The Monopoly

In 1894, when Russia reintroduced a state monopoly on the production and trade of vodka, Finance Minister Sergei Witte announced the state’s intention to build 350 state wine distilleries.

A prime location was given to the Moscow State Wine Warehouse No. 1: on the banks of the Yauza river, near important railway channels and over three artesian wells. By the early 1900s, No. 1 was the largest in Russia, shipping 2.6 million deciliters of spirits a year.

WWI brought prohibition and halted the building of wine distilleries across Russia (148 had been built before the war broke out, 30 in Moscow). It also led to a shut-down of existing distilleries. No. 1 survived the war because a hospital was temporarily located there. Plus, there was still some demand for spirits and vodka. No. 1, said Zinaida Stepanchuk, public relations manager for the factory, “was virtually the only spirits production plant to survive prohibition.” It also survived the postwar prohibition instituted by the Bolsheviks, and in 1923 produced one of the first new vodkas, nicknamed Rykovka (after then Minister of Economics Aleksei Rykov).

In 1941, while the invading German army was encamped on the outskirts of Moscow, No. 1 continued to produce vodka (how else could Soviet soldiers get the requisite narkomovskiye sto gram — the allotted “people’s commissar 100 grams”). Yet it also helped produce the infamous Molotov cocktails used against the invaders.

By the early 1950s, production was back on track and the distillery, now known as the Moscow Liquor-Vodka Factory, began competing in international competitions. Its vodkas, such as Posolskaya and Pshenichnaya, became the most prestigious available in the Soviet era. “If Pyotr Smirnov was the purveyor to the Imperial Court,” a current company brochure declares, “then during the years of Soviet power Cristall became the purveyor of its drinks to the leading elite of the Kremlin.” By the late 1980s, on the eve of Soviet President Mikhail Gorbachev’s ill-fated anti-alcohol campaign, the factory was shipping 13 million deciliters of spirits a year.

Workers at the factory remember the Gorbachev years as a “mourning period.” The production lines of Russia’s finest vodka factory had to be converted to produce syrups and alcohol-free drinks. It was at that time that the factory’s name was changed to Cristall, to remove the now politically-incorrect reference to alcohol.

And yet, the toughest times were still ahead. In the early 1990s, the government introduced excises on domestically produced vodka that pushed prices higher than that of cheap imported vodkas. “We made it through the tough times thanks only to exports,” Stepanchuk explained. “we virtually lost the domestic market...” Between 1993 and 1996, Cristall saw its production slump to below two million deciliters a year, less than 20% of what it had been in the 1980s. “In the past,” Stepanchuk recalled, “we couldn’t meet demand. Cristall used to be virtually the only vodka in Moscow.”

But 1997 saw a turn around for the 97-year-old factory. Sales more than doubled vs. 1996. Cristall General Director Yuri Yermilov, in a report delivered in January, attributed the turnaround largely to newly protective government policies. “Russia ... after being drowned in the sea of Royal [a cheap spirit allegedly from Holland that is notorious for having claimed caused many deaths by alcohol poisoning] and “crystal clear” Rasputins [a new vodka brand that has been repeatedly faked], came to realize that alcohol products are an essential part of the state budget ... which means the domestic alcohol market needs state patronage and a strict organization.” Added Deputy Director Sergei Nikultsev, “France protects its products like champagne or cognac, why don’t we protect our vodka? All the more so since the name ‘vodka’ and its legality [as a uniquely Russian product] were proven in the international arena. It is our national value; it is our national pride; it needs to be permanently protected.”

Some observers have noted that such quality protection will favor domestic producers such as Cristall. Moscow Mayor Yuri Luzhkov’s recent decree to impose additional bar-coding to ensure the safety of vodka sold in the city [see lead story], is applauded by Cristall — Nikultsev called the decree a “very strong document.”

But export markets are also still very important to Cristall, and it has sought to bring order and a Western look to its branding. Whereas the factory owns title to the names “Stolichnaya-Cristall” and “Moskovskaya-Cristall,” the names “Stolichnaya” and “Moskovskaya” are owned by Soyuzplodoimport. So Cristall, after a complete brand redesign by its American partners, now simply offers Cristall vodka to external markets, employing the motto, “Compromise is unacceptable.”

For Cristall, the future lies in the hope that Russian and foreign consumers will agree that good vodka is better than cheap vodka. In 1997, the factory was awarded the new Grand Prix Symbol of Russia, which also was recently awarded to the Kalashnikov rifle. But, like many vodka producers, Cristall has received another endorsement, this one back-handed and less welcome — from vodka knock-off artists. Cristall has responded by introducing “fake-proof” bottles and will soon open a factory direct store in Moscow. “You see,” said Nikultsev, “nobody has ever faked unknown artists. They fake Levitan, Raphael and Rubens, but they never fake unknown artists. For the same reason, the biggest number of fakes fall on Cristall brand names — for Cristall is an image which means stability and quality.” Imitation, as the saying goes, is the sincerest form of flattery.  RL