Vodka being poured

Vodka Takes a Stand

20 July, 2022

Businesses all over the world have boycotted Russian vodka in a show of solidarity with Ukraine, but what does this mean for the wider vodka market?

The impact of the drinks industry on people and particularly politics is apparent now more than ever. In the media vodka has had a significant part to play in protesting Russia’s invasion of Ukraine. The spirit, a large part of Russian culture and identity, is now under the spotlight as other countries show their support to Ukraine using vodka as a means to do so.

EXPORTS, IMPORTS AND BOYCOTTS

According to GlobalData, in 2020 the global vodka market was valued at $75.7bn – an 11.3% share of global spirits value – with vodka being one of the biggest spirits categories alongside rum and whisky. Since the conflict began in Ukraine, many have been showing solidarity with the country by boycotting Russian brands and focusing on Ukrainian-owned businesses. With Russia the largest producer in the world and vodka the country’s largest export, it’s clear why the spirit was targeted by protesters.

Thorsten Hartmann, analyst at IWSR, says: “In 2021, the largest export markets for Russian vodka were: UK, Israel, Germany, US, duty free and Kazakhstan. Following the start of hostilities, many global markets have issued boycotts of Russian vodka imports with former Commonwealth of Independent States (CIS) countries and some Middle Eastern countries being the only significant ones not following that example.

“Most of the vodka imports into Russia in 2021 were accounted for by international brands (mostly premium and above) owned by multinationals. Most multinationals have completely suspended their Russian operations or are in the process of doing so. Imports are, therefore, now down to a minimum.”

On first inspection it’s difficult to know if these boycotts have any significant effect. According to IWSR data, more than 90% of Russian-made vodka is consumed domestically, with Russian vodka accounting for less than 3% of all vodka consumed in Europe (excluding CIS) by volume. Therefore, when it comes to standing with Ukraine to send a message, the impact is symbolic rather than financial.

As Carmen Bryan, consumer analyst at GlobalData, mentions in a company report: “Governments have been implementing sanctions, however it is interesting to see similar moves from the wider public and independent businesses.”

The ramifications of Russian vodka being embargoed has seen Ukrainian vodka sales significantly increase in support of those affected by the war. One example is US alcohol delivery service Drizly. Liz Paquette, head of consumer insights at the company told Money.com that the share of Ukrainian vodka sales, out of all the vodka variations available on Drizly, has increased 225% since 24 February 2022, the day Russia started its full-scale invasion. This is a positive consequence for Ukrainian vodka and shows the gravity of how vodka purchasing is being used to stand against the confl ict.

As IWSR’s Hartmann notes: “In 2022 several EU markets – and the US in particular – have seen solidarity initiatives to boost vodka imports from Ukraine, particularly coupled with shelf boycotts of Russian products.”

The US is, however, just one example, as the UK has increased economic pressure on Russia with a 35% additional tariff on a list of Russian goods, including vodka.

SPIRITED SUPPORT

Boycotting hasn’t been the only way companies have shown solidarity with Ukraine as many took to their products in order to send a message. Latvian-based Stoli is one of the companies using vodka to show its stance on the confl ict. Since the invasion, it has changed its name from Stolichnaya to Stoli to remove any association with Russia. Furthermore, the company also stopped using ingredients sourced from the country and earlier this year it launched a limitededition Ukrainian-themed vodka with all profi ts going to World Central Kitchen’s meals for Ukrainian refugees.

And it’s not just Stoli – other brands chose to show their support too, with premium vodka brand Vodka 4 Peace launching in the UK, and pledging to donate 100% of profi ts until 2026 and £5 per bottle sold to NGOs in Ukraine. 

Bryan adds: “GlobalData’s survey reveals that brand loyalty is heavily influenced by alignment to one’s values. This puts Russian vodka brands in a precarious position, as prolonged confl ict will not only damage immediate sales, but may also cause permanent disillusionment against Russian commodities in the long term.”

Chernobyl Spirits is one other such company, using its brand to support those aff ected by the war. Its production of a homemade vodka, appropriately named Atomik, is a social enterprise to help rebuild communities impacted by the Chernobyl nuclear disaster and now the war. The company is donating at least 75% of profi ts, with £15,000 being donated to the Ukrainian Refugee Appeal so far. The vodka, created by scientists studying crops in the Chernobyl Exclusion Zone, using left over grain to produce the alcohol, is a force for good in helping the people of Ukraine.

Ukraine’s largest spirits company, Bayadera Group, has felt varying eff ects as a result of the war. According to Andrew Kushnir, global export director: “During the first five months of 2022, our vodka exports overall decreased by 18% compared with the 2021 baseline. Price increases for transport services, especially sea freight, lengthening of delivery chains due to restrictions on certain routes during the war, and a colossal increase in component materials’ price were the main factors behind this decline. 

“All this led to an increase in the cost of our vodka and forced us to increase the selling points.”

Oleksandr Ponomarchuk, marketing director of vodka at Bayadera Group, adds: “Before the invasion of Russian troops, the plant supplied products to 45 countries over the world and its capacity allows for the production of 200 million bottles per year. However, the enterprise is currently operating in crisis mode, so product deliveries are gradually being restored. We forecast sales growth at the end of the third quarter of 2022 as we are now seeing the biggest increase in demand from the Baltic countries and Poland.”

Bayadera Group has also seen an improvement in the attitude towards Ukrainian vodka as it has “greatly improved against the background of the disappearance of Russian brands from shelves”, says Kushnir. 

In terms of branding, he says Bayadera is among those distancing itself from Russia: “The main change that was made to our label design is a special sticker with the inscription ‘Ukrainian vodka’ on the background of the Ukrainian flag. This change really helps all consumers find our vodka on supermarket shelves faster and to show that Ukrainians continue to produce their vodka, regardless of anything.”

The conflict has had numerous eff ects on brands internationally, with Russian vodka sales taking an international hit as a result of boycotts. Domestically, where much of Russia’s vodka business is done, sales are relatively unaffected, but the biggest change caused by the conflict is the attention that Ukrainian companies such as Bayadera Group are receiving from international markets.

The big challenge now is for Ukrainian producers to manage inflation, the costs of production and routes to market in order to capitalise on the booming sales figures that have come from oversees in solidarity against Vladimir Putin’s regime. Should they succeed, then there is a significant portion of the international market that once belonged to Russian vodkas, ready to be conquered by Ukrainian brands.





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