Nemiroff has its eye on Smirnoff. In two years the company wants to go shot to shot with the American-owned brand. That means it hopes to reach sales of 14 million deciliters of vodka, 10 to 11 million of them to be exported, half to Russia and the rest to other countries.
Meanwhile, Nemiroff's current international presence seems negligible. Last year the company produced a little over three million deciliters of vodka, exporting only a fifth of that. A little more than 100,000 deciliters were exported beyond the ex-Soviet Bloc, which amounts to 2 million conventional half-liter bottles. Only 225,000 deciliters were sold in Russia (less than 0.2 percent of Russia's practically boundless vodka market), a country in which Nemiroff hopes to build its international brand presence.
These may not be very impressive international figures but the company's sales are growing exponentially and it's been a leader in Ukraine for eight years already. As almost all high-quality raw alcohol used for vodka production in the former-Soviet Union was made in Ukraine, and the Ukrainian market is currently more competitive and organized than the Russian market, Nemiroff could conceivably reach its goal of conquering Russia. A major flaw, however, may be the lack of a well-functioning distribution system.
As the company goes global beyond Russia, however, it may find itself in an opposite situation: delivering a product to stores in the West is not a problem; the problem is getting people to buy it. Nemiroff’s problem may be that the brand appears to be blurred and developing chaotically, perhaps as a result of its earlier history.
In Soviet times there were 20 identical vodka trademarks produced in all factories of the country. The Western consumer knows at least one of these standard vodkas: Stolichnaya (or Stoli), which is prevalent in the Western market. When the USSR broke up in 1991 and Ukraine gained independence, most alcohol factories were privatized or new businesses were built. Competition wasn't stiff and shelves weren't full of high-quality products, so there was little need to build brands; consumers bought whatever was offered. This situation has changed over the past three years as brands began to spring up and consumers are bombarded with heavy advertising campaigns of new vodka brands. Each new brand strives to create a unique positioning, differentiating through packaging and emotional appeal. Strangely, long-standing market players have had the poorest track record in this competition for consumer preference. They are simply demonstrating their product range as they had in the past (some companies produce up to 100 SKUs under one name). Their best ads look like well-designed sale posters with bland copy.
After researching Ukraine's vodka market periodically during the last three years, Nemiroff’s problems become more apparent. Using a brand essence model, it is possible to split the brand into four components: attributes, benefits, values and personality. Consumers make statements describing these components in preliminary qualitative research. Then potential users apply these components to brands in special surveys using both qualitative (e.g., focus groups) and quantitative (e.g., telephone surveys) research.
For example, the attribute "This vodka is originally packaged" may be ascribed to a vodka brand if its package is really different from others, or not ascribed to any brand if all of the packages look similar. Therefore, brand models are built out of a list of 120 to 160 statements (30 to 40 per brand component). As a rule, three or four competing brands are analyzed. If consumers ascribe the same statement to different brands, a special analysis determines whether to attribute this statement to one or to none of the brands. Therefore, if a brand was unable to build clear associations between itself and values in consumers' minds, its model may include no statements at all. It will be empty!
That's exactly what's happening to Nemiroff: its model includes only a few attributive descriptors, which is obviously not enough to maintain the brand's position locally, let alone fight for the international market.
The company’s advantages over its competitors can be summed up as:
- High product quality;
- Loyalty born out of its 8-year market presence; and
- Strong sponsorship presence at top sporting events.
Historically, there's been one bestseller among the company's more than 100 SKUs: vodka in a black package that bears the company's name but has no name of its own. Consumers call it "Black Nemiroff."
However, neither loyal consumers, nor buyers of other brands can describe Nemiroff’s brand in terms of its difference(s) from competitors, emotions accompanying product consumption, target audience or the personality behind the name. All this suggests that the Nemiroff brand doesn't exist in consumers’ minds.
This situation may be passable for Ukraine. It may also be tolerated in Russia for some time. But it's not going to work in the established markets of Europe and the US where the company's management is dreaming of expanding. The main stumbling block may not even be the sophisticated marketing and advertising strategies that these countries will require. The first meeting with a Western distributor the company's marketing specialists will have to answer the questions: "Why should I add another vodka to my portfolio?” and “How will your product be different from competitors?" It’s unlikely that anyone will be interested in a story about product quality and previous successes in Ukraine.
The battle for consumers in the West is not in the store, its in consumers' minds. Sophisticated consumers are shopping with an established list of favored goods, which is seeded through companies' marketing efforts. A new vodka brand will require a clear brand model to build the necessary perception to be included on that list.
Consumers in highly branded markets will not pay US$ 30 for half a liter of Ukrainian vodka solely on the strength of its quality. Nemiroff has to overcome its rather standard looks and a name that looks like it is stolen from Smirnoff. Until the Ukrainian vodka gets a brand, Western markets will remain off-limits.