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Friday, July 26, 2013

Is Stoli Russian? Sure Seems Like It.

Posted by on Fri, Jul 26, 2013 at 3:19 PM

Owned by SPI, Stoli sometimes promotes its vodka as Russian and sometimes downplays its Russian affiliation.

Ask people the world over, drinkers or not, to name a Russian vodka, and he or she will tell you straight up: Stoli. But ask executives of SPI Group, the giant alcohol conglomerate that produces Stolichnaya Vodka and that is about to regain control over US distribution of the brand, and they say Stoli isn't Russian at all. It's Latvian. Or Luxembourgian (Luxembourgish? Luxemburger?). Definitely NOT Russian.

That is what SPI CEO Val Mendeleev suggested in his "Open Letter to the LGBT Community" in response to the #DUMPRUSSIANVODKA and #DUMPSTOLI boycott that aims to draw attention to, and to help end, brutal attacks on Russian gays and state-sanctioned persecution of gays, lesbians, and allies.

Boycott opponents argue that because some Stoli comes to America via a factory in Latvia, not Russia, a boycott doesn't really make sense.

So, #DUMPRUSSIANVODKA boycotters face the question: Is Stoli, or SPI for that matter, Russian or not?

SPI, described by a Russian magazine in 2006 as "a spirits company with Russian roots and Russian capital," appears to be concerned. In the first 48 hours of the boycott, gay bars in at least four countries have dropped Stoli, citing what is happening to gay people and their allies in Russia.

To tackle the Russian question, look at information that was on SPI's own website as recently as yesterday. (Be prepared to log in. Like most alcohol sites, "legal age" logins are required up front.) Some things jump out: prominent distillery locations, where the wheat is grown, lists of domestic vodka brands SPI produces and sells throughout Russia, who owns the US distribution rights to Stoli, and who owns how much of the SPI itself (as near as we can tell). All signs point to a very big company that looks deeply Russian in at least five ways:

First, the distilleries. SPI's website says they produce vodkas and bulk alcohol, and run agricultural and real estate operations in Russia. Of the company's three major distilleries mentioned on SPI's website, two of them—Talvis, located in Tambov, and PermAlko, located in Perm—are in Russia. And Talvis is reported to the be largest distillery in "European Russia."

Second, the ingredients. SPI makes a super-premium version of Stoli, called "elit," that comes complete with a gold-plated ice pick and whose production "begins with the authentic Stolichnaya base spirit, produced to the highest standards using 100% Russian wheat, rye and artesian well water."

Third, the brands. While SPI may not produce Stoli in the Russian market, it does produce many other vodkas that are exclusively Russian domestic brands, with names we've mostly never heard of, like Gradus, Vodka Great Embassy, LB Vodka, and Vodka Kaliningradskaya. Those sell throughout Russia and are marketed with hearty Russian bravado:

The old history of vodka making has been embodied in the traditional vodkas we make for our home markets… Our local vodkas represent all that is best about Russia's favourite drink… We have something to preserve; something to take pride in, vodkas made for the people by the people.

SPI even has a sort of extra nationalist vodka, Kaznacheyskaya, that was "created for the Russian market, designed to evoke a sense of national status… Kaznacheyskaya is all about pride in Russia."

Fourth, the business. Consolidating the post-Soviet mess of rights to Stoli around the world has been an ongoing battle that SPI has been patiently waging, and largely winning. It was featured in a 2006 article, "Repatriation of Stoli" in the Russian business magazine Smart Money. The SPI website has a rudimentary English translation: [sic throughout]:

“We registered our rights to these marks having paid $300,000 for them. It was quite an adequate price then. The brands were so much discredited by counterfeit that they did not cost anything at all”, remembers Skurikhin… The Stolichnaya and Moskovskaya trademarks (in Cyrillic) belonging to [Russian state enterprise] FKP Soyuzplodoimport were recognized confusingly similar to Stolichnaya and Moskovskaya and [SPI owner] Shefler was put on the national search list and then on the international one for a few criminal charges. The partners left the country: Shefler for France and Skurikhin for Switzerland... In foreign courts (where FKP came with the requirements to recognize its exclusive rights to Stolichnaya and Moskovskaya trademarks) S.P.I. won steadily. The disgraced businessmen had two facilities left in Russia: the Kaliningrad SPI-RVVK distillery and the Talvis alcohol-producing association in Tambov. Definitely, the controversial vodka was bottled not there but at the Riga Latviyas Balsams distillery that S.P.I. bought a year before the conflict with the authorities flared up. They transported alcohol to Riga from Tambov and Kaliningrad and this allowed S.P.I. to write with a clean conscience the words genuine Russian vodka on the bottles.

