just the answer - Stolichnaya
Pernod Ricard's acquisition of Absolut has once again made the future of Stolichnaya a subject of intense speculation. Pernod had been in negotiations with Russian owner SPI Group about a possible acquisition of Stolichnaya, but for anti-trust reasons has had to abandon any such plans and walk away from its existing international distribution agreement for the brand. In this month's just the answer, Chris Mercer spoke with SPI minority shareholder Andrey Skurikhin about Stoli's future.
j-d: There has been a lot of talk and confusion about the future of Stolichnaya vodka. Could you explain SPI's position?
Andrey Skurikhin: The situtation is very simple. There has been a lot of speculation in the media, which has centred around whether we are selling Stolichnaya or not. It was not SPI who started this speculation.
SPI does not have plans to sell Stolichnaya. After Pernod Ricard bought Absolut vodka, we decided to restructure all of our distribution systems worldwide to increase our own performance.
j-d: Can you tell us more about what this re-structure involves?
Skurikhin: Before our global distribution deal with Allied Domecq [and subsequently Pernod], we had our own distributors and we arranged the deals ourselves. We do have this experience and we believe that we can successfully rebuild. We are currently in negotiations with potential distributors in many countries.
j-d: So are you not looking for one international distributor to replace Pernod Ricard?
Skurikhin: Nothing is impossible. We do not strike out any option. But it is difficult to find one company that can give Stolichnaya global solutions with the necessary effectiveness. If there is somebody out there, we will seriously consider that option, but so far we have not found anyone.
j-d: Are you prioritising a distribution deal for the US?
Skurikhin: The US is a major market in terms of volumes and sales, and our recent analysis shows high single-digit growth rates there. We are in discussions with several well-known companies in the market.
j-d: You said Stolichnaya had shown good growth rates in the US. How do you plan to take the brand forward in what is now a very competitive market?
Skurikhin: Stolichnaya growth can be much higher than it has been before. Stolichnaya has been in the market for a very long time, since the 1970s. It's a brand everybody has in the back of their minds. What we need to do is revitalise Stolichnaya's image to make it more relevant for modern consumers. We need to rejuvenate our advertising and we are planning to launch a new campaign soon. I'm afraid I cannot give more details on the campaign at this time.
j-d: What is your market share in the US?
Skurikhin: It depends on which section of the vodka market you are talking about. We have around 5% of the overall vodka market.
j-d: Turning to your long-running dispute with the Russian government over Stolichnaya ownership, Russian press reports have suggested you are keen to bring this issue to a close. Is this the case?
Skurikhin: We have been in this situation [with the Government] for the last eight years. We won our court case in New York in 2006 and after that, the whole financial grounds for this legal dispute disappeared. It makes no sense to continue this financially, and because of that the dispute must come to an end.
j-d: There are reports that you may look to do a deal with the Government in order to end the dispute swiftly. Can you elaborate?
Skurikhin: We have always been open to amicable discussions. I believe the Russian government has based its position on inaccurate assumptions and the  US court ruling should have given some clarification.
It looks like the Russian government is considering taking the Russian portion of the trademark and assigning it to another government department. If this change in government attitude will see real attempts to find a settlement, then we have always been prepared to do that. Stolichnaya will only benefit.
There must be a beneficial and profitable solution for both sides. There are different ways we could do this. For example, via a joint-venture agreement or by separating the Russian portion of the trademark. We are prepared to discuss a just and fair solution, if the Russian side is prepared to do the same.
Right now there is no economical basis for the Russian government to continue this battle.
j-d: Do you have a time limit for a deal?
Skurikhin: I do not want to put a time limit on discussions. If something will happen in two, five or ten years' time, then great. The legal battle creates some uncomfortable surroundings, but from a business point of view we have still been able to make the brand successful.
j-d: So do you disagree with suggestions that this dispute has made foreign companies cautious about doing business with you?
Skurikhin: We have not noticed any problems in our negotiations. Distribution is distribution.
j-d: You say there are no plans to sell Stolichnaya. Have you had offers?
Skurikhin: From time to time there are different requests coming to us from different players. But we are not selling Stolichnaya, we are happy owning this asset and we do not see any benefit for us in selling it at the moment.
The value of the brand is high and within the next five years we can make it higher. We have a plan to grow the brand, and then we will turn to the second page to see what we should do, whether we should have a sale or a joint venture with somebody.
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