Nemiroff Vodka Distillery Expansion, Nemirov, Ukraine
In April 2004, Nemiroff Ukrainian Spirit Company, one of the leading producers of vodka in the Ukraine (holding an estimated 29.6% of the legal vodka market), opened a new distillery in the town of Nemirov, in the Vinnytsia Region of the Ukraine. This was Nemiroff's second distillery in the region.
The company needed to expand its production facilities following increased shares of the Ukrainian export market for alcoholic beverages of 74.3% and also an increase in domestic demand for its new range of alcopop, the 'Spy' Low Alcohol Cocktail (LAC).
Construction of the new facility began in 2002, using state-of-the-art technology for rapid construction of the necessary buildings. The new 17,000m² plant, along with a 1,200m² administration complex, was built on a site with a total area of 54,000m² and cost $16m. The new facility was able to offer an additional 500 jobs to the area when production began in February 2004. The company also invested $2m in the modernisation of its alcohol production plant, also in Nemirov.
When it first opened, the distillery had one production line able to fill 24,000 bottles per hour of the company's new 'Spy' range of LAC. Demand for the new product made it necessary for second and third phase expansion plans to be brought forward.
In July 2004, Nemiroff announced the start of the phase two investment at the facility. The plan was to install two new bottling lines for the new plant for vodka and LAC production in an attempt to keep up with market demand. This involved the installation of two new 12,000 bottles per hour filling lines for vodka production (one vodka filling line and one LAC filling line).
The phase two expansion was completed by the end of 2004 and the two new lines were in full production by the start of 2005. Phase three started in the second quarter of 2005 and involved an additional 24,000 bottles per hour filling line for LACs. The company is also considering plans for a third distillery when the production of the new second distillery is outstripped.
The new investment in the facility for phases two and three was estimated at a further US$17.2m.
When all the production lines are running at full capacity, the capacity of the plant is 72,000 bottles per hour. The distillery was able to run at full production capacity by 2006, which totalled 6.6 million decalitres per year (15% of the domestic market).
The distillery had paid for itself by the start of the 2006 financial year.
CONTRACTORS AND CONSULTANTS
Krones of Germany were the main technical consultants, suppliers and installers of the new bottle filling production lines at the new facility. In total, the company installed four bottling lines for the production of LACs in 275ml glass bottles and also a range of vodka products in 750ml and 500ml glass bottles.
Each filled bottle is coded with a unique laser product protection which takes the form of notches on the glass bottle and cap to denote bottling time and date. Krones has praised the new distillery as a "unique plant for Europe in terms of its technical facilities and processing concepts". Nemiroff sources much of its glass bottle requirements from the Gostomel Glass Factory.
PRODUCT RANGE AND NEW BOTTLE DESIGN
Nemiroff's product range includes its popular premium vodka brands (the best selling brand is Nemiroff black), a number of flavoured vodkas (lemon, orange, cranberry, honey, pepper and currant) and a variety of alcopops, which amounts to a production total of 14 million cases per annum. The company produces over 500,000 bottles of vodka per year for domestic markets and 350,000 bottles per year for international markets.
In October 2007, the company released a new range of flavours – Honey Pepper, Birch Buds and Ukrainian Wheat in a newly designed orthogonal bottle;, the new bottles were designed and developed by Claessens International but based on the company’s original bottle design released in 1999. In early 2008, the new bottle design will be adopted across the full range of Nemiroff vodkas.
In March 2007, Nemiroff introduced a newly designed brand protection system for its vodka range. Counterfeiting of vodka across Russia is a big problem and the company wanted to make sure that its consumers were getting the genuine product. The company made an investment of $6.6m (€5m) into the new system.
The company's 'Schtof' bottles are now fitted with a 'truth detector' cap developed by Tekhnologia Ltd. The truth detector device is a red circle that appears on the aluminium cap when the bottle is first opened. The red circle means tells the consumer that they were the first to open the bottle and that the product is genuine Nemiroff vodaka. The bottle is also equipped with a specially designed valve that allows vodka to be poured without spilling and also does not allow the bottle to be refilled, which is a further level of protection.
In 2002, Nemiroff introduced laser engraving of the bottle neck of each product bottle with a time, date and batch number as protection against counterfeiting but this has now been superceded by the new system.
Although Nemiroff is a well established vodka brand in the Ukraine, Russia and CIS, with over a hundred different SKUs (stock keeping units), the market for LACs is still an uncertain one. There are many established brands already occupying a steady but precarious market.
The experience of companies launching new brands has shown that good marketing is required to enter a new product into a 'trendy' market. Price is not the controlling factor as consumers are prepared to pay more for their chosen brand.
Nemiroff's brands include Top Spy (6% by volume) in orange, lemon, peach and grape flavours and also Jolly Spy (7% by volume) in gin tonic, whisky cola, light blue rum, tequila cactus and red brandy flavours.