“Region-50” will launch the production of alcohol in the suburbs

The opportunities that have opened up after the departure of some global alcohol companies encourage local distributors to develop their own production. For example, Region-50, a major alcohol supplier on the Moscow market, will open a plant with a capacity of 4.9 million decaliters per year to produce vodka, gin, whiskey, cognac and tinctures under its own brands. Own platform will reduce the risks of dependence on partners and increase the profitability of the business, but production requires separate expertise, market participants say.

The alcohol distributor Region-50 will launch a plant with a capacity of 4.9 million decaliters per year in Dmitrov, Moscow Region, in July, Kommersant was told in the company. Equipment, recipes for cognac and vodka and part of the brands “Region-50” previously bought out at the bankruptcy auction of the Moscow Inter-Republican Winery, the beneficiary of which was the ex-president of the Bank of Moscow Andrei Borodin.

The new plant will produce vodka, tincture, gin, whiskey and cognac under the brands “Region-50” – “Stuzh”, English Park, Glen McClaud, “Kutuzov”. The plant is headed by the former top manager of Tatspirtprom, Farit Shagiakhmetov, added a representative of the distributor.

Until now, Region-50 has been producing its own trademarks (STM) on third-party sites under a contract. As explained in the company, having entered the sales of 1 million decalitres of private labels per year, it “has hit the ceiling” in terms of placing and increasing orders, as well as logistics. In addition, its own plant will allow expanding the range, including in the premium segment, which is impossible with a contract bottling, they say in Region-50.

“Region-50” launches production in the face of the termination of the supply of alcohol to some global companies, including Diageo (Bell`s, Johnnie Walker, Captain Morgan) and Pernod Ricard (Chivas Regal, Jameson, Beefeater, Absolut). Luding Group CEO Ernest Khachaturian notes that the departure of Western brands opens up new opportunities, and all major players in the market have launched their own brands, which has led to high competition.

Ladoga President Veniamin Grabar adds that Russian companies have “seriously increased their production volumes and assortment.” According to the data of market participants available to Kommersant, in January-April 2023, the production of whiskey in the Russian Federation increased by 55%, to 1.24 million decalitres, alcoholic beverages with a strength of over 25% – by 20%, to 4.2 million gave, year after year. And the production of vodka and cognac decreased by 10% and 11%, to 21.41 million and 2.37 million decalitres, respectively.

Stanislav Kaufman, the owner of the Kaufman brand agency, believes that Region-50 has a good private label portfolio, so the company should not have problems selling its drinks. As he notes, distributors that do not have their own production are forced to depend on partners in the supply of raw materials, paying excise taxes, and their own platform allows them to control these issues. But, the expert emphasizes, production is a separate and risky business that requires other competencies related to production technologies.

Veniamin Grabar also warns that the transfer of production from contract sites to its own requires expertise in terms of procurement management, inventory and financing. So the business can become more marginal, but it will also require considerable investments, therefore it is not obvious how this will affect the final cost of products, he adds. AST General Director Leonid Rafailov says that the company plans to continue placing bottling orders under contracts, which makes it possible to choose the best partner in each category.

Anatoly Kostyrev