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Stoli Group USA and Kentucky Owl, which produces Stoli vodka, filed for Chapter 11 bankruptcy protection in federal court in Dallas last week. This announcement follows the cyberattack they faced earlier this year.
In legal filings, the company said the protection would help it pay off a total of $84 million in debt. News of the bankruptcy also comes as some Gen Z consumers are limiting their alcohol consumption or abandoning traditional spirits like vodka as they switch to trendier ready-to-drink products.
The company is an American subsidiary of Stoli Group. The vodka brand, first sold in the United States in the 1970s, has had a complex geopolitical history since its founding.
Stolly originated in Russia in the early 1930s and was owned by the Union of Soviet Socialist Republics until the collapse of the Soviet Union in 1991. The vodka brand was subsequently privatized and acquired by the Latvian company SPI Group. Stoli Group is currently headquartered in Luxembourg. For decades, the Russian government has been trying to regain rights to the brand. Russian President Vladimir Putin issued an executive order in 2000 to restore government ownership of Stoli.
The problem worsened this summer when the Russian government seized the country’s two remaining distilleries, according to court filings from Chris Caldwell, president and CEO of Stoli Group USA and Kentucky Owl.
Stoli Group also experienced a ransomware attack in August, disrupting the company’s internal processes. According to court documents cited by Reuters, the Russian government classified the Stoli group as “extremists” for its opposition to Russia’s invasion of Ukraine.
Caldwell emphasized in the filing that the cyberattack affected the company’s IT systems and forced the company’s accounting team to switch to manual entry to complete functions. This prevented the company from providing financial reports to lenders notifying them of the loan default, he said. The companies do not believe the systems will be restored until the first quarter of 2025, the CEO said.
Vodka remains the most popular spirit in the U.S., but its volumes fell 7.7% in the year ending January 2024, according to NielsenIQ data cited by The Spirits Business.
This week, liquor giant Constellation Brands announced the sale of vodka brand Svedka to Fireball producer Sazerac. The Modelo brewer cited its intention to focus on more expensive premium spirits as a key factor in its decision to offload the brand.
