Smirnoff and Smirnov back together again after $50m deal

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A deal between Smirnoff parent Diageo and the Russian maker of Smirnov yesterday reunited the two legendary vodka brands after a gap of nearly 90 years.

The drinks giant Diageo has signed a joint venture with Russia's Alfa Group's A1, the owner of the Smirnov Trading House. Upon completion of the deal, Diageo will pay $50m for a 75 per cent share of the fast-growing Smirnov brand and business. Smirnov will join Diageo's portfolio of spirits - which includes Johnnie Walker whisky, Captain Morgan rum and Jose Cuervo tequila - within the newly formed company.

Smirnov uses the original recipes concocted by Piotr Arsenyevich Smirnov, who opened a distillery in Moscow in the 1860s and later became the official vodka supplier to the tsars. After the Bolshevik revolution of 1917, when all private property was confiscated and the distillery turned into a state-owned garage, one of Piotr's sons fled Russia and established Smirnoff in Paris, using the French spelling of the family name. In Russia, the original vodka brand was revived by the Smirnov Trading House in 2002.

The new operation's distribution arm, Diageo Distribution ZAO, will be the exclusive distributor of Diageo's spirits brands and Smirnov vodka in Russia. The new business is expected to employ between 250 and 300 people - a big step up for Diageo, which currently employs around 30 people in Russia.

Andrew Morgan, the president of European operations at Diageo, said the venture "creates a strong foundation for our joint ambition to become the leading spirits business in this market". With sales in Europe flat, Diageo is pushing east and recently reported a 41 per cent jump in first-half sales in Russia. Across the globe, its best market was the US. Last year, Smirnov sold 220,000 of its nine-litre cases of vodka in Russia, while Smirnoff sold 25 million nine-litre cases globally.

The venture is expected to be up and running by July and requires approval from Russian regulators.