spirits review
Ladoga extends its reach
Ladoga Group president Veniamin Grabar explains to Helen Windle how the company is expanding
Ladoga Group, based in St Petersburg, has
established itself as one of the leading spirits
producers in Russia. Initially a vodka producer,
the company has been expanding and evolving
to take advantage of the market opportunities
available. It now produces brandy, liqueurs,
bitters, vermouth, gin and pre-mixed cocktails,
as well as owning two wineries in Spain, a
distillery in France and the Fruko-Schulz
company in the Czech Republic.
The company boasts some impressive
statistics for 2012, with spirits production up
14.1% on 2011, to reach 3.3m nine-litre cases
in total. The value of the company grew by
10%, reaching RUB9.27bn (US$281m), of
which RUB7.35bn (US$223m) was generated
from the St Petersburg plant.
Ladoga’s largest volume driver is vodka,
selling nearly 1m cases in Russia in 2012.
While some of its lower-priced brands declined
in 2012, the company’s premium selection is
looking healthy. Its key brands are the
premium vodkas Czar’s Gold and Czar’s
Original, which draw inspiration from Peter the
Great and royal Russian heritage. Behind
Russian Standard, the Czar’s brand range is
the second-largest in the premium vodka
segment in Russia and saw growth of 27.4%
in 2012 versus 2011, according to the IWSR.
In the context of the declining Russian vodka
market this growth is even more impressive,
although the premium-plus vodka segments
are faring better than the lower end of the
vodka market. Increasing excise tax and a
sharp rise in the minimum price of vodka is
sacrificing the low-priced market to the
black market.
Excise tax impact
President of Ladoga Group, Veniamin Grabar
talks to the IWSR Magazine about the impact
of these price increases. “The increase in
excise taxes made production of counterfeit
alcohol even more profitable, volumes of
which, without doubt, will grow by 10-15%. A
truck with 20,000 bottles of illegally produced
vodka brings $60,000 – this is a serious
problem for legal producers of alcohol.
Recently, the black market began to raise its
head. It’s not a secret that their success is
down to low prices, which would be especially
attractive to the consumer. Any increase in
excises will strike manufacturers of cheap
vodka first of all. After raising excise taxes, the
cheapest vodka is close to RUB200 ($6),
whereas two years ago you could buy vodka
for less than RUB100 ($3). In my opinion, such
an increase can be characterised as rather
26 September 2013
declining, other spirits categories – and not just
imported spirits – are in growth in Russia.
Ladoga is driving forward the local liqueurs and
bitters categories. Ladoga holds 18-20% of the
market of liqueurs and bitters categories in
Russia and nearly 95% in St Petersburg.
Ladoga’s bitters portfolio grew 26.8% in 2011
and a further 2.3% in 2012, according to the
IWSR. Meanwhile, its liqueurs portfolio grew
17.9% in 2011 and 26.1% in 2012. Grabar
adds: “Consumption of liqueurs and bitters in
Russia is gradually increasing. Recently there
has been a tendency, when choosing between
vodka and liqueurs, for consumers to opt for
the latter. This is primarily due to the fact that
consumers who are buying these kinds of
products are after the taste, not strength. In
addition, during the economic crisis buyers
tried to manage their money rationally and
chose liqueurs and bitters as a cheaper option
and not a lower-quality type of alcohol. If there
are no sharp fluctuations in the Russian
economy in the next five years, this market will
grow steadily.”
Czech acquisition
Veniamin Grabar, president,
Ladoga Group
sharp. Consumers of ordinary vodka,
who cannot afford their favourite
brand, are likely to switch to the use
of counterfeit alcohol; manufacturers
of cheap vodka will be harmed.
“In part, we are protected from the
risks associated with the increase in
excise. We sell vodka in the premium
and super-premium segments.
According to our estimates, the
increase in excise taxes won’t have
huge impact on us. Like many other
players in the alcohol market, we
made large reserves of alcohol at the
end of 2012, before the tax increase.”
However, while the vodka market is
Imperial Collection Gold is the
international version of the firm’s
flagship brand Czar’s Gold
In 2008 Ladoga Group bought Fruko-Schulz,
the Czech spirits producer, for approximately
€15m ($20m). The factory currently
has three bottling lines and a total
capacity of 1.7m nine-litre cases
per year. “The acquisition of the
Czech plant of Fruko-Sсhulz
helped to strengthen our market
position in these categories
[bitters and liqueurs],” notes
Grabar. “Moreover, it didn’t just
give us a new market, but
also allowed us to touch
upon a more than 100year-old tradition of
production of bitters,
liqueurs and absinthe,
which are not
manufactured in Russia.
