Diageo Replaces Smirnoff by Smirnov in Russia
The world's biggest alcoholic drinks group, Diageo winds up Russia’s production of its famous Smirnoff vodka. Instead, Diageo will be promoting Smirnov in the country, which was owned by Alfa-Eco not long ago. This change in the marketing policy, the analysts say, roots in too moderate sales of Smirnoff in Russia.
Termination of Smirnoff bottling at Liviz distillery, St. Petersburg, has been reported by a number of dealers. Temp Pervy CEO Valery Kononenko, for instance, said they would be getting the whole portfolio of Diageo less Smirnoff starting from June 6. “From now on, we will be supplied Smirnov bottled at Novgorod Alcon,” Kononenko specified.
The management upheaval in Russia’s office of Diageo could be regarded as an indirect indicator of changes in the marketing policy of the company. Andrey Kravets, who was in charge of Smirnov sales at Alfa-Eco, has been recently appointed the general manager for Russia’s sales at Diageo.
Diageo and A1 (former Alfa-Eco) set up a venture in late February 2006, expecting it to focus on the distribution of the Diageo brands in summer. A1 transferred its Smirnov vodka brand to the venture, and Diageo paid $50 million for the brand and for 25 percent in the venture. According to the analysts, it was the price of Alfa’s refusal to challenge Diageo’s Smirnoff.
Diageo's decision to drop Smirnoff in Russia in favor of the cheaper Smirnov could be attributed to the market share taken by the brands. Smirnoff had just 0.05 percent in early this year, while Smirnov covered 0.2 percent in terms of money.
The distributors don’t think the company plans to reposition Smirnov up to the higher-price segment. It will remain in the average category and cost roughly 120 rubles/0.5-litter bottle. On the other hand, Diageo will stick to Smirnoff brand overseas thanks to its worldwide popularity.
www.kommersant.com
All the Article in Russian as of June 01, 2006
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