Cullins: Stoli now ‘rationalising’ vodka range
As Stolichnaya vodka’s new CEO, Rob Cullins has some ambitions ideas. Here, he talks market strategy, opposition to discounting and plans to make Stoli THE vodka on everyone’s lips.
Rob Cullins was named CEO of Stoli Group in February this year, taking over from Val Mendeleev*This article was first published in the April 2015 issue of The Spirits Business magazine
Running a Big Interview with Stolichnaya Vodka has become something of an annual ritual for The Spirits Business’ Vodka Issue (published in April), but never in the past five years of featuring the brand has there been so much change to report.
The past 12 months have been transformative for the international vodka brand, which has undergone several significant transitions in terms of strategy, the launch of a new ATL campaign, and personnel appointments. Just weeks ago the Luxembourg-based group appointed Rob Cullins as its new CEO, who stepped in to take the reins from previous incumbent,
Val Mendeleev. Rene Lek, formerly of Pepsico and Shell, joined as CFO, while John Esposito, Stoli Group USA president, has been promoted to chairman of
the subsidiary.
Meanwhile, 2014 concluded what Cullins calls a period of “bedding down” for Stoli Group USA, a wholly-owned distribution arm established to assume responsibility from William Grant & Sons USA. Coupled with a portfolio overhaul, the launch of the brand’s largest marketing campaign to-date and the establishment of Amber Beverage Group in the Baltics to manage SPI’s “ambitious development plans” in the region, and it’s no wonder Cullins begins our interview by exclaiming: “We are trying to keep all our balls in the air just now.”
While Mendeleev continues in his capacity as chief executive of SPI Group, as well as chairman of Stoli’s board of directors, his focus has shifted to concentrate on exploring mergers and acquisitions for the group. It falls to Cullins then to lead the global sales and marketing strategy for Stoli, as well as dutifully answer my questions for the brand’s annual SB interview.
Ambitious strategy
So what’s his ambition now as CEO? “To make Stoli the preeminent vodka company in the world,” he states. “And that’s through our brand, our portfolio and our people. Having said that, we will look to expand within the category and be innovative and unique through different expressions and segments.”
As the group’s largest market, Cullins’ biggest focus is on the US, which he claims had a “year of two halves” in 2014 as a result of the launch of Stoli USA in January. The reorganisation, which came with wholesaler changes in California, Illinois and Canada, caused some disruption in sales, but the brand finished the year having outperformed the category. “There were some growing pains through the transition but we finished very strongly in Q3/Q4 and are well placed now for future growth,” Cullins predicts.
In fact, Stoli’s performance during the year was so strong that despite overcrowding in the marketplace, the continuation of “flavour fatigue” and a competitive squeeze on pricing, the brand was among the 10 fastest-growing vodkas in the US in 2014, up 5.2% on a relatively large base. Cullins explains: “We have chosen not to discount and not to erode brand equity by following price downs, but to continue to invest in the brand, recruit new consumers and send our message through our creative campaign and advertising about the heritage and authenticity of the brand. So far it’s working for us; we are quite pleased.”
Stoli has slowed down its flavour innovation in light of the much reported vodka “flavour fatigue”Safety plans
Pricing and increased competition aside, vodka producers operating in the US are now far over the crest of the flavour boom that’s dominated headlines as a core volume driver over the past few years. Demand for the whipped cream and cake varieties of a few years ago are fading away, prompting many brands, Stoli included, to turn back to more traditional expressions, such as citrus or berry, that have always resonated with consumers. With around 30% of Stoli’s US volumes derived from flavoured expressions, does Cullins have an action plan to safeguard against declines? “Recently we’ve started to rationalise our range so we have discontinued flavours that may have had their zenith in past years, but we just don’t see long term going forward, such as Gala Apple and White Pomegranik, and some others of that nature that tend to be more niche,” he explains.
“We’ve slowed down the flavoured innovation and started to look at creating new and exciting vodkas with different intrinsic selling points, maybe in terms of filtration method, how it’s aged, or how it’s stored. That’s where we are moving our innovation profile to and we have some things we will be introducing over the coming months and years that are differentiated in terms of what you would expect from a vodka company, so that’s quite exciting for us.” Cullins points to the recent success of RTD Stoli Ginger Beer, which launched in May and has already performed “better than we would have hoped”, and hints at the roll-out of a cinnamon-flavoured, non-alcoholic mixer to play in the space of Sazerac’s wildly triumphant Fireball whiskey liqueur.
