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Feature
Stoli CEO envisions ‘complete range of high-end spirits’
As the famous vodka brand prepares to celebrate its 80th anniversary next year, Stoli Group’s new CEO, Hugues Pietrini, spells out his vision.
There’s a new spy in Tinseltown who makes James Bond seem a bit old and arthritic. While Bond sips on single malt, worrying about his pension, Charlize Theron stomps around Berlin beating up Stasi thugs and slugging Stoli in this summer’s Atomic Blonde. Playing a Cold War MI6 agent and looking like “Debbie Harry dipped in venom”, to quote The Guardian’s Wendy Ide, Theron has been exciting audiences everywhere, not least Hugues Pietrini, who became the new CEO of Stoli Group in April this year.
“It’s an amazing partnership we have with Atomic Blonde and Charlize Theron,” he says. “It’s not fake; it’s integrated with our vodka campaign and through-the-line advertising.” For the first time in seven years, Stoli ads are on American TV, proclaiming itself as ‘THE’ vodka, which Pietrini considers a justified conceit with the brand turning 80 next year. “We’re not a vodka invented in a garage in some US state 15 years ago,” he says. “We have a real history of vodka-making and we’re proud of our Russian heritage.”
While Stoli sales are up by 3%4% in the all-important US market, according to Pietrini, the category has slowed since 2011, with millennial consumers and bartenders in America embracing brown spirits as never before. Is this a cause for concern? “First of all, I don’t believe in categories,” Pietrini retorts. “They’re a very convenient way to see the market and put things in boxes. The reality is you can be in a declining category, but it doesn’t mean you can’t grow.”
This may be true, but in a shrinking market, competitors are invariably driven to discount, and some will release wild brand extensions just to cling on to their share. Pietrini’s says: “The pattern of many big brands in the US has been a game of push, a game of flavour extensions,” and in the process some “went way too far, losing their base and their brand equity. There are only a handful of vodka brands that really have the knowhow on flavours, and Stoli is one of them, being the first to launch flavoured vodkas in the 1960s.”
If the recent flavour explosion is seen to have backfired, he is nevertheless upbeat. “I don’t believe there are irreversible category dynamics,” he says. “Furthermore, if you look at the history of vodka in the US, it has been in constant growth for almost 40 years, and every 10 years it has reinvented itself.”
AMAZING FUTURE
When asked about other categories, he says: “Of course there is a trend for brown spirits in the US, and you will see women drinking Scotch or Bourbon, which 10 years ago you would not have seen.” Yet it hasn’t shaken his faith in what remains America’s favourite spirit by some distance. “I absolutely believe that the vodka category has an amazing future, and not only in the US,” he says. Nor does he accept the argument that vodka’s production is somehow too industrial and its branding too much about lifestyle to be part of the craft movement.
“I fundamentally disagree with that,” he says, citing the success of Stoli elit – the brand’s ultra-premium extension that was launched in 2003. “We’re growing 30% on elit, and you cannot make a product more ‘craft’. Every bottle is individually produced, and the liquid has been called ‘the world’s best-tasting vodka’. There is no brown spirit in the world that is produced with as much ‘craft’. But if you don’t get the story out there in the right way and do tastings it’ll never work.” As for rival vodka brands that have pulled off this trick, he says: “Tito’s is growing by 25%-30% and has managed to somehow get that craft message across, even though the category is flat.”
There is a tightrope that any high-end luxury brand has to walk, balancing the need for growth with the need to remain exclusive. As Stoli Group’s then international marketing director, Lars Vestbirk, told The Spirits Business last year: “Once you reach a certain volume, like Grey Goose, and you’re available in all segments of the trade, it doesn’t define luxury anymore. Luxury is more niche, and once it becomes mainstream it contradicts that super-premium idea.”
Pietrini agrees, and says: “It’s something I learned with LVMH, where Dom Pérignon is the easiest product in the world to sell. The guidelines we had were extremely restrictive in terms of distribution and pricing, and the more luxury you wanted to be the more you had to be aware of that. Thank God elit is still very far from Grey Goose.”
Vestbirk left Stoli Group in June 2016, followed by CEO Rob Cullins in October, after barely 18 months in the job. Asked if things have settled down at all, Pietrini says: “I am trying to put in a bit more serenity and fix not only the short-term but also work on a very exciting entrepreneurial project for the next five years. Of course, it’s challenging, and I wouldn’t say the last six months have been a Club Med cruise. But we’ve got a super international team where the average age is just 40. It’s very young and very diverse.”
Apart from LVMH, Pietrini has worked for Heineken, Orangina Schweppes and was briefly vice-president of the Stolichnaya Brand Organisation in 2005-2006, when Stoli was sold and marketed by Pernod Ricard. “It was the first time the brand was co-ordinated globally,” he says. Since then the company has evolved into what he calls “a truly global distribution business”.
Stoli Group USA was formed to replace William Grant & Sons as US distributor in January 2014, and an international network of importers was established. “In key markets we work with some very passionate distributors,” he explains. “They’re not necessarily subsidiaries of large spirits companies. They’re more local players who understand how to build Stoli like it was their own brand.”
During his eight years with Orangina Schweppes, Pietrini had to face the “ordeal of dealing with private equity”, and “the pressure of working closely with shareholders”. By contrast, life at Stoli would seem much simpler, with decisionmaking notably quicker and more efficient. There is “one shareholder, who’s very visionary and who puts all his trust in management”, he says, referring to Yuri Shefler, owner of parent company, SPI Group.
The expat Russian billionaire is clearly doing alright, having snapped up Scotland’s most expensive sporting estate this year.
Meanwhile, back in the real world, Pietrini says: “What’s very important is not to forget that the centre of gravity is clearly Stoli and elit. However, with the customer base we have, we’re one of the most distributed brands in the US, so it makes sense to also be there with Tequila, Bourbon, rum and other categories.” Rather than diluting the resources behind Stoli, he insists that broadening the portfolio benefits the brand. “If you have just one brand it’s more difficult not only in terms of critical mass, but from the customerfacing point of view,” he says.
So what next? A Scotch single malt? A boutique gin? Pietrini politely declines to comment on or confirm reports in The Spirits Business in September about plans for a new US$150 million distillery in Kentucky (this has seen been confirmed, full details here). The news came eight months after SPI Group made its debut in the American whiskey category with the purchase of Kentucky Owl Bourbon. At this stage, all the boss will say is: “We’re not going to expand the portfolio forever. Our vision is to have a complete range of high-end spirits, and that will help our vodka.”
Expanding on this vision, he mentions three objectives. “We are trying to continue to amplify the success story of Stoli and make it the most successful premium spirit in the world,” he says. “Then, it’s about elit – a completely different proposition where we want to repeat its US success and really grow the brand in other parts of the world. The third part is to succeed with the rest of the portfolio because in five years’ time we need to be seen as a global player in wine and spirits with super-premium brands.”
DOUBLE-DIGIT GROWTH
According to Pietrini, the group’s volumes outside of the US have seen “almost double-digit growth in the last 18 months”. At present, Stoli is distributed in 150 countries worldwide, with the top 20 accounting for 80% of volumes. Of untapped regions, he mentions Africa, Andean Latin America and China. “If the Chinese started drinking vodka tomorrow that would be fantastic,” he laughs. How best to crack this vast market is something to contemplate over a neat shot of Stoli in the evening. “I like it frozen, one ice cube, just pure,” says Pietrini. No doubt the Atomic Blonde bombshell would approve.