Alcohol companies are expanding their range of bottled water

The reduction in the share of foreign drinking water brands has spurred the interest of alcohol companies in this segment. A large producer of whiskey and brandy, Stellar Group, has begun producing its water, and Ladoga is also considering entering this market. But you shouldn’t count on high turnover and a quick return on investment, market participants say.

Alcohol company Stellar Group has launched the production of bottled water Stellar Aqua. The structure of the SD Rus group sells a package of four 1.5 liter bottles on Ozon for 1.2 thousand rubles. or 300 rub. per bottle excluding discounts, drew the attention of Kommersant. According to Rospatent, another structure of the group, SG Rus, registered an image of a Stellar Aqua bottle in November and submitted applications for registration of still and sparkling water labels.

Stellar Group produces Mancatcher whiskey, Old Barrel brandy, and Veda vodka in Dmitrov near Moscow. According to data from market participants available to Kommersant, in January-September 2023 the company increased whiskey production by 11%, to 504 thousand decaliters, taking second place after Novabev Group (Fox & Dogs brand). Stellar Group is also one of the top three producers of alcoholic beverages with a strength of 25% and brandy.

Stellar Group Commercial Director Alexander Grevtsov says that the launch of the water brand will complement the range primarily in HoReCa, specialized and premium chains. According to him, water is released at the production site in Kabardino-Balkaria. The top manager did not disclose the volume of production and investment.

The departure of some foreign water brands from Russia or an increase in prices for imported water opens up opportunities for the development of new brands, market participants previously told Kommersant. Alcohol distributor Luding Group, for example, created a joint venture with water producer from Karachay-Cherkessia Dausuz to develop the brand (see Kommersant on September 4). Water under the brand name “4 waters” is in the portfolio of the Abrau-Durso Group of Companies. President of Ladoga (Tsarskaya vodka, Barrister gin, Fowler’s whiskey) Veniamin Grabar says that the company is considering including its own brand of water in its product range, but for now it sells the products of two other suppliers.

President of Abrau-Durso Group of Companies Pavel Titov says that in the nine months of 2023, sales of the group’s non-alcoholic category doubled with virtually no investment in marketing support. According to him, the dynamics are also explained by market demand and the need to replace departed brands. Veniamin Grabar notes that water is mainly popular among event organizers. According to him, launching a product under the manufacturer’s brand will help promote the entire company, if the reputation of the rest of the portfolio does not raise questions. The KLVZ “Crystal” (Bionica vodka) reminds that in the 2000s, “every self-respecting” vodka manufacturer produced water in order to advertise through the umbrella brand. But, adds Veniamin Grabar, if the goal is to make money, then a new market participant should be prepared for high competition.

Director of the Aqua-White mineral water plant, Alexey Voinov, explains that 95% of the bottled water market is occupied by low-price segment brands, and the rest by premium brands. According to him, for an alcohol company this is a logical development of the portfolio, which does not require expansion of distribution capacities. But, Mr. Voinov warns, you shouldn’t count on big sales and the return on investment will be long. Restaurateurs, he said, will most likely be ready to buy such water with deferred payment and discounts.

The founder of the Meat & Fish restaurants, Sergei Mironov, says that there is not enough quality water at an adequate price. Some suppliers may position their brand in the French Vichy category, he notes. According to retail audit NielsenIQ, in January-September, water sales grew by 3.4% in volume and 13.3% in money year-on-year.

Anatoly Kostyrev