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Changes in the Beluga vodka brand ownership

19
october 2022

BELUGA GROUP is the largest alcohol company in Russia. The company’s lines of business include the production of more than thirty spirits in different categories and price segments, winemaking, distribution of products, exclusive representation of world-famous foreign brands in the country, operation of the in-house WineLab retail chain, and, until recently, export of alcohol.

The current geopolitical situation has significantly impacted the export business. External factors led to a number of complications in vodka export from Russia, which, in turn, caused a drop in sales or a termination of work with several countries. A direct ban on shipments to the leading markets of super-premium alcohol — the US (Executive Order of the US President 14068 of March 11, 2022) and the EU (Council Regulation No 833/2014 of July 31, 2014 with subsequent additions), nearly suspended cooperation with the largest Duty Free operators, import tariff increase in the UK (The Customs Regulations 2022 No 376), delisting of Beluga vodka from the range of products in the largest retailers in Australia, as well as general refusal of many foreign distributors to renew partnership with the Russian brand all contributed to the current problematic state of the export. In addition, due to sanctions imposed by the United States and the European Union and in compliance with European legislation, BELUGA GROUP had to stop the operation of the warehouse in Riga on July 9. Thus, export business for Russian vodka became practically impossible.

Due to the current political situation, BELUGA GROUP has decided to sell the international rights to the Beluga super-premium vodka brand while retaining the intellectual rights to the trademark in Russia. The size of the transaction is expected to be over $75 million, which is significantly higher than the value estimated by independent appraisers. The transaction will enhance the company's liquidity and thus enable the group to adhere to its current dividend policy. At the end of 2021, exports of Beluga vodka were within 4% of BELUGA GROUP's revenue, which amounted to 2% of total shipments in terms of volume, so stopping the export will not have a significant impact on the overall results of the group.

BELUGA GROUP will focus on the Russian market in order to maintain its leading positions in the remaining business directions. The company will continue to develop popular brands in key categories of alcohol, create new products that will meet the tastes of consumers and replace outgoing foreign spirits. At the same time, the group will represent the products of foreign partners and conclude new contracts, engage in winemaking, improve and scale the in-house WineLab retail chain and thus remain the largest player in the domestic alcohol market.

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