Posted on | December 29, 2013
Written by | Kristen Wolfe Bieler
Now on it’s own in America, Stoli Group USA builds a new team and aims to establish Stoli as the leading premium imported vodka.
Great brands don’t happen accidentally. They are born of a combination of art, science, substance and magic, and they only stay great brands if they are handled with the same formula. “Working successfully with premium brands is about so much more than sales and marketing,” says John Esposito, President of the newly-formed Stoli Group USA, the New York-based subsidiary of SPI Group, Stoli’s owner. “You must have passion, the very best people and a deep level of commitment. You have to love your brand like a child.”
Esposito should know. An industry veteran who most recently ran Bacardi USA and Moët Hennessy USA, he understands what makes great brands tick and what keeps them relevant. While Stoli—the first imported Russian vodka, Stoli came to the US in the mid-’70s—is hardly irrelevant today, it could use what might be described as a shot in the arm. Climbing to 2.2 million cases in 2007, it has since lost share in spite of modest growth in recent years, and has fallen out of step with the growing vodka category.
“For a number of years while the industry was flying high, Stoli did well as an agency brand,” Esposito describes. “But as soon as the industry hit a bump in 2008 that growth stopped. Parent company SPI decided that having yet another family adopt this brand was probably not the right decision, so they decided to make a major investment in the U.S. market with Stoli Group USA.”
Effective January 1st, Esposito’s 70-plus person team is charged with changing Stoli’s course, bringing back growth and vibrancy to the brand. The good news: “We already have terrific distribution all over the country, the liquid is phenomenal, and we make some of the best flavors in the industry,” he explains. The challenge: “Getting Stoli reintroduced to people and reminding them why it is different from other vodkas, and why it remains the original.”
This sounds like a tall, slightly intangible order, but Esposito sees a very clear path ahead. And his playbook looks something like this:
STEP #1: GET BACK TO BASICS
Stoli was the original premium imported vodka and, remarkably, the quality has never changed. “We are one of the only brands in the category that controls the whole process,” explains Esposito. “We own the wheat fields, we own the production plant, the blending plant, the bottling plant in Latvia. The liquid has always been incredible and this needs to be our message.”
Agency brands can easily lose a clear identity; they can fall victim to schizophrenic communication, says Lori Tieszen, Senior VP, Marketing, Esposito’s first hire who joined the company in June. “We know we have a great brand, but the real question is ‘how does the industry perceive it?’” Tieszen spent her summer talking to distributors to find out what this brand means to them. “One thing we know is that we need a much bigger focus on the base brand—it’s what got us to where we are and the basis of the entire House of Stolichnaya family.”
STEP #2: FORM A STAR TEAM
Esposito retired as Bacardi USA’s CEO in 2011, but couldn’t resist this opportunity to get back into the business: “This was a chance to build a team from scratch; to recruit a group of people who share the same vision and take pride in the brand they are working with.”
The Stoli Group USA office in midtown Manhattan is pulsing with entrepreneurial energy. This is Esposito’s primary advantage in going up against larger companies with massive budgets, he believes: “We are a start-up in terms of how we work, how nimble we are and how we spend money. We need to be able to find out what works, what doesn’t, and move forward quickly.” Stoli Group’s sales force—a 43-person team led by Diageo alum Tom Schlachtenhaufen—represents a huge increase in feet-on-the-street for the brand and is equally energized.
STEP #3: RETHINK FLAVORS
Tieszen is quick to remind the trade that is was Stoli who created flavors over 50 years ago. “Back then Stoli introduced the first flavored vodkas to the market, and flavors remain an important part of who we are.” Yet in recent years, the brand’s flavor program went slightly off the rails, believes Esposito: “A lot of flavors were introduced one after another, and not all were successful. We’re in the process of evaluating what works and reducing the number of offerings. You’ll begin to see a much stronger focus on our core flavors.”
Stoli’s top four flavors—Vanilla, Raspberry, Blueberry and Orange—account for 73% of the company’s flavor business (with several other flavors, such as Peach, showing strong regional popularity), shares Schlachtenhaufen, Senior VP, Sales. “We want to maximize every opportunity to focus on these core flavors and our distributors are thrilled to hear it. While flavors can be a growth engine, there is definite retailer fatigue; we need to be more strategic.”
There is a point at which new flavors stop generating incremental business, and Mike Oringer, Senior VP Innovation & Trade Marketing, believes the vodka category has reached it. “This industry is where the soft drink business was ten years ago. For awhile, countless new flavors add novelty and the pie is growing bigger for everyone. But when we start seeing flavors like gummy bear, bacon and s’mores—that overcrowd shelves and back bars-—and don’t satisfy any legitimate consumer need, the pie stops growing. Everything you will see from Stoli will be original, authentic and premium.”
STEP #4: REDEFINE INNOVATION
Without a slew of new flavors on the horizon, just what can we expect to see from Stoli? Fewer new products, more value and more focus, says Oringer. “Innovation will continue to play a major role. But it will focus on the underlying brand objective,” says Oringer. “And that is staying true to the brand identity. Before we introduce anything we will ask ourselves: Is it genuinely filling a white space and a consumer need; and does it make sense across the value chain?” Spaces to watch include natural—“purity is going to be key,” says Oringer—and craft.
