14 Nov 2021
DAMIAN MCKINNEY: HOW I’M TRANSFORMING STOLI GROUP AND VODKA’S FUTURE
Stolichnaya is a historic vodka brand. It has deep roots in the vodka industry, dating back to 1948, and was a standard bearer of Soviet/Russian vodka.
The rights to the Stolichnaya brand were acquired in 1999 by SPI Group, a private company chartered in Luxembourg, founded and owned by Russian businessman Yuri Shefler. The Russian government has disputed the legality of the sale of the Stolichnaya brand and vested those rights in a Russian state-owned company – FKP Sojuzplodoimport.
The upshot is that two different companies claim ownership of the Stolichnaya brand. Each operates in those countries where the local courts have upheld their ownership of the brand.
In the United States, the Stolichnaya brand is managed by the Stoli Group, a division of SPI Group. Recently, I sat down with Damian McKinney, CEO of the Stoli Group to talk about the recent, dramatic changes at Stoli group, as well as the future of premium vodka in North America.
Damian McKinney brings an eclectic mix of skills and experiences to his role as the CEO of the Stoli Group. An officer in the Royal Marine Commandos, he operated in a variety of the world’s hot spots, including the Persian Gulf during the Gulf War, and received numerous awards for courage and distinguished service.
In 1999, he founded and built a global consultancy, McKinney Rogers, which was acquired by GP Strategies. McKinney has a formidable reputation as a business leader, transforming companies and brands to become the best in the world. He has worked across many industries and continents, achieving significant recognition, with particular focus on the beverage alcohol industry.
JM: In the United States, since its creation in 2013, the Stoli Group has functioned both as a beverage company and an importer of other brands it distributed. In the last year, you appear to have pulled back from third party distribution in favor of focusing on your own brands. What’s behind that strategy?
DM: Focus. Over the past year we have established a clear, hyper focus on elevating Stoli to the most powerful ultra premium wine and spirits portfolio in the world. As a result, we have recommitted to existing brands and launched new premium ones. We are turbo charging Stoli with brands including Elit (Vodka), Kentucky Owl Bourbon, Villa One Tequila, and of course, Chateau Miraval Rose.
JM: Stoli Group has a significant wine portfolio. Its wholly owned subsidiary Tenute del Mondo owns an interest in renowned Super Tuscan brands like Luce, Ornellaia and Masseto. Recently you acquired Angelina Jolie’s 50% interest in Chateau Miraval. You have other premium wine properties in Spain and Argentina. Many of your wine brands are joint ventures, in the case of the Super Tuscan wines, with famed Italian producer Frescobaldi. Do you prefer a joint venture format? What role does wine play in Stoli’s overall beverage portfolio?
DM: Our wine arm, Tenute del Mondo, operates a mix of joint ventures and 100% ownership: we own Achaval Ferrer, Melipal and Arínzano completely.
Our vision is to create the world’s leading ultra-premium wine group, by building an extraordinary portfolio of wineries. Wine is intimately connected to terroir, and great winemakers take many years to learn the subtleties of an individual vineyard and to be able to make great wine from it. We therefore value the consistency and experience that our partners bring to the wineries in our portfolio, and take great value from their continued participation. These partnerships also allow us to broaden our own knowledge and experience.
Overall, we see wine as hugely complementary to our spirits portfolio. Most luxury drinks consumers enjoy a portfolio of different wines and spirits, and by having both wine and spirits our aim is to be able to offer those consumers something special for every occasion, whatever the drink they choose for that moment.
We also believe strongly that our expertise in brand building and distribution adds huge value to the wine brands which we work with; the world of spirits has always excelled in developing and marketing top brands, and by combining this brand building process with our wine team’s deep knowledge of the category we are able to create something truly special.
JM: There have been a lot of changes at Stoli over the last year. These include significant changes in personnel, a renewed focus on owned brands, and an expansion in the product range of existing brands. What didn’t you like about the old Stoli and what do you want the new Stoli to be?
DM: We are all beneficiaries of history. And I am grateful for where Stoli is today. Those who came before us created a legacy of which we are proud.
While our rich history is what brought us here, more recently, Stoli did not have powerful, or consumer led brands or a strong established global team or culture. If you were to ask Stoli personnel a year ago, who is Stoli? You would be hard pressed to find a consistent or compelling answer.
