Setting up a vodka empire
That’s Russian hubris for you. In three years’ time, Russian Standard vodka’s owner, the billionaire Roustam Tariko, hopes to sell more vodka than Diageo.
In recent years, Mr Tariko, who made his fortune from vodka and banking (his bank is called, not surprisingly, Russian Standard Bank) has branched out in all segments of the vodka market in an effort to compete with drinks groups Diageo (Smirnoff, Ketel One, Ciroc) and Pernod Ricard (Absolut, Wyborowa).
So since 2011 he has reportedly spent USD 1.1 billion in cash and assumed debt to gain control of Polish spirits maker Central European Distribution (CEDC), buying it out of bankruptcy last year. The deal gave Mr Tariko’s company the Zubrówka brand, a Polish vodka flavoured with bison grass, as well as the cheaper Green Mark vodka, a Russian brand that sells for about USD 15 a bottle in the United States.
The expanded portfolio catapulted Mr Tariko’s operation into second rank, with total vodka sales exceeding 34 million 9 litre cases sold, ahead of France’s Pernod Ricard, but still behind the UK’s Diageo in terms of volumes sold, it was reported. Russian Standard sells more than 2.9 million 9 litre cases annually, compared with Smirnoff’s 25.8 million cases (2012).
Originally, Mr Tariko made his fortune importing spirits made by Bacardi’s Martini & Rossi unit into post-communist Russia. He launched Russian Standard in 1998 in a bid to produce a high-end brand in the country.
The UK is Russian Standard’s biggest export market, thanks to clever marketing that includes travelling groups of “Miss Russia” contestants, who promote the brand at bars and special events.
The Russian Standard brand has grown by an average rate of 10 percent per year by volume over the past five years, compared with a 1 percent decline for the USD 49 billion vodka market, according to industry estimates.
Whether Mr Tariko will be able to overtake Diageo in sales volumes is another matter. The world’s major drinks company has revenues almost six times that of Russian Standard’s annual sales of about USD 3 billion.
Integrating the new Polish vodka brands could prove difficult. CEDC is currently very badly positioned. It is overexposed to the highly competitive and shrinking central and eastern European vodka market, where most vodka is sold in the value segment. Mr Tariko reportedly wants to dominate the market from “Germany to Vladivostok” by bolstering CEDC’s marketing budget which was slashed as the company collapsed.
