Polish acquisition the start of a new era for Belvedere

Belvedere, the French wine and spirit distribution company, has registered a 59 per cent rise in sales to €106.8 million in the first half of the year, helped by the €8.2 million acquisition of the Polish distillery Starograd Gdanski, one of the many former state-owned distilleries privatised by the Warsaw government, at the start of the year.

Although it has distributed Polish vodka brands for many years, until recently Belvedere has not been able to produce any vodka in its own right. The decision by the Polish government to privatise the various Polmos distilleries based throughout the country finally gave the company - along with many other big names in the European spirits industry such as Pernod Ricard and Allied Domecq - the opportunity to take control of production of vodka as well as distribution.

The Starograd and Royal Sobieski distilleries acquired by Belvedere have been integrated into the company's existing Polish distribution and logistics business Belvedere Dystrybucja over the last six months, the company said, adding that the company had also signed agreements to sell the excess raw alcohol produced by the distilleries to a number of partners, since their capacity is greater than that needed to produce Belvedere's own brands. Some 6.8 million litres of raw alcohol was sold during the half, netting the company €5.2 million.

When the Polmos distilleries were put up for sale by the Polish government, they were each allocated the domestic rights to a number of Polish vodka brands. One of Starograd Gdanski's brands was Zoladkowa Gorzka, but since this was considered by Belvedere to be too small and a poor fit with its existing brand portfolio, it was sold earlier this year to an undisclosed Polish company for €9.7m.

The acquisition of the Starograd Gdanski distillery gives Belvedere a 12 per cent share of the Polish market, making it the third largest player. The group's strategy will now be to develop the nationwide distribution of all its brands, in particular Sobieski and Zawisza which currently have only limited distribution in the north of the country, in a bid to increase this market share further.

Belvedere's success in the Polish vodka market has come primarily from the Belvedere and Chopin brands, which it has distributed worldwide for many years and which are produced by the Polmos Zyradow distillery. But in 1997, around the time when the Polish distilleries were put up for sale and the question of who owned the rights to which brand came to the forefront, Belvedere became the focus of a lawsuit filed by Phillips Millennium, the company which was the leading contender to buy the Zyradow distillery, over who exactly owned the rights to the brand.

While the government had allocated the brand rights to Belvedere vodka to Zyradow, the bottle design which had proved such a success on export markets had been created by Belvedere, and the new owners of the distribution rights were keen to ensure that they also had the rights to the distinctive bottles.

Belvedere promptly added its name to the list of bidders for Zyradow, arguing that that was the best way to ensure the rights to the brand and bottle design remained in the same hands. Nonetheless, Zyradow was sold to Phillips Millennium, and the dispute was only concluded when Belvedere was named as the approved buyer for the Starograd Gdanski distillery. Given that it now had access to its own production facilities, the French group agreed to sell the rights to the Belvedere and Chopin bottle designs to Phillips for €25.15 million.

The loss of the rights to such premium vodkas - especially after it had played such a major role in their success - was undoubtedly a blow for Belvedere, but the payment for the brand rights will help offset the cost of the new distillery, and the company's experience in creating and managing a Polish vodka brand will certainly stand it in good stead as it seeks to increase its market share.

With major international players such as Pernod Ricard putting Polish vodkas firmly on the map, the potential for increased sales certainly exists. The question is, can Belvedere get up to speed quickly enough at the international level to prevent rivals such as Wyborowa - or even Belvedere and Chopin - from cornering the market?