Before President Putin started a new Cold War, the transition from local to international market was doing and progressing well.
Earlier this year in his State of the Union Address, US President Barrack Obama said: “Russia is isolated and its economy is in tatters.”
Well, President Obama was somehow right considering the trouble in free-fall, down by half against the dollar in 6-months with a slump in the oil prices worldwide.
Diageo’s MD for the region Svetlana Naumova said in Russia, they are operating in a challenging environment of macroeconomic decline, currency volatility and consumers are trading down. He added that while the performance continues to be affected by the external factors, it is still a good and attractive market for Diageo.
A week after President Obama made his address, a report from BBC said that seventeen percent drop in the company’s Scotch whisky sales in Russia in the second half of 2014. The report further said that Johnnie Walker Red Label is still leading the scotch category while White Horse gained share.
Despite Obama rhetorically boast about the impact of western sanctions, Putin had just shrugged off about it.
“A big, black media war between the two countries,” these are the words of Cyril Claquin, Pernod Ricard’s CMO for Eastern Europe and Russia. Furthermore he said: “Of course the overall economy has slowed down if you consider the GDP figures, but we’re not in disaster mode. It was expected the Russian economy would collapse and consumers would panic and lose confidence about everything.”
Claquin added, “The premium whisky market is growing steadily by 8% in the off-trade in the year to date.”
He also credited two main factors of the said growth, as quoted he said: “The first is that consumer confidence has not eroded as dramatically as we expected, and secondly the market is very much fed by very aggressive promotions from almost all players.”
On the other hand, his opposite number at Campari, Cesare Vandini stated that the last 18 months have been less brilliant that usual in Russia stating further those consumers have become more sensitive to promotions.
However, Vandjni agrees with Claquin to the idea that brand owners are being “very aggressive” on price.
On the other hand, The Moscow Times had recently reported that Sinergia, Russia’s biggest vodka producer has retaliated with its own brands which are Captain Gin and Captain Rum. However, Diageo isn’t getting worried with it. Svetlana Naumova says that “among imported spirits, rum is the fastest growing category and Captain Morgan is gaining momentum”.
Meanwhile, last year Diageo just also launched a premium spirits drink with Irish whiskey called Rowson’s Reserve which is priced at RUB 500 (£5.60). This was made after being encouraged by the success of Shark Tooth.