Stoli CEO: Going ‘back to basics’ critical to success

2016 is set to be a transformative year for Stoli Group USA – president and CEO Patrick Piana reveals big ambitions for the company led by organic growth, innovation and partnership.

Stoli Group USA president and CEO Patrick Piana

Picture the scene: a gigantic 16-floor ramp barely a stone’s throw from the Los Angeles Coliseum. A lone snowboarder waits at the top, something of a curious sight given the 22°C heat. Even more bizarre, the snowboarder is clasping a cocktail shaker in a gloved hand.

The figure is pro snowboarder Eric Willett, who is about to attempt to create a ‘Big Air Mule’, by carrying the cocktail shaker down the enormous ramp and performing a backflip. He duly does, sticking the landing and then, cool as you like, pouring the cocktail into a waiting Stoli Signature Mule Mug, to the delight of a cheering crowd.

“It’s really about having an edge on what we do,” says Patrick Piana, the recently appointed Stoli Group USA president and CEO, as he recalls the stunt. “You basically had about 60,000 consumers, 25 to 30-years-old… And these are the type of events where you can really continue to inspire customers to join the brand.”

‘Inspire’ seems to be Piana’s buzzword as we discuss Stoli, the brand’s place in the wider market and his aspirations for the company as a whole looking forward. He joined Stoli Group USA, the North American subsidiary of SPI Group, in June 2015 following a period when, in his words, “the brand had been going through more difficult times”.

Piana had spent the previous five years in France, where he served as a very successful CEO to Cognac brand Rémy Martin. Under his charge, revenues rebounded to double and profits trebled – but “after that I think it was time for me to move on to something more entrepreneurial and exciting”, Piana says.

Stoli’s transformation

Even if he doesn’t express it outright, from speaking with Piana you get the impression that he enjoys a challenge. If not upheaval, he certainly joined Stoli after a period of transformative change. Back in February 2015, Stoli parent SPI Group announced Rob Cullins’ promotion to Stoli Group CEO.

At the same time, Piana’s predecessor John Esposito became chairman of the subsidiary and Rene Lek, formerly of Pepsico, joined as SPI Group CFO. Val Mendeleev, who had served as SPI Group CEO, left the company in August 2015 after almost seven years with the firm.

But amid the whirlwind there was that potential to inspire. The Stoli USA role was appealing because of the long-term vision for building the business, Piana says, adding that the strong willingness to invest in the brand and in its people also had a pull factor. “And very honestly, the opportunity above and beyond the existing plan to grow the portfolio in other categories, as we did with Bayou rum and many other projects we have, was very exciting to me.”

Stoli Group USA’s interest in Bayou Rum was one of the first hints that the subsidiary had spirits aspirations beyond its core vodka proposition. In October, it announced the signing of an exclusive multi-year distribution deal with producer Louisiana Spirits LLC, which came into effect from 1 January 2016.

“The opportunity to partner with a powerful, brand-focused organisation like Stoli Group USA will help us achieve our long-term vision of establishing Bayou Rum as the leading American rum on the market,” Trey Litel, co-founder and president of Louisiana Spirits said at the time.

It was a move that squarely fits within Piana’s business priorities for the next 12 months. With one deal under his belt, next, he says: “We have to grow the brand and we have to grow the business – that’s the business we’re in.” He stresses it is imperative that his entire organisation – Stoli USA, Canada, distribution partners and retail partners – is extremely focused and aligned when it comes to executing the business plan.

Piana is precise with that vision. “I want the company to… make sure that we look at every single opportunity we have in order to improve our competitive position compared to the rest of the market.” That strategy, he says, has organic growth, innovation and partnerships at the core.

‘Potential acquisitions’

“And then I’m looking into potential acquisitions,” he states, matter-of-factly. “And these things don’t happen overnight, so it’s important we stay very open to that.”

Piana is indeed open. The current portfolio comprises Stoli Vodka, elit by Stolichnaya, a growing wine selection, and, of course, Bayou Rum. “After that the categories we’re interested in, and would make a lot of sense, are Bourbon or American whiskey, gin and Tequila.

“I don’t think we want to be in every single category of the spirits world, but I think the ‘Big Five’ would be, you know, if I think about the next five years, it would be great for us to have a play in these areas.”

It’s a big ambition, effectively transforming a subsidiary known for its eponymous vodka brand into a drinks group in its own right. But Stoli is growing, and where there is momentum there is ground to be gained. By Piana’s reckoning, Stoli Group USA grew 7.6% in 2015, healthy gains compared with the region’s vodka market, which only managed 3.8% in value terms, according to Euromonitor.

“The performances we achieved overall in North America, we achieved those without any new product, which to me really shows how strong we were to generate that organic growth on the brand.” Piana cites “going back to basics” with strong communication platforms – and the vodka itself – as critical to the success. “I think in 2016 we’re continuing to do the same thing and even more of that, but we’re adding innovation.”

That development is Stoli Gluten Free, which, with its 88% corn, 12% buckwheat mash bill, does exactly what it says on the tin. For Piana, the launch marks “the first time a global vodka brand is creating a completely new gluten-free recipe that is going to meet the needs of gluten-free consumers in America”.

