Stoli Group is owned by SPI Group

Stoli Group is owned by SPI Group

Late last week, the head of Stoli Group, Hugues Pietrini, was in London for a few days. While in town, news & insights editor Andy Morton met him for lunch to talk about executive churn, the prospects for Stolichnaya and Stoli's continued expansion into other spirits sectors.

In a London restaurant, on the 40th floor, Stoli Group CEO Hugues Pietrini is discussing the view from the top. Not the one out the window - delightful though it is on this bright February afternoon. Instead, we're talking about what it is like to lead Stoli - the spirits arm of SPI Group, which in turn is owned by Russian billionaire Yuri Shefler - compared to holding an executive spot in a publicly-listed multinational.

The difference, says Pietrini, who as a former Moët Hennessy, Heineken and Orangina Schweppes employee ought to know, comes down to bureaucracy. Or, more accurately, a lack thereof. "You have the ability to do things," he says of his current role. "In large companies, even when you are the CEO or a brand owner or whatever, your autonomy is very limited. They will not tell you that, but that is the reality."

Pietrini's autonomy at Stoli in the year since he took over has led to many changes at the group. Mainly known for the Stolichanaya vodka brand, Stoli Group has expanded its portfolio in recent years. Some of the new entrants, such as American whiskey brands Kentucky Owl (bought just over a year ago) and Louisiana Spirits' Bayou Rum (Stoli exclusively handles Bayou's US distribution), precede Pietrini's time at the company. Others, like last year's launch of new Tequila brand Cenote, have come under his watch. More is to follow - a mezcal will launch in the next few weeks, while other as-yet-unannounced projects are imminent.

These add-ons have altered the company massively, from a vodka-dominated supplier to a broader-based spirits company looking to appeal to the premium on-premise. Stolichanya remains the company's focus but, when it comes to gaining space on the back bar, the brand now serves as the thin end of an increasingly-appealing wedge.

Stoli has also seen changes of a different kind. Over the past few years, a succession of managers have exited the group, some after only a relatively short time. Pietrini's predecessor as Stoli Group CEO, Rob Cullins, left in October 2016 after less than two years in the post. Cullins resurfaced this month as the new North America head for Italian liqueur maker Gruppo Montenegro, which is helmed by another ex-Stoli man, Marco Ferrari.

Stoli Group's Europe MD, Jean-Dominique Andreu, has also moved on, taking over as CMO at Cognac house Camus this month. One of Stoli's biggest changes, though, came three weeks ago, when North America CEO Patrick Piana and his CMO Brian Cox departed.

Judged from the outside, the company would seem in a state of flux. That, however, is one view definitely not considered by Pietrini.

"I needed to make some changes, so these changes have happened"

"[Management departures] are a part of corporate life," says the CEO, who declined to comment directly on Piana and Cox. "I needed to make some changes, so these changes have happened. Now, we are fully resourced to take it to the next level."

The number of people moving, however, does raise some questions. Would Pietrini describe Stoli Group as a challenging company to work for?

Hugues Pietrini became CEO of Stoli Group in April, 2017

"You have to have a certain skill set, a certain profile," Pietrini replies. "I'm much more of an entrepreneur. I enjoyed my time working for private equity at Orangina Schweppes and this is more the type of job that fits me because it is entrepreneurial. I have one shareholder [Shefler]. I see him regularly, and he trusts me and empowers me to make decisions. That's why we're able to invest, make important calls and create brands, but in a quick way. In other companies, it would have taken me three years to do what I have done in past six months."

Changes accomplished, Pietrini feels he now has the right team in place to lead Stoli Group for the next five years - a mix of new hires and existing staff that have been "empowered" to take on more important roles. It is a relatively young team, he says, one that is "able to develop, to be innovative, nimble and fast", as well as be more globally-focused. Indeed, Pietrini will merge the position of North America chief into his own as he takes on more responsibilities as CEO. Meanwhile, general sales manager Rudy Costello is onboard from Beam Suntory as COO, while two-year Stoli veteran Russell Pareti has moved up to lead marketing.

The challenges facing the newly-assembled team are many. According to Stoli - which as a private company doesn't release figures - Stolichnaya is growing volumes at about 5% to 6% a year globally. In the US - the world's most valuable spirits market - the brand's growth has been slower. Call it the Tito effect, if you like: the runaway success of Fifth Generation's Tito's Handmade Vodka, which according to some metrics got within spitting distance last year of Smirnoff, is taking share all over the country. Meanwhile, across the rest of the world, Stoli is rebuilding distribution channels that Pietrini says collapsed after Pernod Ricard bought Absolut in 2008.

