Latvijas Balzams set for mass increase in vodka making

RIGA - Latvijas Balzams, Latvia's largest distillery, looks set to begin producing all of the Stolichnaya vodka previously exported from the Russian exclave of Kaliningrad in the next few weeks for Soyuzplodimport, a company that represents Latvijas Balzams' controlling shareholder.

"We expect to start producing Stolichnaya for export in about two weeks' time," said Rita Varonkova, the spokesperson for Latvija's Balzams.

Latvijas Balzams produces the Stolichnaya vodka that is sold in Latvia, but taking on the responsibility of producing all of the vodka to be exported would mean a substantial increase in the amount of alcohol that the company produces, as Stolichnaya is the world's most popular vodka brand.

According to Sergei Boguslovsky, Soyuzplodimport's spokesman, 25 million liters of Stolichnaya vodka were produced for export in Kaliningrad last year, and the company expects exports to grow to 32 million liters this year.

Juris Gulbis, chairman of Latvijas Balzams, said that the company has been preparing for the increase in production since Soyuzplodimport bought a controlling share last year and is now ready to raise its output substantially.

The company has no plans to hire more people at its Riga factory but may decide to do so after the company's stockholders meet later this spring.

According to Latvia's State Revenue Service, Latvijas Balzams produced 48.65 percent of the 2.5 million liters of alcohol produced in Latvia last year - a drop in the bucket when compared to Stolichnaya's exports.

Soyuzplodimport is currently embroiled in a legal tug-of-war with the Russian government over who owns the trademarks for Stolichnaya and 42 other vodka brands, including Kristall and Moskovskaya.

The switch to producing vodka at Latvijas Balzams' facilities is due to problems at the company's Kaliningrad factory, said Boguslovsky.

Two weeks ago Mikhail Vanin, head of Russia's customs service, ordered all regional customs institutions to prevent the export of all Soyuzplodimport products from Russia.

According to Boguslovsky, 120 containers of Stolichnaya vodka are currently impounded in customs in Kaliningrad.

Soyuzplodimport's legal troubles began last October, when Rospatent, the Russian government's patent office, refiled the patents for all 43 of Soyuzplodimport's vodka brands on behalf of Russia's Agriculture Ministry.

But days later a Russian district court returned 26 of the brands to Soyuzplodimport after a company shareholder filed a law suit.

The Agriculture Ministry then filed a counter-suit. Russian Farm Minister Alexei Gordeyev said the state had a right "to win back what under the law belongs to it."

This accounts for Soyuzplodimport's current legal hassles, as both the Russian Federation and Soyuzplodimport are vying for control of all 43 trademarks.

The Russian government believes that Soyuzplodimport acquired the trademarks illegally in 1997 when its similarly named parent company Soyuzplodoimport sold them for a derisory $300,000.

At the time the Foreign Trade Ministry valued the Stolichnaya brand name at more than $1.4 billion.

Russian President Vladimir Putin has been trying to regain control of Russia's vodka industry and its essential tax revenues.

Soyuzplodimport currently owns the rights to the Stolichnaya trademark and it represents the Cyprus registered SPI company, which holds the controlling stake in Latvijas Balzams.