Setting a new Standard: A new distillery in St. Petersburg is aiding Russian Standard’s rapid global growth

RUSSIA/INTERNATIONAL. Fast-growing Russian Standard has underlined its ambitions to become a major global force in the world of premium vodka. And travel retail will play a key role in driving awareness – and volumes – of the brand internationally.

Speaking to The Moodie Report at the recent TFWA World Exhibition, Russian Standard Export Director Mykola Kuzemko said: “Travel retail is a key market for us. The channel showed sales growth of +74% in 2007, against +40% growth for all international sales. We expect the channel to deliver a strong double-digit increase in 2008 too.”

Total volumes of the brand hit 1.9 million cases in 2007, and will reach 2.5 million in 2008. Kuzemko said: “Our international export growth will come from new locations where we are introducing the brand, but also from strong organic growth where we are already established. That includes Russia and the CIS States, our traditional base, but we are achieving strong growth in Europe, we will make the US a key focus, and we will target South & Central America, Asia Pacific and Australia too.”

The brand will target its travel retail growth on traditionally strong vodka markets, but also on non-traditional markets where there is good growth in travel, particularly among the affluent, young adult segment of consumers.

The company has big ambitions therefore, but in an already crowded premium vodka market, how does Russian Standard intend to convince retailers that it has a brand that can stand out from the crowd?

Mykolo Kuzemko: Having passed the Russian consumer test, earning customers’ loyalty overseas is the next step

“We believe we have certain core values that enable us to stand out,” replies a bullish Kuzemko. “First, we will never compromise on quality. We have sustained our success in Russia on quality ever since the company was founded – and Russian consumers are among the most discerning in the world when it comes to premium vodka. They trust our brand, and now overseas consumers are coming to believe in Russian Standard’s quality and integrity.

“Second, we have strong Russian credentials. We have built a brand in the world’s biggest vodka market, and now our partners in other parts of the world are recognising that success. Our Russian heritage is key.

“Third, we commit major investment behind the brand to support its development and to support our retail partners.

“And fourth, Russian Standard is the only truly Russian premium vodka in its class – we don’t see a direct competitor in duty free. We have seen Russian-made brands come and go, trying to take advantage of the latest trends, but we are here for the long haul.”

Russian roots: The brand trades heavily on its Russian heritage, from field to factory

Element of theatre
Kuzemko also emphasised the need for in-store theatre to attract consumers to the brand in travel retail. “In this channel we see the need for a combination of fast, efficient service and a brand experience that matches the expectations of travellers. We believe we can contribute to that by creating new experiences for travellers. In Cannes we have had a huge reaction to the brand display and bar we created, with the Russian Standard livery and images, with customers asking how we can translate that to the retail arena. That is something we will work on developing.

“Tastings are a key feature too. The best results have come when the consumer has the opportunity to experience the brand directly. And that also drives repeat purchases. Once people try the brand, they like it, so we need to make it available in-store, particularly in those non-traditional vodka markets where tasting is so important. Consumers also see how versatile a drink it is. We have a range of cocktail options that we suggest for certain markets but the quality is such that we recommend Russian Standard is sipped, and can even be enjoyed at room temperature.”

Enhanced capacity and resources
To aid its drive into overseas markets, in 2006 the company – which is owned by Russian businessman Roustam Tariko – opened a new US$60 million distillery in St. Petersburg, which can handle production of four million cases a year. Recently the company also acquired a new warehousing facility, which will be converted into a logistics centre, to aid its growing capacity needs.

Alongside its expanded production capacity in St. Petersburg, the company’s sales & marketing resources have been enhanced over the past 18 months.

Kuzemko said: “We now have a number of offices to handle our overseas expansion, including Paris, Beijing and New York, alongside Moscow, plus we have people in the field in locations such as Italy and Bulgaria, and many distributors worldwide.

“Through this network we can implement our clear marketing strategy, and we work very closely with our distributors to ensure that the brand message is consistent. We are guardians of the brand’s essence, so that is very important.”

Proud portfolio: Russian Standard comes in Original (top left), Platinum (top right) and Gold (left) variants, with the Imperia brand (right) representing the range at the luxury end of the market

Growing the portfolio
To the brand’s product portfolio – which encompasses Russian Standard Original, Platinum and the high-end Imperia line – the company has now added Russian Standard Gold, designed as a gifting line extension, which is to be rolled out initially in Russia, and later for export.

The line made its debut in September 2008 at off-trade locations in major Russian locations, including Moscow, St Petersburg, Yekaterinburg, Rostov, Samara, Novosibirsk and Nizhny Novgorod. It will soon make its debut in Russian duty free.

Gold is described as a combination of Dmitry Mendeleev’s classic vodka formula and carefully selected extracts of Siberian ginseng, or “golden root” in Russian, which is said to add vitality. In price terms it is positioned about +20% above Russian Standard Original, and lies between Original and Platinum.

Mykola Kuzemko said: “It’s designed as a gift for special moments, and Christmas will be an important launchpad for Gold in duty free. But we will be careful about distributing it selectively both in domestic markets and in duty free. We don’t want to confuse consumers by over-extending our offer, or risking over-cannibalisation of the core brand. Each part of our portfolio should appeal to a particular consumer group. Gold will target those markets where we already enjoy good brand recognition – primarily Russia and the CIS states – and it can help build the story around our core brand.”

Kuzemko said new product development (NPD) would continue, with other line extensions due in the next six months. “NPD is a rolling process, one driven by the needs of the markets. If there’s a strong rationale, we analyse the business case, capacity issues and other factors, and take it from there.

“It helps that we can act quickly because we are a privately owned company, so we are flexible and entrepreneurial, and we don’t have to wait for shareholder approval of new marketing initiatives. Our President [Roustam Tariko] is very hands-on, and is the best ambassador we could have for the brand.

“And his ambition is very clear: within the next two to three years we should be the world leader in the premium vodka segment. In some markets we are already there, in others we are beginning to make progress towards achieving that goal.

“Even though the global market may slow in the year ahead, we believe we are better positioned for growth than any other premium vodka brand. Our product’s quality, our Russian heritage and our ability to invest give us great confidence in the future for Russian Standard.”

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