So, SPI appears to have used the Latvian facility as a way to escape the wrath of Russian authorities, while still being able to claim that Stoli was a true Russian vodka, after obtaining the Soviet versions of the Stolichanya and Moskovskaya trademarks in 1997.

SPI CEO Mendeleev's Bloomberg profile says that he holds a Harvard Business School MBA, and it shows. Over the years, SPI has executed a patiently brilliant strategy of buying assets on the cheap and modernizing plants and production to widen profit margins while also adding high end, high profit "elit" products and investing in major marketing campaigns in countries outside of Russia. And according to SPI's Andrey Skurikhin, quoted in the article on SPI's website, they got cooperation from the Russian government:

Joining forces with the Interior Ministry and the tax police we cleaned the market but it was extremely difficult to control the quality of Stolichnaya at a hundred Russian factories even if they had licenses from us. That is why in January of 2002 we revoked the licenses and transferred production of Stolichnaya to our own distilleries in Kaliningrad. We also planned to buy four other distilleries...

In that story, Skurikhin also offered one clue that might explain why SPI is now concerned about a rapidly developing boycott of their signature Russian product: "Over seventy percent of our sales are made in the North American market."

Fifth, the branding. There is the question of the Stoli's "brand DNA"—the essence of what it is and means to people all around the world. In some countries and times, SPI's Stoli is marketed as "Premium Vodka" and in others it is called "Russian Vodka" with an SPI logo on the top left of the label.

SPI has used advertising giants like Ogilvy and Publicis over the years to craft its brand, and when it's advantageous for SPI to hype the Russian-ness of its brands, it does. When it's sensible to downplay its Russian identity, it does that too.

Lastly there is the question of where the corporation is "domiciled," meaning where their lawyers file corporate paperwork. Past media coverage said SPI was headquartered in Switzerland; now it is said to be headquartered in the Grand Duchy of Luxembourg. But like US corporations that are domiciled in the state of Delaware (64 percent of Fortune 500 corporations in America are, technically-speaking, "Delaware Corporations"), just because the paperwork lives there doesn't mean that's where the company really is. Put in Seattle terms: Boeing has a tower full of executives Chicago, but zero jetliners are made there and no one thinks of a 747 as a product of Illinois.

There are lots of smart questions to ask about boycotts, how to do them, why to join them, and what real impact can they really have. Those questions are being raised and debated all over the world right now as people decide to #DUMPRUSSIANVODKA or not.

But the main question here has a pretty straightforward answer. With distilleries, real estate developments, and agricultural assets in Russia, and with 88 percent of company shares reported to belong to Russian entrepreneur Yury Shefler—not to mention 100 percent of the "brand DNA" being Russian when it's useful for SPI to market things that way—is Stoli Russian?

Sure seems like it.


Comments (18) RSS

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seandr 1
It'd sure be interesting to hear from actual Russian GLBTQs as to how we can help.
Posted by seandr on July 26, 2013 at 3:24 PM · Report this
The Stoli boycott idea is a good if totally insufficient start. Go after every single sponsor of the upcoming Olympics. Not Russian brands, most Russians themselves don't give a fuck about gay rights. But Coke would, Unilever would, Nike would if they start carrying a lot of negative PR. If they are going fly their corporate flag at the Olympics, go for the throat. Any high profile celebrity who goes to Russia--publicly shame them, make it personal. It worked against South Africa--but it took years and years.
Posted by Westside forever on July 26, 2013 at 3:56 PM · Report this
Pope Peabrain 3
Stoli is Russian. That is clear. I don't know how their judiciary works but I do know this. That government is corrupt as hell and rather than play games with us and trying to obfuscate the facts, they should bribe a few judges to rule the anti-gay laws unjust. Cheap, easy and a way out of their mess.
Posted by Pope Peabrain on July 26, 2013 at 3:57 PM · Report this
Drinking a Seagrams vodka and soda right now. It's pretty nice, a creamy almost vanilla-y flavor.
Posted by chi_type on July 26, 2013 at 4:02 PM · Report this
I realize this question isn't strictly related to the narrow scope of this article, but what sense does it make to punish a company that, as far as I know, has no history of homophobia, for the actions of a government it has no control over?
Posted by Aneemus on July 26, 2013 at 4:06 PM · Report this
I understand that boycotts are often more about the message they send rather than putting a company out of business but by picking a pro-gay company like Stoli for no other reason than it is a product with Russian ties just makes you look foolish. Sure they're out out another statement of support of the gay community, but they probably would have done that anyway, considering they ALREADY partner with many gay organizations. It's slacktivism at its finest and most misguided.
Posted by Vodka on July 26, 2013 at 4:25 PM · Report this
@6, which common Russian products would you have us boycott instead?
Posted by GermanSausage on July 26, 2013 at 4:36 PM · Report this
matt. you are a moron.
Posted by a.moron. on July 26, 2013 at 4:42 PM · Report this
TomJohnsonJr 9
I've always had the notion that the word is "Luxembourgeois".

