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EU and US sanctions unlikely to harm the Russian Vodka industry

Published:  14 August, 2014

A ban on Russian vodka in the EU and US would have a minimal effect on the Russian vodka market. 

Vodka Vending Machine

Russia is the largest market in the world for vodka. According to The Russian Health Ministry, per capita consumption is 13.5 litres, which is twice the global average.

As part of the first round of sanctions that were adopted by the EU, which were considered 'low intensity' sanctions, luxury goods like furs, diamonds and vodka were banned. However, given Russia has such a large domestic market it is unlikely to have a major impact on industry.

The EU relies more heavily on EU member countries within the 'Vodka Belt' as a source of the white spirit. The Vodka Belt, which is not a strictly defined area, often includes Latvia, Estonia, and Lithuania, Scandinavian countries, Belarus, Poland, Russia and Ukraine. In the European Union 70% of the vodka consumed comes from EU Vodka Belt countries.

According to The Grocer Britain's 100 Biggest Alcohol Brands 2014 list, the UK's the top vodka brand is Smirnoff. Despite being founded in Moscow by Pyotr Smirnov in 1864, the most popular vodka in the UK is actually produced in several countries including India, Ireland, Italy, the UK and the US. The brand is owned by London-based Diageo. Sales were just shy of £400 million this year with sales increasing 6.7%. 

The second most popular vodka and coming in as the 11th biggest brand in the UK according to the Grocer is Glen's Vodka which is distilled in Scotland and the UK from sugar beet.

Russian Standard, which is the 28th biggest brand in the UK according to the list, is the top Russian produced vodka on the list. Sales did top £89.2 million, but with so many alternatives in the market, finding a substitute or switching brands should not be too difficult.

Equally the US is not a huge importer of Russian vodka particularly after a protest against Russian vodka that hit major metropolitan cities in the US. The protest was in response to anti-gay laws that were signed into law prior to the Olympic Games being held there.

According to the Distilled Spirits Council of the US, the amount of vodka imported from Russia dropped 70% in 2013. This was mostly due to top vodka brands predominantly being sourced from other countries that are producing the spirit.

In the US in 2013 Smirnoff was the top best-selling vodka brand as well. The number two spot was Swedish brand Absolut, followed by Swedish Svedka, the fourth most popular brand was French vodka Grey Goose and Skyy vodka rounded out the list at number five, which is produced in the US.  Additionally in the US market there are now over 500 craft vodka distillers and that number continues to climb.

According to the WSTA's Market Report for Quarter 2, 2014, vodka remained relatively flat in volume at 620,000 hl. But Vodka is still the most widely ordered spirit in the on-trade, although it is losing volume.