Stoli Group USA and Kentucky Owl, the producers of Stoli vodka, recently filed for Chapter 11 bankruptcy protection in a Dallas federal court due to financial challenges exacerbated by a cyberattack earlier this year.
In their legal filings, the companies stated that the protection sought would assist in settling a combined $84 million debt. This development comes at a time when some Gen Z consumers are moving away from traditional spirits like vodka, opting for more trendy ready-to-drink options or reducing their alcohol consumption.
Stoli Group’s American subsidiaries have a rich history, with the vodka brand originating in Russia in the 1930s. Following the collapse of the Soviet Union in 1991, the brand was privatized and eventually acquired by Latvian company SPI Group. Today, the Stoli Group is headquartered in Luxembourg.
However, tensions have arisen with the Russian government seeking to regain control of the brand. This was evident when the Russian government seized Stoli Group’s remaining distilleries within the country earlier this year, as reported in a court filing by Chris Caldwell, the president, and CEO of Stoli Group USA and Kentucky Owl.
Furthermore, a ransomware attack in August disrupted the company’s operations, with the Russian government labeling the Stoli Group as “extremists” due to their opposition to Russia’s actions in Ukraine.
Caldwell mentioned in the filing that the cyberattack severely impacted the company’s IT systems, leading to manual entry for accounting functions. This hindered the companies’ ability to provide financial reports to lenders, resulting in defaults on loans. The restoration of the systems is not expected until the first quarter of 2025.
Despite vodka’s popularity in the US, there has been a decline in volumes, with a 7.7% decrease in the year ending January 2024, according to NielsenIQ data.
On a related note, Constellation Brands announced the sale of vodka brand Svedka to Sazerac, known for producing Fireball. This move signifies Constellation Brands’ focus on premium spirits, aligning with their strategic business goals.