Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, December 11, 1994 TAG: 9412120064
SECTION: VIRGINIA PAGE: B8 EDITION: METRO
SOURCE: ASSOCIATED PRESS
DATELINE: FREDERICKSBURG LENGTH: Medium
``I know it sounds sort of crazy, like the ultimate coals-to-Newcastle arrangement,'' said John B. Adams Jr., president of A. Smith Bowman Distillery and a distant cousin of the second U.S. president.
Vodka is probably more Russian than apple pie is American. The average Russian man guzzles nearly a bottle of vodka every two days, despite government efforts to cut consumption.
But because of inefficient production and distribution, it can be cheaper for Russians to buy imports than their own Stolichnaya or even a lesser-priced Russian vodka, Adams said. And Russia's new monied class of entrepreneurs prefers the cachet of imports.
``After communism went away, there was a pent-up demand,'' Adams said. ``Russia wasn't able to meet it very well, and they still aren't.''
Since the fall of the Berlin Wall four years ago, inefficient state-run industries have withered and all manner of Western goods have flooded Russia and the rest of Eastern Europe.
``Really, why should vodka be any different?'' said Mark Orr, who heads the international trade office at the Distilled Spirits Council of the United States, an industry group.
American manufacturers sold $23.7 million worth of alcohol to Russia last year, about 6 percent of all American exports, according to the trade group's figures. Of that, $14 million was vodka and $8.6 million was grain alcohol.
Russia imported far more from Europe.
``The money is there,'' said Robert E. Lee IV, chairman of the board at Bowman and great-grandson of the Confederate general. ``I don't know where it's coming from. You hear all this about the economy over there, but somebody's got money.''
Many domestic sources of raw alcohol for vodka have dried up, and at one point Russia couldn't get enough glass to bottle what it did make, Orr said.
But the situation probably won't last, Orr said. Russia already has begun imposing restrictive tariffs on vodka and other alcohol. Russia remains a large exporter of vodka, mostly expensive boutique labels packaged for Western tastes.
Fredericksburg-based Bowman, the nation's oldest and smallest family-owned bourbon distillery, sold about 340,000 cases of alcohol two years ago. The company was founded after Prohibition and for 50 years made nothing but the signature Virginia Gentleman bourbon.
Bowman was looking for new markets as American tastes turned to wine or lighter liquors. The company long had bottled vodka and other white liquor manufactured by other distillers.
Bowman experimented with vodka shipments to Poland in 1990, then moved on to Russia, the world's largest vodka market, in 1992.
``We just wanted to make it as inexpensive as possible to buy our products over there. Once we figured out how to do that in one place, it was fairly easy to do it in other places,'' Adams said.
Now 82 percent of Bowman's sales are overseas.
Last year, Bowman sold 940,000 cases - mostly vodka and grain alcohol. This year the figure was 2.3 million cases, Adams said.
Grain alcohol, the clear, powerful raw material for vodka, is shipped in inelegant plastic liter bottles, the same packaging used for cheap bottled water in American supermarkets.
Selling for a few rubles, it's often the cheapest alcohol available.
The 190-proof alcohol is so potent it carries a hazardous-material label. Ordinary vodka is 40 percent alcohol by volume, or 80 proof. Bowman believes it is the largest exporter of grain alcohol to Russia, although no one is collecting complete data.
Russian buyers can make their own vodka by thinning the grain and adding flavorings, but many apparently don't bother, Adams said.
``A group of men, usually, will sit around and cut it with water,'' Adams said.
Kristall, the historic distillery which makes Stolichnaya, is on the rocks financially. The mostly state-owned company was declared insolvent in August when it was more than $3 million in debt.
Russia's best-known domestic producer lays the blame for its financial woes on Russian government taxes and competition from cheap imports such as Bowman's.
Kristall's production this year is expected to be about 35 million liters - less than half last year's total.
``We produce the same amount,'' Adams said. ``We have 90 employees and they have 1,000. There's no secret about why they are inefficient.''
by CNB