Of all the challenges a brand owner has to face, the military invasion of your home country must be one of the biggest. Nemiroff Vodka Co CEO Yuriy Sorochynskiy tells Global Drinks Intel how the Ukrainian vodka company has navigated the crisis and discusses where the namesake brand is bouncing back highest.
Global Drinks Intel: The last time we met was at the TFWA World Exhibition & Conference in Cannes last year.
Yuriy Sorochynskiy CEO Nemiroff Vodka Co: For us as a company – and for the brand – it’s one of the most important events. We’ve been going to TFWA for around 15 years. I haven’t attended every year, but I was there to see our partners and talk to new potential partners, as well as to see old friends. At last year’s show, we launched a new product, so it was important to hear people’s first impressions and get feedback.
GDI: What proportion of Nemiroff’s sales are in global travel retail?
YS: Our domestic market is the largest but since 2022, our exports have increased by almost 50% as momentum created the desire to buy Ukrainian products.
Before COVID, we were the number three vodka in global travel retail in volumes. 2021 was a recovery year after the restrictions that created issues for all brands in duty free and we started to slightly improve our position.
Unfortunately, 24 February 2022 closed Ukraine for normal business. We have dropped back slightly, but since the war started, we’ve started working with a lot of European duty-free operators and wholesalers. I’m very confident that if we keep doing what we are doing, it will help us to be back in the top positions in duty free worldwide.
GDI: What’s the ownership structure for Nemiroff?
YS: It’s a family business – well, two Ukrainian families. For around 70 years, the company was state-owned, at a time when private businesses were not allowed – We’re still suffering from the past.
Then, when the Soviet Union collapsed about 30 years ago, the two families decided to restore the vodka production business. The distillery was still state-owned until only two years ago, when we became the first company in Ukraine to privatise our distillery.
In 2022, the distillery celebrated its 150th anniversary but obviously, we couldn’t invite any guests. We decided to postpone – we can celebrate this a little bit later.
GDI: What’s the domestic-to-export sales split for Nemiroff?
YS: Right now, it’s around 55% domestic, 45% export. About two or three years ago, it was 80% domestic, 20% export. Among our export markets, Kazakhstan is big – there’s a long historical relationship between the two countries. There’s also Poland and the Baltic states. We’re a one-brand vodka company, so the big vodka markets are very important for us.
In the UK, we started a partnership with Whyte & Mackay last year, and are starting to fill the retail chain pipeline there. The UK will be an important strategic market for us and I believe we’ll have some very positive results soon.
GDI: You haven’t mentioned the US.
YS: We started our own import operations to the US just before COVID. We have distributors in almost all of the main states – around 80% of vodka’s volumes in the US come from five or six states. In March 2022, we were fully sold out in the US – we sold around eight months of stock in one month. As we tried to deliver product from Ukraine, though, we had a huge logistical problem.
Before February 2022, it took us 25-to-40 days to deliver, at a cost of around US$9,000 per container. Three months later, we ordered ten containers from a freight forwarding company to deliver our product to the US. From 1 June to the end of August, these containers were still on Ukrainian soil. Overall, it took us almost four months to deliver and the cost was three times higher than before.
I hope to visit our US distributors soon. At the moment, I require a special permit from the government to travel. That’s why all of our team at TFWA was female – for them, travel isn’t a problem.
GDI: Is there the option to move to an in-market production strategy?
YS: This isn’t a simple mix of ethanol and water. It’s very important that we use our home grain and our home water. We also have 12 stages of filtration, the purpose of which is not to clean the vodka but to upgrade its taste and provide minerals.
This is more than 150 years of history for us – We love to do this. We could transfer the recipe, the water, everything. But we can’t transfer the love of the people who make this. It might be cheaper to produce close to the market, but you will lose the emotional connection with the place of origin.
GDI: Who do you see as your competition?
YS: As we operate worldwide, we’re competing with the big players in vodka, of course. Our competitors vary by market, but generally, it’s Absolut, Stoli, Finlandia, Grey Goose and Belvedere. We observe what they do and we know their strengths and weaknesses. We try to utilise our strengths to find our place in the market.
GDI: You launched Lex by Nemiroff, last year, at around US$85 per bottle. That’s quite a step up from your flagship expression at about $25, particularly in these economically challenging times for consumers.
YS: Absolutely. But, we know there are people out there who like to feel in control of their own destiny. Life didn’t stop yesterday and everything is changing, every day. Consumer behaviour at the moment is to look for something new, something unique. They would like to have something that’s completely distinctive from what others choose. They don’t want to copy and they don’t want to follow.
We’re presenting Lex by Nemiroff to these kinds of consumers. This is a handcrafted product – it’s not automated. Even the labels are applied by hand. We want to show that we can produce a high-quality product in unique, handcrafted packaging, to show something different.
GDI: What are your expectations for Lex?
YS: This is a product that should not be presented everywhere. It’s an ultra-premium vodka. If it were available everywhere, then we’d be talking about volume targets. We also have internal limitations to factor in; the wheat grain that we are using for Lex is organic, so we rely on our local farmers to be able to harvest organic wheat.
I suppose, for a new ultra-premium spirit, 50,000 cases would be very good, but remember Lex isn’t for eveybody. We need to make sure it’s in the proper places for people who can afford it, to understand what value they’re receiving from Lex.
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