Worldwide spirit
While the US has been the major market for Stoli, sales in the international arena have doubled for the brand in the last four years. While Stoli is now traded in almost over 170 markets internationally, Cullins has his eye locked onto particular markets that will help cement its path to becoming the “most preeminent” vodka brand, although news came late last month that SPI had lost a trademark dispute in Benelux, including the group’s plans in that market. “Clearly we are very disappointed that the local court failed to rule in our favour,” he says. “We are still the rightful owners of the trademarks in over 190 markets and the Benelux region, for which this ruling covers, is only a small part of our business – about 1%. We have won this uneven fight with the Russian authorities in other markets such as Chile, Austria and repeatedly in the US and so it is still business as usual for the brand and the group.
“Our global focus this year, aside from the continued growth of the US, is to continue our double-digit growth in Europe and Western Europe, then work on our footprint in emerging markets,” he explains. “While we don’t have market gaps, there are still opportunities in the northern countries of South America, in sub-Saharan Africa, and South East Asia. Then the one everyone continues to focus on is China, where we’ve had great success over the last four years and we expect that to continue.”
China may not be every vodka brand’s idea of a success story – the country’s obsession with dark spirits and allegiance to baijiu leaves little room for other white spirit categories to thrive – Cullins sees a market with little competition from its own sector and an increasingly maturing cocktail culture. “Vodka is primarily consumed in more westernised cities, so Shanghai, Guangzhou, Shenzhen, Beijing and as far west as Chengdu, where you have cocktail bars sprouting up because of the travel of the Chinese consumer. International vodka’s now becoming an option and part of consumers’ repertoires.”
The brand rolled out its THE Vodka marketing campaign in September 2014THE Vodka campaign
For the most part, vodka is not an emerging spirit in much of the world. On the contrary, as the second-largest spirits category, brands are continuing to struggle in many markets against increased competition; an issue Cullins claims is the biggest challenge facing the category just now. While the brand has gained traction among both bartenders and consumers with signature serves such as Stoli Lemonade and the Moscow Mule, Stoli’s plan of attack to set itself apart among its peers came with the launch of THE Vodka campaign in September. First launched in the US before a global roll out in November, the campaign is designed to differentiate Stoli as the most “original” vodka, bringing the focus back onto the product itself. “With THE Vodka we really want to reinforce what Stoli is – the heritage, authenticity and originality, which are all still very important,” says Cullins. “We want people to understand we do have the heritage and history and are, in our mind, the reference vodka.” The campaign will be executed throughout the year using social media, digital shorts, OOH executions, events sponsorships plus a TV commercial.
Stoli’s heritage has proven something of a contentious subject for the past couple of years, as the brand bore the brunt of much anti-Russian sentiment in the wake of Vladimir Putin’s ban on underage homosexual education, and the annexation of the Crimea. However, Cullins claims the group’s consistent communication of the brand’s modern Latvian production has allowed Stoli to “negate the political discord”. The idea is to move the brand away from being a vodka originating in Soviet Russia, to an international premium vodka that happens to have a Russian heritage. Cullins does admit the environment is “a little more touchy” in Eastern Europe and the former Soviet Republic, where clear anger over recent Russian activity remains, while volumes in the Ukraine, which was an “essential” market for the brand, have plummeted.
Ultra-premium segment
While the group’s core focus will be on the Stoli Premium expression and its band of flavours this year, SPI is simultaneously continuing to drive recognition for its ultra-premium brand extension, elit. This year sees the roll-out of exclusive on-trade sundries to complement the vodka as a base for the Martini. Specially-selected olives and lemon peels will be available to key on-trade accounts to help bartenders develop their elit serves.
The conclusion this year of elit’s Pristine Water series with the Andean Edition, featuring spring water sourced from the Andes Mountains, attracted attention for the elit brand among target high net worth individuals in both domestic and travel retail. At €3,000 a pop, Stoli hopes the innovation will create a halo effect for the ultra-premium brand, which sold just shy of 100,000 cases in 2014, a 40% increase on the previous year. “The Pristine Water series was a tool to create awareness around elit but also around what you can really do with vodka at a high level,” Cullins explains. “It has been a public relations tool, but also an educational tool to talk about the purity of the spirit and how water can affect what we’re doing.” Cullins adds that the Pristine Water series will by no means be the end of innovation under the elit brand.
Cullins has clearly adopted his new role with fervour, keen to develop the work achieved by his predecessor, Mendeleev. He may be juggling several strategies for the brand at once, but if Cullins can keep his balls in the air, Stoli has a bright future ahead.
