Stoli Vodka Files for Chapter 11 Amid Financial Struggles and Cyberattack Impact
Stoli Group USA and Kentucky Owl, the producers of Stoli vodka, filed for Chapter 11 bankruptcy protection last week in a federal court in Dallas. This filing comes after a cyberattack earlier this year that affected the companies.
Court records indicate that entering bankruptcy will allow the companies to address over $84 million in debts. This news arrives at a time when some Gen Z customers are shifting away from traditional spirit brands like vodka, opting instead for more innovative ready-to-drink beverages or reducing their overall alcohol consumption.
Stoli Group’s Geopolitical Challenges and Cyber Threats
The two companies are American subsidiaries of Stoli Group, which has a complex geopolitical history. Stoli was originally owned by Russia since the pre-war 1930s and became a popular beverage in the Soviet Union before its dissolution in 1991. After that, the vodka brand was privatized and acquired by SPI Group, a Latvian company. Currently, Stoli Group operates out of Luxembourg. For many years, the Russian government has tried to reclaim the brand; in 2000, President Putin signed an executive order to restore state ownership of it.
The situation became more complicated this summer when the Russian government seized Stoli Group’s two remaining distilleries in Russia. This was detailed in a court filing by Chris Caldwell, the president and CEO of Stoli Group USA and Kentucky Owl. Additionally, Stoli Group faced a ransomware attack in August that disrupted the company’s internal operations. According to court documents cited by Reuters, the Russian government had previously labeled Stoli Group as “extremists” due to the company’s opposition to Russia’s invasion of Ukraine.
Caldwell explained in the filing that the cyberattack impacted the company’s IT systems, forcing the accounting team to rely on manual data entry to perform their functions. This hampered the company’s ability to provide financial reports to lenders, who were not informed about loan defaults. According to Caldwell, the systems are not expected to be fully restored until the first quarter of 2025.
Vodka Market Decline and Shifting Consumer Preferences Affect Industry Giants
Although vodka remains the favorite spirit among Americans, sales experienced a 7.7% decline year-on-year, ending in January 2024, according to NielsenIQ data reported by The Spirits Business. To adapt to changing market conditions, alcoholic beverage giant Constellation Brands has decided to divest its vodka brand, Svedka, to the Sazerac Company, known for its Fireball brand. This decision is part of the company’s strategy to focus on more premium spirits.