From May the product is set to hit the US, a market where TTB legislation allows spirits with gluten-free raw materials to make the gluten-free claim. Its announcement has rekindled a long-running debate in spirits circles: surely, if distillation removes gluten proteins, isn’t every distilled liquid free from gluten?

“I think it’s a very good point,” Piana counters. “We know that distillation theoretically would lead to the elimination of most of the gluten proteins, okay. And although science is proving that the majority of the proteins are removed, the only way a product can truly be 100% gluten-free is to begin with naturally gluten-free raw material.

“What you put in is extremely important. I’m a huge believer in the importance of the quality of your ingredients, the quality of your distillation process, and the quality of your final product is really linked to that.”

Lifestyle choice

Piana is quick to point out that the Stoli Gluten Free launch has nothing to do with health and everything to do with lifestyle. With just 1-2% of the US population suffering from Coeliac disease, it’s the anti-gluten trend among the wider population that has piqued his interest. “I will never claim any health benefit to our products because I think our business is about entertaining, it’s about sharing, it’s about enjoying the moment, and it’s part of a lifestyle. So it’s very important for us to be able to offer to consumers who have decided to live a gluten-free lifestyle a product that is responding to their needs.”

Millennials are that key market Stoli is trying to entertain – 67% of millennials and multi-cultural consumers would purchase gluten-free vodka, according to the brand. And that group’s interest in and appetite for authenticity in the brands they purchase was a consideration behind another of Stoli’s major developments in the recent months: the unveiling of a new bottle design in October at the TFWA World Exhibition in Cannes, France.

“It’s more premium, more elegant, but it’s not a revolution which is very important,” Piana says of the bottle revamp. The cues play on heritage, provenance and production values with the narrative starring Stoli’s grain beginnings, its Latvian distillery, its filtration and its bottling all as central protagonists.

“It’s extremely interesting to the US consumers, and particularly those in the, I would say, millennial set. They care today, younger consumers, probably more than ever before, really care about where you’re from, who you are, what’s your philosophy and what you’re saying – is it true to the product we’re tasting?”

The opening anecdote of the snowboarder in LA is just one example of how Stoli Group USA is attempting to woo that key millennial group. But one only has to look to the on- trade to find a section of the business not just dominated by millennial consumers, but bartenders from that age bracket, too. Piana is a bartender champion: his organisation “strongly believes that the bartender is critical to the brand’s success”, both for Stoli and for elit by Stolichnaya.

He says it’s the day-to-day relationships between the subsidiary, distribution team and the on-trade that drives the business. “It’s really about that collaboration we have, that we take bartenders’ feedback comments very seriously, we engage with bartenders in order to make sure that our decisions, our way to go to market, our products, our drinks strategy, are meaningful to them, because they will be ultimately the ones selling the end product to the end consumer.”

Brand building

It’s signature serves like the Stoli Mule (simply Stoli, ginger beer and lime juice), as so spectacularly demonstrated by Eric Willett, that have helped build the brand both inside and out of the cocktail hubs. But what about the role of the flavoured side of the Stoli portfolio at a time when bartenders seem exhausted by the concept?

“Stoli Group in North America did a great job because we were able to grow that part of the business [in 2015] when we know the market slowed down and basically generated no growth,” Piana says to rebuff the notion. He talks of a “conscious decision” made by John Esposito and Rob Cullins before his time to focus on four key flavours: Oranj, Razberi, Blueberi and Vanil.

“By focusing on that and working with bartenders, we were able to grow our business. And I’m very optimistic that despite the general trend of the industry on flavours, we will be able one more time in 2016 and beyond to grow this business.”

Piana’s golden touch, flexed at Remy Martin and honed at Pernod Ricard before that, certainly seems just as vibrant at Stoli. Perhaps the only shadow on the otherwise strikingly blue horizon has been the revival of a long-rumbling trademark case by Federal Treasury Enterprise Sojuzplodoimport in the US.

The disputed claim for the Stolichnaya name surfaced in 2000 following an order from the Russian president and government officials who see the brand as part of the state’s ‘Russian heritage’.
“To be honest with you, I don’t really worry about that,” Piana states, apparently only mildly irritated by the case. “I have full confidence in the US court system, and I really believe we will prevail.”

After all, he continues, Stoli has been so successful in protecting its assets in the past, it will continue to “aggressively defend” its rights now. “So there are absolutely no worries on my side.”
What then of Stoli’s, and indeed the wider category’s, fortunes in 2016 and beyond? “The vodka market will remain for sure the biggest spirits category in the US by far,” Piana is emphatic. “And it’s going to generate growth overall; maybe not as much growth as it used to about 10 years ago, it’s got very competitive. I think competition is good, it usually makes us better as a brand.”

Crafty manoeuvres

Neither is he perturbed by the rise of micro and craft distillers and their penchant for disrupting the market: “I think micro-distillers and craft distillers are a great addition to any market dynamic.”

He adds that Stoli’s roots make it a great bridge brand: “It’s about superior quality and authenticity in the product with a strong heritage, and also the ability to river the values of a modern brand of today.” Some trends will appear, some brands will accelerate, and others will find it more difficult, he says.

“But if overall we do what is right for the brand, if we focus on bartenders, key retailers, our distributors, make sure our advertising message, our mobile platform is activated, I think for Stoli on the vodka market it’s going to be, 2016 and beyond, great years.”