Russian vodka row sparks supply fears

- Last updated on GMT

Related tags: Drinks brands, Allied domecq, Russia, First drinks brands

Efforts by the Russian government to nationalise the Stolichnaya brand may lead to future UK distribution problems for First Drinks Brands and Allied...

Efforts by the Russian government to nationalise the Stolichnaya brand may lead to future UK distribution problems for First Drinks Brands and Allied Domecq.

A row has erupted between the authorities in Russia and the former state-owned drinks company Soyuzplodimport, (SPI) which was controversially privatised by Boris Yeltsin in 1992 following the collapse of the Soviet Union.

A recent government report suggests that SPI paid the Russian government well below the market value for the brand, and a lengthy legal battle to bring SPI under state control looks imminent.

This May, the government took its most decisive step towards regaining control of the vodka industry, and the massive revenues it brings, when it set up a new spirits monopoly, Rosspirtprom, to control all its vodka interests.

Neither Allied nor First Drinks were able to shed light on a recent Moscow City Court ruling in which both sides of the ownership battle claimed victory.

Edwin Atkinson of the Gin and Vodka Association said: "It's well known that in Russia there are a number of court cases which may affect companies over here."There were some companies that believed that they would not be caught by the formation of the Rosspirtprom that are now having difficulties."

However, a spokesperson for First Drinks Brands - the UK distributor since 1998 - refused to discuss events in Russia and only added that it "can't perceive any short-term problems concerning distribution".

While in the possession of First Drinks, Stolichnaya has established itself as a leading premium vodka and has gained a loyal following among style bars in and around London.

However, last year, previous owner Allied Domecq signed a deal with Soyuzplodimport that may see the brand change hands when First Drinks' contract expires in two years.

The 10-year agreement covers the distribution rights for Stolichnaya in the US as well as the first right of refusal for other parts of the world when contracts come up for grabs.

It is unclear whether a change in ownership will affect any potential distribution agreement with Allied Domecq.

A spokesperson indicated that even if the brand was nationalised, the government would still require an agent to distribute Stolichnaya in the UK. He said: "Whatever the outcome of the debacle Russia, it's difficult to see how this will affect the UK market in the long-term."

Related topics: Spirits & Cocktails

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