P.S. thanks for kicking this off, Matt!
Posted by TomJohnsonJr on July 26, 2013 at 4:49 PM · Report this
fastasleep 10
Did Stoli write the laws in question? This is the dumbest thing since you guys pushed for the invasion of Iraq.
Posted by fastasleep on July 26, 2013 at 5:09 PM · Report this
This whole boycott is ridiculous at best. Why would Russia care one bit if the gays boycott Stoli?? Do think Putin won't get any sleep tonight because of it? Stoli had nothing to do with what Russia has decided to do. The best I can tell they have been a better supporter of the LGBT community than most. Boycotting and writing letters to those that support the Olympics makes more sense. Write letters to NBC and hold them accountable to fairly report on this subject. I really don't see how boycotting a vodka company is going to prove anything !!!
Posted by bmadden68 on July 26, 2013 at 5:26 PM · Report this
You_Gotta_Be_Kidding_Me 12
Well then, by all means. Lets stick it to what is arguably the most pro gay "Russian" company around for not being pro gay enough. Because Stoli IS the only company in Russia... Right? Or wait, is vodka the only thing gay people buy???...

I wonder, if Stoli didn't sponsor our parades, market in our magazines with pro gay images and send thier reps into our bars to pour us shots, would they still be the only "Russian" brand we can think of?

Also, with pro gay propaganda outlawed in Russia, doesn't that place companies with pro gay advertising (propaganda) messages afoul of that law and potential targets of prosecution under it???

Yes. Clearly we should push the long knives into Stoli.
Posted by You_Gotta_Be_Kidding_Me on July 26, 2013 at 5:34 PM · Report this
Point of Order. It is correctly Luxembourgish (Lëtzebuergesch).…

The rest can be argued as you like, and as your politics (or lack thereof) lean.
Posted by Wim on July 26, 2013 at 5:40 PM · Report this
rob! 14
If anyone else is wondering who-the-hell Matt Fikse-Verkerk might be, here's the number-one Google hit.

Manners, dear Editor, manners.
Posted by rob! on July 26, 2013 at 6:10 PM · Report this
Matt from Denver 15
Or, you know, maybe it's still not black and white.

The more I read, the less well thought out this boycott seems.
Posted by Matt from Denver on July 26, 2013 at 6:22 PM · Report this
Stupid idea is Stupid, even the GLBTQs in mother Russia herself think so.
Posted by Forgotton2011 on July 27, 2013 at 12:02 AM · Report this
@7, Glad you asked. None. Because there is no Russian product that Americans consume enough of and provides enough leverage over the Russian economy or government to led to change. Your time is better spent drinking whatever the heck you want and donating some money to gay advocacy groups in Russia which are currently being beaten up by anti-gay thugs on the streets while the Stranger propagates this absolutely useless solution.

Boycotts are notoriously ineffective in most cases, their real power comes in the negative reputation that it generates for the target. In this case Dan Savage has concluded that if he tries to ruin Stoli's reputation, it'll convince one of the parent company's major owners to lobby Putin on this issue. This completely ignores any of the political realities in Russia, and presumes that all that matters is some old-boys club. In reality these anti-gay laws are not just the whim of Putin or the oligarchs, but something which is supported by huge majorities of Russians. Less than 5% of Russians support gay marriage, down from 14%, "22 percent said that the treatment of homosexuality must be made compulsory, and 5 percent said that homosexuals should be ‘exterminated.’" These are incredibly popular laws at a time when Putin's power is waning, and it will take more than one billionaire to convince the Russian leadership that they're more trouble than their worth.
Posted by Vodka on July 27, 2013 at 1:40 AM · Report this
Nobody suggests to boycott Californian wines because of Proposition 8 even though Californian winery owners are much more influential in the USA than Russian business people in Russia (don't you know what happened with Hodorkovsky or Gusinsky?).
Posted by angrybird on July 27, 2013 at 12:50 PM · Report this

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