The reason flavor life cycles are getting shorter and shorter, explains Esposito, is because they never answered a true consumer need, and thereby have no staying power. “We want to look at where the consumer is going, and ask how we can stay ahead of them? This brand has been here for 80 years; we are the current stewards and want to make sure it is in much better shape when we hand it off. For us, innovation doesn’t equal new flavors—it may be something totally different.”
STEP #5: STABILIZE PRICING
It can be tempting to move cases—whatever the cost. But the discounting required at times to do this can be detrimental to a brand. “Stoli is a premium brand and the trade will not see heavy discounting from us,” vows Schlachtenhaufen. “Of course, we benchmark several other brands, but you won’t see us chasing other brands up or down the price scale to compete.”
Stoli’s past inconsistent pricing is a problem that Esposito admits will take some time to recover from. “Our budget will be put towards the consumer, rather than subsidizing discounting, and that is the first thing the trade wants to hear,” he says. “Our pricing will be clear, it will be steady and it will be premium. We won’t cave under pressure. When the trade sees the marketing we are building, they will start to see a real brand here again.”
STEP #6: ENGAGE BARTENDERS
Behind the bar, Stoli already has an advantage: It’s the bottle bartenders reach for when they want to make a quality vodka drink. “Bartenders love the bottle and they appreciate the fuller, more flavorful profile,” says Tieszen. “The brand has so much integrity—it has stood the test of time—and we are trying to bring that to the future within the bartender community.”
With this in mind, Stoli has created an exciting new bartender video, which highlights the brand’s rich history—a heritage that younger mixologists may not know. The company also partnered with the United States Bartender Guide, M. Shanken and Liquor.com, among others, to create “Start with Stoli,” a program dedicated to educating and engaging bartenders. It includes a strong digital component and learning modules, written by influential industry experts.
Expect other quarterly trade programs in 2014, which includes a significant investment in the off-premise, says Oringer. “Winter/Spring is centered on the Bloody Mary, Spring/ Summer on Lemonade, and during the Holiday season, we will feature the Gimlet and Martini.”
STEP #7: SPEAK TO CONSUMERS
“You never want to lose the balance between consumer pull and tactical activity to hit a certain volume,” Esposito believes. Over the last decade, many new competitors were entering the market spending lots of time and money talking directly to consumers. Yet Stoli spent very little money on consumer advertising, and younger consumers weren’t actively recruited. “If you don’t talk to those people they go some place else,” says Tieszen. The consumer of today has an enormous amount of brands in their repertoire. You need to get your brand into that repertoire.”
Stoli Group is now unveiling a multi-pronged campaign that engages on all fronts. Digital is a priority: Consumers can download an app called “Recap” which enables them to take a video of a night out.
Having direct dialogue with consumers was particularly important last summer when many licensees boycotted Stoli in response to anti-gay legislation the Russian government enacted. “As a company, we did not want to stick our heads in the sand, so we reached out to local leaders and organizations to tell our story,” explains Tieszen. “There was a lot of emotion flying and we decided to get ahead of it and let our consumers and trade partners know that we abhor what the Russian government is doing—and that we are in fact a Latvian vodka.”
The company’s CEO came here to speak, and Tieszen and Esposito participated in town hall meetings to express their position. “We have a long track record of being very supportive of the LGBT community—Stoli stands for human rights,” says Tieszen. “We used digital media to get our message out there and now Stoli is back in most accounts.”
STEP #8: LISTEN TO THE TRADE
“A lot of our competitors believe they know better than anyone else and they want to tell their distributors what to do,” says Esposito. “We are going to listen to our distributors and make them real partners. We will use more distributor resources than the big guys.” By bringing clear messaging, real vision, quality programming and “letting them know what success would look like,” Esposito’s aim is to make the best use of his wholesalers’ time.
STEP #9: OWN THE ULTRA-PREMIUM SEGMENT
It wasn’t long after he took the helm last winter when Esposito realized he had an underdeveloped gem on his hands in the form of “elit by Stolichnaya.” The first ultra-premium vodka to hit the market over a decade ago, and still among the most expensive, elit was never properly supported in the market. Yet distributors and bartenders love it, considering it easily the finest tasting vodka produced anywhere. “We are putting huge talent and resources behind elit—it is no longer an afterthought,” he emphasizes. Made from single-site grain in very small batches and frozen with a specific age-old technique that removes any impurities, elit is a very hand-crafted product. “Our position is that elit was craft before craft was cool,” Tieszen adds. “We want to own that luxury space.”
One question on many people’s minds is whether or not Stoli will remain a one brand company. “Stay tuned,” says Esposito. “The phone has already started ringing. We’re being approached by entrepreneurs who want to expand their brand and already like what we are doing here. They see our vision and who we have hired. Our long term goal is to bring other brands into the fold, strictly in the premium and super-premium segments. But they have to have a passion for their brand the way we do for ours,” he says.
Stoli Straight Up
Owner: Luxembourg-based SPI Group
U.S. Company Name: Stoli Group USA
U.S. President: John Esposito
Country of Origin: Latvia and Russia
Year of Origin: Early 1940s
Rank: #5 on the list of global vodka brands (3 million cases worldwide).
Best Selling Flavors: Vanil, Razberi, Blueberi, Ohranj
Fun Fact #1: “First Vodka in space,” Stoli was part of the Apollo-Suyuz mission in 1975
Fun Fact #2: Stoli introduced the first flavored vodkas over 50 years ago.