Interview, Part 2: Russian Standard USANovember 29, 2012
In the second part of this SND interview with Russian Standard USA’s CEO Leonid Yangarber, the discussion turns to flavored vodkas, mainstream competitors, advertising, on- versus off-premise sales and regional strengths.
SND: The imported vodka market was up 3 million cases in the U.S. last year, largely based on the success of flavor offshoots, especially dessert flavors. Russian Standard hasn’t entered the flavored vodka segment. How confident are you that this is the right strategy? Does a purist approach to vodka limit your growth potential?
Yangarber: Flavors are hugely important to low premium brands—mainstream players like Smirnoff and Svedka. We’ve seen a couple of success stories from the high end, but with few exceptions, it’s been mainly on the low premium level. We don’t believe it’s right for us, at least for now. At our price level, the established brands with flavor extensions are seeing little or no growth on their core brand’s 80-proof variety. They play the flavor game to grow their business and garner some excitement. We’re seeing so much momentum and natural brand development that we don’t feel much pressure to go into flavors. So we have no plans to enter the flavor segment, although we never say never.
SND: How has the success of vodka’s lower-priced segment, with fast growing brands like Svedka and Pinnacle, impacted your growth potential in the U.S. market?
Yangarber: We definitely commend their success. Overall, we believe those brands can potentially drive more young people into the category, and obviously all premium brands will benefit when those consumers start earning more money and seeking out more premium options. We believe in premiumization—that premium, authentic brands have a strong future. We watch what’s going on with brands that are $6-$7 below us in price, but we need to be who we are.
SND: Vodka’s success in the U.S. market was driven by advertising. What level of investment is Russian Standard putting behind its brands in actual advertising spending this year?
Yangarber: We approach the market in an aggressive manner. Obviously, we’re still young and we still have a way to go to reach our competitors. We’ve been quite consistent with advertising in recent years. Last year and this year we have spent around $7 million annually. Next year we’ll definitely spend more.
SND: How much of your business is off-premise?
Yangarber: A little over 70% today is off-premise for our total portfolio. And the rest is on-premise.
SND: And on-premise is growing at a faster rate?
Yangarber: The on-premise is growing at 32% this year.
SND: What are your strongest regional markets for Russian Standard, and indeed your entire portfolio?
Yangarber: The biggest vodka markets in the U.S. are also our biggest markets. Historically, we’ve been very strong in Florida, and it continues to be our largest market. But Los Angeles, San Francisco, New York and Chicago are the next biggest ones. And of course Boston, Atlanta and Dallas—all the big markets, the usual suspects.
SND: Is it still possible for a small marketer to get the proper attention from its wholesaler partners?
Yangarber: Don’t forget that several important brands in this market, especially in vodka, were built independently before they joined major suppliers. So we have a bit of a roadmap, looking at Grey Goose and Ketel One and Svedka, and a few more. So it is possible. We’re just trying to ensure that we’re the next one.