Stoli Group USA and Kentucky Owl, which produce Stoli vodka, filed for Chapter 11 bankruptcy protection in a Dallas federal court last week. The announcement follows a cyberattack they faced earlier this year.
In the legal filings, the companies said the protection would help them pay off a combined $84 million in debts. The bankruptcy news also comes as some Gen Z consumers abandon traditional spirits like vodka as they limit their alcohol consumption or turn to trendier ready-to-drink products.
The companies are American subsidiaries of Stoli Group. The vodka brand, which was first sold in the U.S. in the 1970s, has experienced a complex geopolitical history since its founding.
Stoli originated in Russia as early as the 1930s, and was owned by the Union of Soviet Socialist Republics before the state’s collapse in 1991. The vodka brand was then privatized and was acquired by Latvian company SPI Group. The Stoli Group is currently headquartered in Luxembourg. For decades, the Russian government has attempted to regain the rights to the brand. Russian President Vladimir Putin issued an executive order in 2000 seeking to reinstate government ownership of Stoli.
Problems intensified this summer, when the Russian government seized the brand’s two remaining distilleries within the country, according to a court filing from Chris Caldwell, president and CEO of Stoli Group USA and Kentucky Owl.
Stoli Group also experienced a ransomware attack in August, hampering the company’s internal processes. The Russian government labeled the Stoli Group as “extremists” because of their opposition to Russia’s invasion of Ukraine, according to court documents cited by Reuters.
Caldwell said in the filing the cyberattack impacted the company’s IT systems, stressing that the companies’ accounting team had to turn to manual entry to complete its functions. This, he said, prevented the companies from providing financial reports to lenders notifying them of defaults on their loans. The companies do not believe the systems will be restored until the first quarter of 2025, the CEO said.
While vodka remains the most popular spirit in the United States, volumes of the fell 7.7% in the year ending January 2024, according to NielsenIQ data cited by The Spirits Business.
This week, alcohol giant Constellation Brands announced it is selling vodka brand Svedka to Fireball producer Sazerac. The Modelo brewer cited its intention to focus on more expensive, premium spirits as the primary factor in its decision to offload the brand.
