Founded in 1872, Nemiroff has been well-established in Ukraine for over a century. Despite being a leading vodka brand in the country, it has only just started to enter other major global markets, such as the US and the UK, in recent years. Earlier this year, the group also struck distribution deals in India, Tunisia and Egypt.
Russia’s invasion of Ukraine has not made progress easy for the grain-based vodka distiller. When the war began in February 2022, production at Nemiroff’s distillery in Nemyriv in western Ukraine was put on pause for two months. However, as a growing list of global countries started imposing sanctions on Russian products, including vodkas, Nemiroff found an opportunity to fill the gap on shelves and build its name in new markets.
Just Drinks sat down with Nemiroff CEO Yuriy Sorochynskiy to discuss the ongoing impact of the war, the state of the vodka market and why he believes premiumisation is key to the company’s growth plans.
Fiona Holland (FH): What’s your view of the international vodka market right now?
Yuriy Sorochynskiy (YS): It’s a very tough market. Vodka is a very traditional base [spirit]… in the world spirits market. In the biggest markets, vodka has a big volume and is always suffering from some seasonal or temporary ups and downs [compared] with the consumption of other spirits.
What I see is a mostly flat, very highly competitive market. If you would like to achieve something… you have to invest heavily, not only money but time, effort, skills, everything to succeed.
As a Ukrainian company, it’s much more difficult because of the Ukrainian circumstances, political circumstances, this full-scale invasion when the country is suffering from the war and a lot of other issues, when you not only have to compete outside of Ukraine but [also] keep business going inside to support your staff, to support the country.
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By GlobalDataFH: Is the conflict still affecting production?
YN: This year we have another big challenge in Ukraine… a lot of power stations were destroyed, and we are suffering [with a lack of] electricity supply. Our distillery in the west part of Ukraine is far from the front line but the whole business is [feeling] the problem with electricity supply and we have unexpected shutdowns. Even today, right now I’m in the distillery and at one time for two hours we did not have electricity. Of course, we have internal sources, diesel generators, but the cost of electricity is high.
This is the biggest problem, it’s not only for us but for our suppliers as well… Right now, it’s summer, and some of our suppliers have solar [power] systems, some are planning to [switch] to some alternative electricity production. We do the same to be more flexible during the high season (October – December), so this is another challenge for all of us, but, nevertheless, we were managing to satisfy all orders and supply our products.
FH: Is the war affecting raw material procurement for your vodkas?
YS: Raw materials and all our suppliers are from Ukraine, and at the moment we don’t have any issues with supply, and we don’t have any lack of raw materials.
All this turbulence with electricity, with staff, creates some increase in the cost of raw materials, but this is not the first time. We know how to manage it and it’s not like a big shock or surprise for us. The cost slightly increases, like, 2% to 5%, it’s manageable. We started to order some safety stocks in April/May, and it helped us to have proper levels of raw materials right now and we are not expecting any breaks in the future.
FH: Where are your most important markets?
YS: The core markets are where we [have been] very well established for many years. And these are revenue and profitability-generated markets like the Ukraine home market, CIS [Commonwealth of Independent States] markets, eastern Europe markets where we have been for 20 to 30 years, and some markets where we have the potential to increase our sales like central Europe, the Middle East, Asia.
The new markets, where we either entered in 2022 and 2023, this is the beginning of a journey, it’s west Europe, the UK, Canada. The United States was [where] you know we see a lot of big potential for the brand, but we have to do the proper job in the market, and this is not like one day or overnight [that] we will be on top.
When the Russian vodkas were under sanction in European markets, I saw that for Nemiroff we have some sort of opportunity to not to replace bottle by bottle because the market is very tough, but to at least open new markets.
Roughly, we are present in more than 60 markets.
FH: You’ve just recently announced distribution deals in India, Egypt and Tunisia. What growth opportunities do you see in those regions?
YS: If we’re talking about India, it’s a very specific market, very high-level duties for imported products. So yes, from one side it is the biggest market regarding the population and per capita consumption, but from the other side, it is a very traditional market [with a lot of] local product consumption, so it’s not easy to enter and your entering price is significantly higher. But I think if Indian consumers see our brand worldwide, it will create some brand awareness and request for the product inside the market… It’s a long-term journey, we are at the beginning, and the same story with Tunisia, Egypt. The traditional local market is not so big, but it’s still a big population… with a proper partner, with proper strategy, proper execution, I don’t see any reasons why we should not achieve the targets.
FH: How do you position Nemiroff in these markets? Does the approach differ to your other markets?
YS: Since 2018, we started our premiumisation strategy, and we did a lot with the rebranding of our portfolio, packaging, everything. Last year, we launched our premium product Lex by Nemiroff. Everywhere we are doing a premium range of our products, except our core markets where we have [a] traditionally standard segment as well.
FH: Do you expect the vodka category to continue to premiumise?
