Russia: Whisky brands which cut ties with Russia still available there thanks to parallel imports system
Politico reported on November 15 that despite the best efforts of Beam Suntory and other major spirits brands to end business with Russia, citizens within the country can still find bottles of Jim Beam and The Macallan at Russian stores.
A Politico investigation found that products from both Beam Suntory and The Macallan’s parent company, Edrington, are still distributed in Russia due to Putin’s parallel imports system, also referred to as the “gray market.”
“It’s a common problem,” said Andrii Onopriienko, the head of Leave Russia, an organization that tracks foreign companies and their decision to end business ties with Russia after the country invaded Ukraine, per Politico.
Onopriienko went on to claim that the issue took place outside of food and beverage as well.
Due to the parallel imports system, the financial ramifications for cutting business with Russia can have plenty of drawbacks — so much that some businesses resumed selling alcohol in the country. After all, if a company’s products are going to be sold in Russia regardless, many companies would rather be the one to profit off of those sales.
Bacardi faced plenty of media scrutiny after pulling operations in Russia for a brief period and then resuming sales within the country. Ukraine declared Bacardi a war sponsor for resuming operations within the country.
According to Politico, Bacardi experienced an 8% revenue increase after resuming operations in Russia.
Yet, those who remained steadfast in banning imports to Russia have faced financial repercussions, as up to 50% of imported spirits in Russia were from the gray market as of May 2023.
Moët Hennessy’s Russian arm reported a 70% drop in sales last year, according to Politico, after LVMH closed its stores in Russia and severed ties with the country in March 2022.
Just Drinks reported in mid-July that Beam Suntory and Edrington sold their Maxxium Russia joint venture to Russian management, shortly after the U.S. imposed sanctions on companies supplying luxury spirits to Russia and Belarus.
Shortly after Beam Suntory and Edrington sold Maxxium Russia, the new owners took over operations at the import companies Maxxium Russia, Maxxium Cyprus and Denview, adding new spirits to their portfolio. Denview allegedly kept importing and distributing spirits, according to Russian customs.
The company was able to continue importing whiskies like Jim Beam and The Macallan because Moscow allegedly adopted more lax policies involving importing spirits without paying royalties to the trademarked companies, which in this case would be Beam Suntory and Edrington.
Politico reported that Maxxium Russia and Denview allegedly sold 9.2 million rubles ($103,890) of spirits in the country.
These tactics have caused headaches for Russian consumers, who are forced to buy low-end products in order to maintain access to top-shelf products.
A manager for a regional buyer complained to Politico that to buy a case of Macallan, “you have to order three times as many incomprehensible drinks Maxxium has included in its updated portfolio.”
Both Edrington and Beam Suntory have staunchly denied being involved with Russia at any level.
“Our investigations show that these products can have only reached Russia without our permission or involvement,” a spokesperson for Edrington said in a statement reported by Politico. “Nobody has our permission to import our products into Russia.”
21 November, 2023
