Distilled Spirits Council President & CEO Chris Swonger joins Yahoo Finance Live to discuss U.S. vodka and spirit market amid the Russia-Ukraine war.
Video Transcript
– Welcome back. Well, the ban on Russia is hitting products in every category, and alcohol is no exception. Russian vodka is being cleared off store shelves in a hurry. For more on the beverage ban, let’s bring in our next guest. Chris Swonger is Distilled Spirits council president and CEO. Chris, Thanks so much for joining us. So just how much vodka do we actually import from Russia in this country? How much are we impacted?
CHRIS SWONGER: Well, first and foremost, let me just say, on behalf of our industry, you know, our hearts pour out Ukrainians and the freedom fighters. You know, it’s such a very anxious time. With that, in all actuality, the US marketplace only consumes 1.3% of Russian vodka in the total vodka marketplace. And actually, since 2011, Russian vodka imports have declined by 79%. So in large part, there’s just a small tad of Russian vodka in the US marketplace, but we appreciate and recognize the sentiments by government stakeholders and all the concerns that are happening in the Ukraine at this time.
– Isn’t it true that a lot of the Russian vodka isn’t even produced in Russia anymore? For example, Stoli is produced in Latvia, and you say Smirnoff is fully owned by Diageo, no ties to Russia. And Smirnoff is consumed in the US, is made in Illinois.
CHRIS SWONGER: Yeah, exactly. I mean, sometimes consumers can get confused with those great brand names in Smirnoff and Stoli and others. So when efforts came afoot over the weekend, obviously, everybody is anxious and they want to contribute and do their part to help what’s going on in Ukraine. You know, we’ve worked very, very hard to make sure some of these great products that might be perceived to be made in Russia actually aren’t. Again, Stoli is made in Latvia, which is a great country, already on public record being very, very concerned about what the Russians are doing in the Ukraine. And Smirnoff for US consumers is actually made in Illinois. And these great brands support and contribute to American jobs here.
– Chris, I’m wondering if you’re seeing– as people turn away from Russia vodka, do you see other marketers trying to come in with their brands and make a push? And what is the sort of market for vodka here in the US and globally?
CHRIS SWONGER: Well, vodka remains one of the top– well, it’s the top spirits category in the US, accounting for 27% of all volumes. So in 2021, 78.1% 9-liter cases of vodka were sold in the United States, generating $7.3 billion in revenues for distillers. So obviously, vodka is a very, very popular category in the United States, along with American whiskey and tequila and all of the above. So consumers have a lot of great choices, a lot of great brands. In terms of the top 10 vodka markets for the United States consumer, France leads, Netherlands, Sweden, Latvia, Poland. Russia comes in right behind Poland. And again, it represents 1.3% of the total vodka marketplace, so it’s a relatively small number.
– The Ukraine is also involved in the vodka market, so what’s happening to their sales amid all this conflict?
CHRIS SWONGER: Well, of course, I can’t speak on behalf of the companies in the Ukraine, but there is a vodka from the Ukraine called Nemeroff. And you know, we hope that they’re safe, and I’m sure they’re navigating not only the human dynamics that’s happening in the Ukraine, but the business dynamics as well. But Nemeroff is a relatively small brand in the United States. But obviously, we wish them well and full safety as well.
– And Chris, just more broadly speaking, you know, how challenged is the spirits industry right now? It was hit so hard at the beginning of the pandemic when restaurants and bars closed, now a sort of recovery. We are seeing a rebound. But then how much of a challenge do you think this conflict has overall?
CHRIS SWONGER: Well, it’s an unsettling time for everybody– all Americans and everybody around the world. The anxiety levels are certainly high. The pandemic created all kinds of challenges, and our industry was caught up in some challenging trade disputes over the last couple of years, where we’re still hanging on to a 25% tariff by our friends with the UK on American whiskey, which we appreciate and hope that the UK and the US get that resolved. It’s related to steel and aluminum trade dispute.
But with that, the pandemic was very difficult for distillers in the United States. Many tasting rooms had to shut down. You know, the on-premise markets with our bars and restaurant friends, they had to shut down. But I’m pleased to report, in 2021, supplier sales were up by 12% to a total of $35.8 billion and volumes rose 9.3%. So we’re seeing consumers trade up. Consumers are really gravitating to distilled spirits. I’m pleased to report that we have captured market share over the last 12 years against beer and wine.
So in large part, you know, the spirits industry is pretty healthy. But as we live in these anxious times, you don’t know what’s going to happen to the marketplace, and we want to make sure that our consumers enjoy the product, trade up to premium distilled spirits, and drink better, not more. And obviously, responsibility is always an important guide for our industry so our consumers enjoy the product but in moderation.
– All right, thank you so much for that perspective. Chris Munger, Distilled Spirits council president and CEO, have a great weekend.
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