These Western liquor companies said they stopped doing business in Russia. But the booze keeps flowing

Russia invades Ukraine. The West imposes sanctions. And hundreds of foreign firms announce they are pulling out of the Russian market.

But, somehow, in a country with a historic predilection for alcohol, the booze keeps flowing. The really good stuff.

If you’re in Moscow or St. Petersburg, a company called Luding — which describes itself as Russia’s largest wine importer — is offering 18-year-old Macallan Double Cask Highland Single Malt Scotch to local buyers at a “best price” of nearly $500 a bottle with a selection of more affordable 12-year-old single malts available for immediate delivery.

If Kentucky bourbon is more to your taste, a range of Jim Beam whiskeys awaits you on the well-filled shelves of your local Perekrestok supermarket.

What do those tipples have in common? They are made and sold by two companies — U.S.-Japanese multinational Beam Suntory and Scottish distiller Edrington — that before the war marketed their liquors through a joint venture in Russia. 

Both companies announced their withdrawal from Russia in July 2022, nearly five months after President Vladimir Putin’s troops invaded Ukraine. But, more than a year on, their products are still freely available in Russia. And, as a POLITICO investigation has found, their prewar distribution operation continues to function much as it did before it was sold to Russian local management.

Beam Suntory and Edrington stated categorically in response to POLITICO’s findings that they no longer had any business relationship with their former Russian employees. They also said they had done all they could to stop shipments of their spirits to Russia through the informal “gray” market.

It’s a conundrum for the West, where governments and the weight of public opinion demand that Russia pay a high price for launching the biggest armed conflict in Europe since World War II — and that companies don’t profit by doing business with what has become a pariah state.

Yet abiding by Western sanctions, or quitting voluntarily, is easier said than done. Many multinationals have announced their exit from Russia, while in practice finding it difficult, or impossible, to prevent their products from being shipped to the market of 143 million people.

“It’s a common problem,” says Andrii Onopriienko, who heads the Leave Russia project at the KSE Institute in Kyiv, which tracks decisions by foreign companies to stay or to quit Russia. Even though many have said they are suspending shipments, customs data shows that their products continue to flow to Russia.

“Unfortunately, it’s quite a standard story — not just in the food and beverages sector — but also in a lot of others,” Onopriienko said.

The liquors are even on sale in occupied Ukraine, for example at the Mriya luxury resort on the Crimean peninsula, which offered Edrington’s 18-year-old Macallan Scotch (at 2,900 rubles, or nearly €30, for a single shot) and Beam Suntory’s Maker’s Mark bourbon (750 rubles) on its bar list this summer, along with a wide range of other international brands. 

The five-star establishment, whose name means “dream” in Ukrainian, advertises its Imperial Villa at 440,000 rubles (€4,500) a night. Owned by Sberbank, the state-controlled Russian bank, Mriya was sanctioned by the United States in 2018.

Promises kept, promises broken

After the full-scale invasion of Ukraine, a roll call of foreign alcohol suppliers announced they would pull out of the Russian market. Moët Hennessy’s Russian businesses, for example, reported a 70 percent drop in sales last year after the division of French luxury group LVMH suspended operations and closed its stores in Russia in March 2022.

Yet some changed their mind: Bermuda-based Bacardi, for example, resumed supplies after a pause, and its local business even reported an 8 percent increase in 2022 sales to 32.6 billion rubles (€431 million at the prevailing exchange rate). Profits trebled.

The family-owned company, which has been branded by Ukraine’s anti-corruption watchdog as an international sponsor of Putin’s war, has doubled down by expanding its contract bottling operations in Russia. The first bottles of its Oakheart rum were produced in the Tula region, to the south of Moscow, in October.

Beam Suntory and Edrington, for their part, announced a clean break: Initially, Beam Suntory issued a statement on March 8, 2022, saying it was suspending supplies to Russia. 

Then, on July 18, both Beam Suntory and Edrington said they had agreed to sell their Maxxium Russia joint venture to local management. Shipments would “remain suspended as we continue to abide by all applicable laws including international sanctions,” Beam Suntory added in its statement.

The announcements followed the imposition of U.S. sanctions four months earlier on supplying luxury goods — including wines, beers and spirits — to Russia and its ally Belarus. The sanctions, issued by the Department of Commerce, targeted “oligarchs and malign actors” in both countries. They required licenses to be issued for export, re-export and in-country transfer under U.S. Export Administration regulations.

Unlike the United States, the European Union did not enforce a complete export ban on luxury goods, but it did impose a price cap — €300 a bottle — on wines, beers and spirits. The United Kingdom, where Edrington is based, imposed similar sanctions at the same time on the sale of luxury goods, including alcohol, to Russia.

Under old management

Before Beam Suntory and Edrington divested their Russian businesses on July 18, 2022, the two companies shipped their products to Russia via a Cypriot company owned by the U.S.-Japanese multinational. This company, Maxxium Cyprus, owned a Russian subsidiary called Denview, which in turn owned another company called Maxxium Russia. 

Following the sale, Pavel Tsoi and three other Russians were listed as owners of a new Russian holding company, called Maxxium Group, which now owns Maxxium Cyprus, Denview and Maxxium Russia. The quartet — Tsoi, Olga Burdova, Konstantin Krasnogorov and Natalya Kosukhina — are named as members of the Maxxium Group leadership team on the company’s website.

