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Bacardí cuts presence in Russia

06 May 2024 By Eugene Gerden

Bacardí, the only large-scale international drinks firm still operating in Russia, is cutting its presence with a sharp reduction of its local range in the state.

The firm has almost completely suspended the supplies of some of its flagship brands, including Bacardí rum, Grey Goose vodka, Bombay Sapphire gin and other drinks.

This has been recently confirmed by representatives of some leading Russian retail chains, and with their stocks of Bacardí drinks almost completely exhausted.

In fact, Bacardí stopped supplies of a number of brands to Russia at the beginning of 2023, although prior to this significant reserves of these drinks were formed — sent mainly to catering enterprises.

Now these stocks are coming to an end, while particular hopes are put on the increase of supplies through parallel imports.

Italy

According to X5 Group, one of Russia’s leading retail chains, Bacardi will continue to export to Russia mainly its Italian portfolio, including vermouths and sparkling wines under the Martini brand.

According to some Russian importers, that may be explained by the fact that Italy is more loyal to Russia compared to the United States, which completely banned the supply of alcohol to the country.

Despite the fact that rum is produced in Puerto Rico and Tequila in Mexico, these brands belong to the American division of Bacardí, which controlled supplies to Russia from the North and Central America regions.

There are still a number of Bacardí products available in the Russian market, such as Dewar’s and William Lawson’s whiskey, as well as Oakheart rum. The last two, however, are bottled in Russia – at the facilities of the Novabev Group (formerly Beluga Group) and the Tula Distillery 1911, respectively.

Reduction in profits

In the meantime, amid cessation of supplies of some of the key brands, its Russian division of the company – Bacardi Rus LLC, reduced its net profit to 1.5 billion rubles in 2023, which, according to financial statements, became the worst figure since 2019.

At that period of time the profit amounted to 630.3 million rubles, after which it grew continuously over all subsequent years (for comparison: in 2022, the company’s net profit was 4.6 billion rubles).

Ukraine

After the beginning of Russia-Ukraine war, almost all of the world’s largest alcohol producers left the Russian alcohol market including Diageo, Pernod Ricard, Brown- Forman, Beam Suntory (Jim Beam) and several others.

Bacardí was not in this list, although the company declared against the war. It also decided to donate $1 million to the Red Cross, stopped exports to Russia, and froze investments in advertising in the local market.

And in August 2023, The Wall Street Journal reported — citing customs data from the Russian government that for the year (until June 30) — Bacardi Rus imported products to Russia on the total sum of US$169m.

The net profit of the Russian division of the group at the end of 2022 was a record 4.65 billion rubles.

Parallel imports

Still, there is a possibility that the gradual suspension of official Bacardi supplies to Russia could be compensated by the increase of exports of its drinks via parallel imports.

According to Russian RBC business paper, in November 2022, the Russian Ministry of Industry and Trade allowed parallel imports without the permission of the right holder of a number of alcoholic beverages to the country, including Jack Daniel’s, Jim Beam, Johnnie Walker, and Chivas whiske, despite the opposition of Russian producers. Currently, the list of drinks allowed for parallel import includes some of the missing Bacardi brands – Aberfeldy and Patron and has significantly increased in recent months.

According to data from the Russian state agency Rosstandart, among the whiskey imported to Russia via parallel imports, the leading products are those produced by the British-listed Diageo, the French firm Pernod Ricard as well as the American-Japanese Beam Suntory.

For example, over the 11 months of 2023, importers filed 350 declarations for Diageo whiskey and 222 for Beam Suntory products. While the actual figures of supplies are not indicated in all declarations, based on the existing information, imports amounted to 7.5 million bottles of various volumes of whiskey from Diageo, 1.9 million from Pernod Ricard and 1.3 million from Beam Suntory for the reporting period.

Pre-war levels

As a result, based on data from the Center for Research of Federal and Regional Alcohol Markets (CIFRRA), the volume of whiskey imports to Russia in 2023 returned to the 2021 level and even slightly exceeded it, reaching about 35 million litres.

As for importers, in recent years the structure of suppliers who import popular strong drinks to Russia has changed: if previously declarations were submitted by official distributors of Western producers or their Russian divisions, now all willing domestic importers are involved in such supplies. This, however, created serious risks of the origin and quality of delivered products.

As for domestic brands, in general they have been unable to replace Bacardi and other Western brands which left the country. After the exodus of global producers and their products from the local market, many Russian producers have made serious attempts to occupy the vacated niches and began producing their own products in the categories of rum, whiskey and gin. But as a rule their products are still unable to complete with drinks of major Western brands.

According to Russian wine and spirits trading companies, often parallel imports are carried out “with the tacit agreement of the right holder”. For example, official distributors from friendly countries purchase products from manufacturers and send part of the batches to Russia.

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