YS: This is an overall worldwide…trend. In most markets, like European… American markets, in Asia, the GDP or disposable income is growing… consumers are going to buy more premium products than standard products. They are ready to pay [the] extra premium price just to be sure that they have the higher quality product.
FH: Have you been tempted to increase cheaper products as consumers become more cautious of their spending?
YS: We are in a [competitive] market. Of course, a lot of players are doing this, and consumers have an option to choose what they would like to buy… It’s very important to have a proper marketing strategy to build up the perception in consumers’ minds that our product is really premium. That’s why we did not simply increase the price like some of the players might… We did the full rebranding with our portfolio, and we were working with one of the top worldwide brand design agencies to develop the proper premium packaging. It means that the consumer, he or she can see that this is something outstanding, through a high-quality label and caps and liquid.
The quality of liquid, this is crucial for us. We are producing only using organic ingredients, and this [is] the solid confirmation that inside the bottle [there is] nothing chemical.
FH: Do you think consumers look for organic ingredients when they buy spirits, or vodka more specifically?
YS: The overall trend for more organic, more healthy food, it is also [present] when we’re talking about spirits. My view is it’s very important, but for us were always using organic ingredients. From one side, we are in Ukraine, not [the richest] country in the world, and from the other side, we try to utilise the benefits that we have organic wheat, organic grains, [it’s] our heritage. We were producing spirits for more than a century and a half using only organic ingredients… This is a part of our history, our DNA as a company and as a long-term vodka producer.
FH: Where do the biggest opportunities lie for vodka?
YS: It is my view that still vodka will be the big player in spirits… overall. The generations are changing, and for some generations the brands which entered the market 20 to 50 years ago, they might look like old-school brands and the youth try to find something new. This is a permanent process, generations are changing and their taste, their favourite products are changing as well.
My understanding, in any case, is that vodka as the biggest spirits category worldwide will not suffer… I would not say it will grow significantly, but my forecast for [the] next ten years [is] the category will be growing 1% to 3% [in volume].
FH: Are you planning to expand into any new markets next year?
YS: Around the globe, there are [about] 200 markets, and we are either in all the biggest markets or developing our presence in markets like in the UK, the US, Canada and some of the new markets under development [India and North Africa]. We will announce [more] when the agreements will be signed because its’ a little bit too premature to talk about the new markets if you don’t have the agreement on the table.
In our very well-established markets, we’re just increasing premiumisation. In developing markets, we are increasing our presence, penetration, increasing sales. In the new markets, we are at the beginning [of] building the distribution, filling a pipeline of products, starting to build the brand awareness.
I will not say that [new regions] are producing very significant volume, but overall from market to market, from bottle to bottle, we managed to increase our sales since 2022 to 2023 [to] over one million cases.
FH: How much do you expect Nemiroff’s sales volumes will grow by in 2025?
YS: It would not be double-digit increase of volume because the market is not growing… Roughly, we’re talking about not more than overall a 10% increase of sales. There might be some better opportunities, but the home market with all this turbulence might create some obstacles as well.
I’m absolutely optimistic regarding the future, but try to be more or less realistic based on the current circumstances… It’s not only the company problems, there’s a whole country problem… 10% of our male staff are in the army right now, a lot of people relocated outside of Ukraine, so these huge external factors can’t help us forecast more accurately. But still, we cross our fingers and believe that we should grow.
FH: And how do you plan to grow the brand further over the next 12 months?
YS: We launched last year the ultra-premium product, and we see that it helps us to work with new markets like the UK, Australia, the United States or Canada, and this also should [bring] some interest to the brand. We are in a branding business where it means that we have to invest in brand awareness. Fortunately, we don’t have problems with product supply and, to win in a competition, we have to build the proper brand awareness in the markets.
FH: Would you consider exploring new categories outside of vodka?
YS: We always [have been] one brand company and in one category. We are producing vodka and vodka-based products. We have some flavoured vodkas, and we are producing some ready-to-drinks but still based on our vodka.
To look in any other categories? It’s a good question. Still, keep in mind that we are in a country which is in war conditions right now. [A lot of] restrictions are in the past, but still [it is] high risk to start doing something in other categories, you have to have free hands…That’s why the topic will be under discussion a little bit [later], when the circumstances around Ukraine will be more normal and peaceful.
FH: Will you launch your RTDs anytime soon?
YS: We used to produce them in the past and right now it’s a hot topic in the markets. We’re preparing for this but we are late because of the circumstances in Ukraine to do everything properly.
FH: Are you sold mostly in the on- or off-premise?
YS: The first priority is retail and second is on-premise sales… because it’s more expensive to go on-premise. But to build brand awareness we have to be on-premise, we have a team of brand ambassadors which are going to all types of events where we present our brand to visiting markets.
FH: What is the benefit of starting out in the off-premise? Is it easier to sell to consumers?
YS: The category is very familiar for them. Of course, we have some information on the bottle like a QR code or very easy to mix recipes on the label to help them break these barriers to understand how to drink this product.
