand is moving forward - volume last year was 7.4% ahead of 2006, and if there's not too much of a hiatus it should comfortably better that in the next 12 months.
For an apt summary of Stoli's potential, which also hints at its more than unconventional brand history, one need look no further than the book Pernod Ricard itself published on the subject, The Spirit of Russian Vodka. "The history of Stolichnaya Russian vodka is a remarkable tale of innovation and determination, blazing a trail for Russia and vodka around the world." Let's hope this remains the case.
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