"We live in very interesting times," says Pietrini. "It is not just wines and spirits, but generally the mainstream-established brands that are struggling. Consumers are looking for unique, authentic experiences. The consumer is even more of a specialist than we are."

While Tito's has captured consumer attention, Pietrini says the vodka category as a whole has dropped the ball when it comes to staying relevant. Vodka has fallen away from its previous heights as the favourite nightclub barcall, having previously dominated the club and cocktail scene. The category may still be the biggest in spirits but, for Pietrini, that's not enough.

"Tito's is a huge success, for sure," he says. "But, we need to come back and tell the consumer that quality is important, history is important." Put simply, Pietrini believes it's about trying "to be cool again".

So, vodka isn't cool anymore?

"In the US, a lot of the brands are big, But, they are not cool"

"In the US, a lot of the brands are big," says Pietrini. "But, they are not cool."

Over the next five years, Stoli plans to recapture the cool with old-fashioned behind-the-bar activations coupled with an increased global marketing spend. Last year, the company linked up with the Universal Pictures movie Atomic Blonde starring Charlize Theron. This week, Stolichnaya will appear in another Cold War-set spy thriller, this time the Jennifer Lawrence-fronted Red Sparrow, on general release from Friday.

"You have to be cool on the band platforms you create, in digital, in classical media," says Pietrini, who, when speaking to bartenders, felt that people had forgotten about Stolichnaya. "We have to make it part of pop culture."

This begins by emphasising Stolichnaya's roots as a Soviet vodka, and its 80-plus years of history. This, says Pietrini, is something Stoli's US competitors can't do. They also can't claim to control all stages of the production process, as Stolichnaya can. The brand grows its own grain, distils its own raw spirit and bottles in its own facilities.

Of course, in doing so Stolichnaya faces a similar problem to that of Bacardi, which owns a self-proclaimed Cuban rum that is oxymoronically made in Puerto Rico. Though Stoli doesn't hide its modern production process, it remains at heart a Russian vodka, but one that is made in Latvia.

For Pietrini, heritage is only part of the picture. Ultimately, it's branding that wins with the consumer.

"At Heineken, I learned that you can have best-tasting beer," he says. "In the end, it's all about the brand: The power of the brand, the importance of the right visibility and advertising across channels. Also, I learned a lot in soft drinks. When you are up against Coca-Cola and its amazing machine you have to do things differently. You have to break the rules, break the code."

Innovation is also part of Pietrini's plan to revitalise Stolichnaya. The company is launching a third flavour in its 30%-abv Stoli Crushed line next month, a mango variant to follow pineapple and ruby red grapefruit, which were rolled out in the US last year. Meanwhile, gluten-free Stolichnanya is performing well after two years on the market, despite being arguably a pointless product - gluten is removed in any distillation process (it's what consumers want, Stoli Group argues, and anyway the recipe is slightly different).

Then, of course, there is Stoli Group's expanded portfolio, which is about to get bigger with the addition of Se Busca, the company's brand new mezcal.

What's striking about Se Busca is that Stoli Group decided not to purchase an existing mezcal brand, but build one from scratch in partnership with a company based in Oaxaca in Mexico. Stoli used the same strategy with new Tequila brand Cenote, which is made in the Fabrica de Tequilas Finos distillery SPI bought into in 2016. In comparison, Diageo bought existing Tequila brand Casamigos late last year in a deal worth up to US$1bn, launching a mezcal under the Casamigos name this month.

For Pietrini, the time is right for the greenfield approach.

"We're back to the binary phase of the market, when some brands were created and you had real visionaries and entrepreneurs"

"I think we're back to the binary phase of the market, when some brands were created and you had real visionaries and entrepreneurs," he explains. "For a while, [brand creation] was impossible because the market was so held up, particularly in the mainstream premium side. But, now it is all about choice and discovery."

Ultimately, though, Stoli Group remains wedded to its most-recognisable brand. Any success for the company, will be because of growth in Stolichnaya. To that end, Pietrini has big ambitions - he wants to double the group's sales in the next five years.

"We have the momentum, we have good distribution partners," he says. "Now, we will start to develop strong platforms and together we can break the clutter."

From this height, it all looks so simple. Making it happen when back on the ground may prove more somewhat harder.

Expert analysis

Global vodka insights - market forecasts, product innovation and consumer trends

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