Thirty days after the Russian invasion of Ukraine, CEO of Ukrainian vodka Nemiroff Yuriy Sorochynskiy writes candidly about the challenges facing the nation and the impact on the company
Nemyriv, Vinnytsia, Ukraine (March 2022): We’ve temporarily closed the distillery – our own decision – as our employees’ safety is our priority. Nemiroff Distillery is located in the centre of Ukraine, in Nemyriv, Vinnytsia. There is no fighting on the ground, as Ukrainian military forces stopped the Russian army on their way around the border regions, but every day there are attempts of air attack on the Vinnytsia region.
On the first day of the war, bombs fell on the majority of the territory of Ukraine, from east to west. No place or district was considered a safe one, so we’ve temporarily put on hold all production. It has already been over one month since the distillery closed. Some of the employees have joined the army and some had to flee abroad.
Nevertheless, every day there are attacks on the Vinnytsia region, from the air as well. The missiles come from both the Black Sea and Belarus territories. Unfortunately, some of them reach the targets and there are destroyed objects with victims within 40km of Nemiroff Distillery.
From the very first day, we’ve felt support for Ukraine and our products worldwide. We receive many requests for the distribution of Nemiroff goods. We do appreciate each of the initiatives and are truly thankful for this support. We are confident in our victory, it’s only a matter of time. But after, we’ll have to rebuild the country and relaunch the business.
Global awareness and loyalty will help us to overcome the consequences faster. This year Nemiroff celebrates its 150-year anniversary. This is the official date; however, the first mention of Nemiroff was in 1752. We are proud to be Ukrainian, to promote our culture and ancient traditions and to inspire the world with our nation’s indomitable spirit.
In terms of the operational issues we are facing, one of our glass suppliers was in a neighbouring area and the first place that was attacked by Russian troops, about 20km to 30km north of Kyiv. Now its status is unknown, staff were evacuated. Our label producers are located in cities that are now under Russian fire. Our packaging producer is located in the city, which is now temporary occupied by Russia.
Another issue is logistics from Nemiroff to our partners and distributors. Lots of roads, railways and bridges are destroyed; air and sea connections are not available. We are checking the possibility of delivering products from Ukraine to Europe.
Russia is a huge vodka market – the world’s biggest in volume, accounting for about 30% of global consumption and second in value. Nemiroff had a limited presence in Russia since 2014, after the occupation of the Crimea and Donbass regions. Nemiroff provided a franchise for using the Nemiroff trademark to a local distillery only for the domestic Russian market. For Nemiroff it was quite a big portion [of our overall sales] due to the market size itself.
The decision about the withdrawal of the license in Russia was made immediately after the Russian invasion on 24 February. It took some time to prepare the legal documents, as the first days were the most uncertain, with lots of air attacks. On 28 February, the relevant legal documents for termination were sent. Officially, from that date, the distillery in Russia is not allowed to produce vodka under the Nemiroff trademark. But based on the current status and full ignorance of legal requirements by Russia, we do not have any legal remedies to enforce the restriction. Within the Nemiroff portfolio, the Russian Federation was quite a big share due to the size of the Russian market itself.
In Ukraine, which is also a big market, spirits sales are forbidden due to the war. We support this initiative, as we need a sober mind to overcome the enemy and be victorious. On the other side of the coin, in the half of Ukraine where there is no direct fighting on the ground, a moratorium on spirits sales may lead to a home-production boom and black-market increase.
Because it is over one month since Nemiroff Distillery was closed, we temporarily cannot make deliveries to our global export markets. Of course, it’s made a huge impact on business, but we are looking to all possible opportunities to relaunch production.
We had ambitious plans for further growth, entering new markets, strengthening positions in premium, launching new products and our own alcohol production [It had previously sourced from the state vodka monopoly].
Currently, we are observing a boom in the demand for Nemiroff vodka worldwide, with an intense interest in Europe and the US. Both in off-trade and HoReCa. From the very first day of the war, we felt support for Ukraine and our products worldwide. We have received many requests for distribution and listings, restaurants are organising charity gala dinners with Nemiroff Vodka, bars worldwide are making promotions with Nemiroff to raise money for the Ukrainian army or humanitarian needs. Influencers make reviews on Nemiroff, create cocktails with it. We do appreciate each of the initiatives and are truly thankful for this support.
For some markets, this will lead to shortage within the next two to three months due to our estimations without production relaunching and for other markets – for four to six months.
During this war, 4m people have already left Ukraine as refugees; 10 districts, which are under warfare now, provide up to 50% of GDP. Some of the businesses there have been destroyed, others need time for recovery or relocation. There are huge economic losses.
The devaluation of the currency is less of an issue. The National Bank of Ukraine keeps the situation with the exchange rate under control as much as it is possible. The currency has lost around 10%, which we do not consider a huge issue. On the other hand, we will face new costs of goods due to raw materials and packaging cost increases. For example, gas tariffs have increased, and they are forming up to 70% of the glass cost. Logistics costs will also increase due to new petrol prices, as we have now only a truck route to the EU, while sea and air are unavailable.
We do believe that our next letter to you will be an announcement about the distillery reopening. I imagine once the war is over and we start to work at 150%, we will rebuild and renovate Ukraine! We are now paying a huge price for [our adherence to] European values and even for human rights, but we are sure that our future is worth it.
The last six weeks have been a real-life demonstration of the indomitable spirit of our nation that Nemiroff was talking about worldwide for the past few years. We are proud to be Ukrainians: free-minded, bold-spirited people who create their own destiny.