A little over a year ago we set out to transform the business. To not only create the most powerful ultra premium brand by 2025, but to create an organization powered by the best talent we could find who were committed to that mission.
In order to achieve that goal, we have had to look at everything from portfolio, to people, to process. To that end, we:
· Transformed our teams by hiring based on capabilities, experiences, AND perhaps most importantly, a unifying mindset.
· Looked for talent that was mission oriented and motivated by the prospect of creating change. This includes recruiting those interested in revitalizing existing brands and inspired to creating new engaging ones.
· Embraced individuals that were entrepreneurial and motivated to work in a lateral organization.
· And, of course, people that actively support diversity, inclusion, and sustainability. Essentially, those committed to standing up for equality and sustainability causes that are critical to our wellbeing and survival.
The result is a renewed, energized mission focused global team. If you were to ask a Stoli employee today – Who is Stoli? You would receive a much different answer than a year ago. I would hope they would say “Stoli is an organization that hires the best people, cares about doing the right thing, and rewards employee engagement.”
JM: Stoli’s beverage portfolio now includes bourbon producer Kentucky Owl, as well as mezcal brand Se Busca and Tequila brand Cenote, among others. Vodka is still the primary driver of Stoli Group’s sales, however. Are you looking to expand Stoli’s beverage portfolio? Will this be primarily by acquisitions? What beverage sectors most interest you?
DM: Stoli Vodka has and will continue to be a primary driver of sales. This past year we awakened our sleeping giant. In recognition for the legacy and outstanding product, we double downed on Stoli Vodka and essentially relaunched it with a heightened awareness and gratitude to those who have supported us all along, including the LGBTQ+ communities. At the same time our Elit Vodka continues to dominate the premium space and in fact, was just recognized as the Best Vodka for the 10th time by the Beverage Testing Institute.
Beyond Vodka, we continue to build out wider and deeper. As an example, our commitment to Kentucky Owl is unwavering and is evidenced in the hiring of our Master Blender, John Rhea, as well as the hiring of David Mandell as president of Kentucky Owl Real Estate Company LLC. Mandell is responsible for leading the construction and development of the Kentucky Owl Distillery and Park located on over 400 acres in The Bourbon Capital of the World, Bardstown, Kentucky.
While we have set our wine portfolio, vodka, bourbon and tequila brands on the right course, we are now working to broaden our gin and rum brands. The expansion of these lines will come with a mixture of acquisition and organic growth.
JM: Botanical vodkas, site/terroir specific vodkas and grain varietal specific vodkas have all become more prominent in the last few years. Is this the next wave of vodka innovation? Will these trends have legs? What are Stoli’s plans in these areas?
DM: Consumers are, in fact, looking for authenticity and innovation. Our plan is to continue to deliver both of those things in meaningful and engaging ways.
One area in which we will focus will be to build out our expertise around flavors. To that end, we will innovate real flavors from original sources. Furthermore, our 5-year plan includes massive efforts in both environmental and social pillars. To that end, we will provide consumers with transparency and brands rooted in sustainability.
JM: Over the last two decades we’ve seen a broad generational shift from white spirits to brown spirits. Vodka has held its own, although its rate of growth has declined significantly.
According to IWSR Drinks Market Analysis, in terms of value, vodka in 2000 represented 21.5% of total spirits value in the US, while in 2020, vodka was 23% of total spirits value.
Why do you think vodka has fared better than other white spirits? How is today’s vodka drinker different from the one 20 years ago? Do you see any evidence yet that the market share of white spirits is staging a comeback?
DM: Yes, Vodka has always fared well, as it has never gone out of fashion. It has remained incredibly consistent as a clean, pure alternative to brown spirits. Vodka has remained versatile and the industry has witnessed massive innovations to remain current despite a constantly evolving marketplace.
Today’s vodka drinker cares about a “better for you” product. They are motivated by mindful consumption, quality, transparency and sustainability. Consumers want to connect with “authentic brands” and are less interested in traditional advertising campaigns.
Instead they want to see brands that take action (not just share words). You will see our support of this with our Liberate Your Spirit campaign which is a platform to liberate voices around the world and highlight issues that can be overcome if we all pull together (i.e. gender, equality, inclusion, peace, and the climate crisis).
Looking ahead, there is further evidence that market share for white spirits beyond vodka is making a comeback. We can see it in the renewed interest in gin that is a global phenomenon.
JM: Thank you.