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2020-08-07 13:06:16

Latvijas balzams as strong as ever


By Inese Timuka . 08.04.2010

Kārlis Andersons, chairman of the board of Latvijas Balzams, to find out about the latest trends in the market.

JSC Latvijas balzams is the biggest manufacturer of alcoholic beverages in the Baltic countries. In Latvia, it has around 30% of the market. The origins of the famous black balsam go back to 1900, when Riga State Spirits Warehouse No.1 started operations. Today, the company is a wide-ranging producer of alcoholic drinks, manufacturing more than 10 product groups – in total more than 100 brands – but the company itself is part of SPI Group, one of the world's leading drinks producing and distributing companies.


Which are the top three products in the Latvian market at the moment? Have they changed in recent years?
The names of the top three have remained the same, it’s just the layout has changed over the years. First position has been taken by Rigas Šampanietis (Riga Champagne) and the next most marketable drinks have been 3 Graudu degvins (Three-Grain Vodka) and Lucky Dog Cider.

Which brands are the best known abroad and in Latvia?
Abroad, Stolichnaya vodka and Riga Black Balsam are the best known, but locally it’s Moskovskaya vodka, Lucky Dog Cider and Riga Champagne.

What kind of trends do you see on the market?
If we are talking about general trends in the alcohol market, I must say that it is stable. Strong alcohol beverages take around 40-42% of the market and drinks with a lower level of alcohol take around 58-60%. In 2009, the excise duty seriously grew for strong alcohol and this has affected consumers as well, who are now choosing lighter drinks.

If the products in the top three are the same, yet Latvijas Balzams puts a lot of new products onto the market, does that mean the customers are conservative?
I would say that people became more conservative in 2009. Before that we saw new products expanding onto the market and our customers had more money to spend and were more eager to try new drinks. New products entered the market more quickly. The trend in 2009 and 2010 has been that traditional and long-standing values have secured their positions in the local market. However, we do pay attention to those traditionally popular drinks, for example by updating the labels and the image.

How would you describe the target audience of Latvijas Balzams and these people’s attitudes to new products?
Young people aged 18-25 are comparatively responsive. They like to try the latest products. However, they are more sensitive to price. Customers in the 25-35 age range have other values, for example: does this product bring with it some prestige, the value, the appearance of the beverage, the style and the shape, as well as additional values such as special technologies used during the process of making the beverage, plus acknowledgements received at international fairs making the product more trustworthy. Customers older than 35 are not so sensitive to prices; for them, the quality is more important than price.

What is the total volume of your exported goods?
In 2009, it was around 60% of all drinks, but the big share of those are exported within the SPI Group network. The most successful brand was Stolichnaya vodka, out of all the drinks offered by SPI Group, but if we talk about Latvijas Balzams those customers can found in 29 countries all over the world. The biggest volume of exports goes to Lithuania. There we export a wide array of drinks that we produce, including of course the brandy Grand Cavaliere, which is specially produced at Latvijas Balzams for the Lithuanian market. Then comes Estonia, Poland and Russia – these are the big destinations for our drinks.  

What has influenced the changes in total exported volumes? Is it just purchasing capacity?
Last year was difficult for us. The factors are explained by purchasing capacity lowering. There were also structural changes in the market as well as new participants entering the market. Plus the numbers of incoming tourists are less, and the amount of illegal alcohol has grown. Excise duty grew by more than 30% during the last year, but according to the statistics income from excise duty dropped by 11% in February compared to the same month in 2009. We can make a lot of conclusions out of this, and of course we know that our products aren't essential goods, but it is also obvious that a large amount of taxes have not been paid to the state budget.

Which destinations are you heading in the future?
Well, we are working on various destinations at the same time. Let’s see which market we will enter next, but we do focus a lot on the eastern market. In Europe, it would be the Czech market.

Does Latvijas Balzams operate retail shops abroad?
Within the SPI Group, retail shops have been developed in two countries, in Latvia and Lithuania. In Lithuania you can find shops called Bravo Alco, and there are two shops in Kaliningrad. At the moment, sales are difficult and we don’t have reason to expand the number of shops we have. We are focusing more on how to keep the current positions at the same level.

In which segments is Latvijas Balzams planning to implement new products?
It is clear that we are planning to implement new beverages in all segments. It’s just matter of time, due to the local economic situation. But in the near future there will be novelties in the premium drink segment and the light alcohol drink segment, where the cycle of product life is much shorter. There we are putting our strengths into improving beverage packaging.

How big is the premium segment?
This segment is comparatively small, but this is a question we can look at in the long-term versus the short-term perspective. It is obvious that the premium segment is interesting for all producers due to its profitability, but from the other side the segment has suffered a lot recently. But bad days don’t last long, and it is already time to work on this segment. As soon as the economy is back on track the winner will be the one who is ready.

Could you tell us more about what the alignment in the SPI Group has given to the company?
The main advantages are financial resources, to which we have access within the group, plus knowledge and technologies as well as the broad outlook on the world of alcohol. It opens up a broader view on the local problems if we look at it from an international perspective.   

In your opinion, is Riga Black Balsam a strong brand representing Latvia?
A brand that is more than 200 years old is certainly a strong brand, and it is quite unique. There are not many examples like this in the world. Within the borders of Latvia, I cannot imagine anything else like it.

We have heard tourists complaining that they know Riga Black Balsam, but have no idea how to use it...
The recipe of Riga Black Balsam is updated too and new beverages based on it are entering the market. The latest is Balsam Blackcurrant. In this way Balsam is more drinkable. We are working with bartenders in Riga so that balsam remains an ingredient in various cocktails. And in the shops black balsam is sold together with tiny cocktail recipe books in various languages.