We have increased
production despite the
very strong increase in
excise tax in the Czech
Republic, as well as
having expanded the
product line, introduced
more modern technology
and improved
management. The
enterprise has not lost
either in volume or in
revenue; 2012 was the
spirits review
third year of steady growth in a row.
Products from the Czech plant are exported
to Russia, China and many European
countries.”
It has been beneficial for Ladoga to expand
its business to involve foreign investment, and
imports and exports. This has allowed the
company to drive growth when other domestic
markets or categories may be falling. Its vodka
exports are expanding, with primary focus on
Imperial Collection Gold, the export version of
Czar’s Gold. Grabar says: “Ladoga shows
outstanding potential in growing its flagship
vodka brand Imperial Collection. The brand is
spreading fast across the globe and the Asian
market is the new target for the company.
Thanks to its highest quality and historical
roots, this vodka has all the grounds to be
ranked among the top brands on the premium
alcohol market. This unique Russian vodka
famous for its golden filtration has been
distributed in Russia as Czar’s Gold since 2003.
“Following its successful re-launch on foreign
markets as Imperial Collection Gold, it has
become the iconic Russian super-premium
vodka. Due to superb packaging and the finest
quality vodka, it is keenly accepted by highend clubs, restaurants and hotel chains in
Europe and the Americas. In 2012 Imperial
Collection hit the London market with our
premium Russian vodka, which has both
history behind it and quality inside. The
Dorchester, The Langham, Buddha bar, Nobu,
Baku and Mari Vanna are just a few of the
high-end venues currently offering Imperial
Collection to their clients. The Imperial
Collection super-premium vodka, served in a
Venetian decanter topped with Swarovski
crystal, was recognised by the Beverly Hills
International Spirits Awards 2012 with a
double gold medal. It is packed in a Fabergé
Easter Egg box, available in 11 colour
combinations and the limited issue of
designer gift-sets is to be introduced to our
exclusive clientele soon.”
Below: spirits from Czech producer
Fruko-Schulz, acquired in 2008
The Imperial
Collection
super-premium
vodka, served
in a Venetian
decanter
“A truck with 20,000
bottles of illegally produced
vodka brings $60,000
and this is a serious
problem for legal
producers of alcohol”
– Veniamin Grabar, president,
Ladoga Group
Domestic activity
As well as export, Ladoga also imports and
distributes products in the domestic market.
It has distribution agreements with other
major importers within Russia and imports
and distributes Black Beast whisky, Lautrec
Cognac and a number of other brands,
including wines from the New and Old World.
Ladoga also exclusively imports the brands
from its foreign enterprises – namely FrukoSchulz, Bodegas El Cidacos and Camino Real
in Spain, and Favraud Cognac in France. This
range of portfolios has helped the company
develop its presence in categories such as
liqueurs and Cognac as well as tapping into
fast-growing categories such as imported
wine for the first time. Altogether these
imported products earned the company
RUB1.06bn ($32m) in 2012.
Grabar explains: “Our acquisitions are aimed
at products that have never been produced in
Russia, but are in demand in the local market.
European wine is very much overpriced on the
Russian market. In a European restaurant a
bottle of good wine is no more than €30 ($40)
and a bottle of similar wine in Russia costs
from RUB2,000 ($60) up to RUB10,000
($300). Our secret is that we have excluded
the chain of intermediaries from the
production – the products of our enterprise in
Rioja are 1.5 times cheaper than other
producers. Competitors are also forced to
reduce prices.”
According to the IWSR, Spanish wine
consumption in Russia grew by 180,000 cases
in 2012 to reach 4m cases overall. The
category is forecast to continue this strong
growth in 2013.
Ladoga is well positioned to enjoy growth
in the Russian market. With representation in
most categories, it will benefit from the
growth of imported wines and spirits, local
flavoured spirits and even within the
declining vodka category. Although its lowerpriced vodkas may be losing out, the
company has key premium offerings,
which can drive growth in both value and
volume terms. ■
September 2013 27