Stoli on the rocks: Geopolitics and cyberattack push vodka icon into Chapter 11

Stoli Group USA, the renowned vodka producer, has entered Chapter 11 bankruptcy proceedings in the United States, citing an array of financial and operational pressures, including geopolitical disputes, a recent cyberattack, and shifting consumer habits that have created a perfect storm of challenges for the company’s U.S. operations.

A long-standing legal battle with the Russian government has intensified Stoli’s struggles. According to court filings, Russia has pursued what Stoli Group describes as “politically motivated” criminal charges against its founder, Yuri Shefler, and has made repeated attempts to seize the company’s assets.

The most significant blow came in July 2024, when Russian authorities confiscated Stoli’s last two distilleries in the country, valued at approximately $100 million. The move came alongside the Russian government’s designation of Shefler and Stoli Group as “extremists” due to their vocal opposition to Russia’s invasion of Ukraine.

While Stoli’s vodka production had been relocated to Latvia decades ago, the loss of these distilleries marked another setback for the company’s global operations. The Russian embassy declined to comment on the ongoing dispute.

Cyberattack Compounds Operational Issues

Stoli Group also recently fell victim to a severe cyberattack that undermined its IT systems. Forced to operate manually for months, the company’s ability to meet production and distribution demands was significantly hindered. Stoli Group CEO Chris Caldwell called the attack “malicious” and noted that it created widespread disruptions across global operations.

“Two months ago, the company was the victim of a malicious cyberattack, which knocked out its ERP (enterprise resource planning) platform and operational systems, since when it has been operating its global business entirely manually while the systems are rebuilt,” Caldwell explained.

“This has been a year of extraordinary challenges,” he added. “From geopolitical targeting to operational setbacks, Stoli has been tested on every front.”

Shifting consumer habits add financial pressure

Stoli Group’s struggles aren’t limited to geopolitical and technological crises. The spirits industry as a whole has faced a sharp decline in demand as post-pandemic consumer habits shift. During the COVID-19 lockdowns, alcohol sales soared, but the market has since softened. Stoli’s filings highlight a consistent decline in demand for spirits since 2023, further straining the company’s bottom line. Wider challenges, including longstanding destocking and reduced consumer spending on spirits, have further compounded the difficulties.

The Chapter 11 filing, which lists liabilities between $50 million and $100 million, only applies to the company’s U.S. operations. Stoli Group has assured customers that its products, including Stoli vodka and Kentucky Owl bourbon, will remain available in stores as it works through the restructuring process.

Globally, Stoli Group continues to operate under Luxembourg-based SPI Group, which oversees a portfolio of spirits and wines. Despite the challenges, the company remains committed to stabilizing its business and maintaining its position in the competitive spirits market.

“We are determined to emerge stronger from this period of adversity,” Caldwell added.