Before the reshuffle, Tsoi was listed as general director of the Russian companies, while Burdova has held those positions since, corporate filings show. Tsoi and Burdova are both directors of Maxxium Cyprus.

On its website, Maxxium Russia describes the transfer of control to Russian management as “temporary.”

Since the change of ownership, Denview has continued to import liquors manufactured by Beam Suntory and Edrington.

How do we know this? Russia’s customs bureaucracy makes it possible to track declarations and consignments of branded beverages, to which Beam Suntory and Edrington hold exclusive trademark rights.

To import a product, a company needs to obtain a declaration of conformity from Russia’s Federal Accreditation Service. For a bottle of liquor, this provides a blanket certification for a company’s products that the label accurately describes the contents, and that those contents are safe to drink.

The importer is required to file these declarations with the support of a so-called authorized person’s contract, in which the foreign manufacturer formally transfers responsibility for a product’s safety to the importer.

After the full-scale invasion, Moscow loosened regulations in a way that allowed importers of branded liquors not to pay royalties to the trademark holder. But it remains the case, under the rules now in force, that importers must file the declarations with the support of an authorized person’s contract, one export agent who deals with Russian customs on a regular basis confirmed to POLITICO. 

When an alcohol shipment from a company holding a declaration of conformity enters Russia, it is registered in the Unified State Automated Information System — known by its Russian acronym EGAIS. Batches are recorded in the system and an excise stamp is issued for each bottle, which is then released for sale.

These filings include embedded links to photos of sample bottles from each consignment — providing verifiable evidence that the shipments are real.

And here are pictures of Jim Beam bourbon found on sale recently at a Moscow branch of Perekrestok. The excise label on one bottle says it was filled on August 12, 2022, nearly a month after Beam Suntory announced it was quitting Russia and suspending shipments.

Maxxium Cyprus remains the primary foreign supplier for the two Russian entities, Maxxium Russia and Denview, according to data from the customs aggregator ImportGenius.

Maxxium Russia and Denview, meanwhile, reported combined sales last year of 9.2 billion rubles (€121 million at the time). That represents a fall of 50 percent from the year before — a big decline but not as steep as that reported by Moët Hennessy or Diageo, whose Russian units saw sales decline by more than 60 percent, according to their financial statements.

POLITICO sent questions by email to Maxxium Group but the company did not comment on them.

Other leading Russian distributors and retailers have meanwhile filed import declarations for sizable shipments of products from Beam Suntory and Edrington this year, according to filings reviewed by POLITICO. Total shipments of Macallan whiskies by one importer called Distribution Centre run, for example, to more than 100,000 bottles.

Beam me up

The documentation reveals that Denview has declared imports into Russia of products made by Beam Suntory in the EU, which only restricts sales of very expensive liquors to Russia, as well in the United States, which has banned all liquor sales.

According to one filing in the EGAIS information system, Denview on December 22 of last year declared a shipment of Jim Beam bourbon bottled at Beam Suntory’s plant in Segovia, near Madrid. The first batch arrived on December 29, and was “accepted,” the filing shows.

Perekrestok, the supermarket chain, advertises Jim Beam as available for pickup at nearly 300 of its stores around Russia at 1,699 rubles a bottle (€17.34) — it recently cut prices by 500 rubles a bottle.

A consignment of another brand of bourbon made in the U.S. by Beam Suntory, Maker’s Mark, was shipped to Russia according to a filing with the alcohol regulator dated March 15 of this year — a full year after the U.S. imposed sanctions on the supply of all luxury goods to Russia. 

Prior to the shipment, Denview had filed a declaration of conformity for the U.S. bourbon on February 20 of this year that is valid until December 2025. The filing refers to an authorized person’s contract dating back to July 2020.

Responding to a request for comment, Beam Suntory reiterated that it had suspended all shipments to Russia in March 2022 and exited its joint venture distribution in the country the following July.

“Sales to Russia remain fully suspended and we no longer have any employees or operations in the country,” the company said in a statement to POLITICO.

“We are in full compliance with all sanctions and have taken rigorous steps to mitigate the risks of parallel trading activities, including taking firm action against any third parties that violate our position. Beam Suntory has not authorized the importation of any of our brands into the Russian market.”

Scotch mist

Edrington products have also continued to flow into Russia. In an EGAIS filing dated April 4 of this year, Denview declares a shipment of Macallan Double Cask 12-year-old Single Malt Scotch Whisky. The first delivery was recorded as “accepted” less than a week later, on April 10.

That shipment was predated by a declaration of conformity filed by Denview on February 17 that covers the Double Cask and two other Macallan whisky brands, and is valid until September 2025. The filing cites an authorized person’s contract dated May 2020.

Further EGAIS filings for shipments of other Macallan brands followed on May 25 and July 31.

In a comment to POLITICO, Edrington said that it had stopped shipments to Russia in February 2022 and had not shipped anything to the country since then. It said it subsequently fully exited Russia by selling its joint venture business to members of the local management team in July 2022 and “we have no economic interest in that market.”

“Our investigations show that these products can only have reached Russia without our permission or involvement,” an Edrington spokesperson said. “Nobody has our permission to import our products into Russia.”

Referring specifically to the authorized person’s contract, Edrington said: “This document was signed as part of existing distribution arrangements which were formally terminated in July 2022 and it is our view that at that point this agreement ceased to have any validity.”

And, on the April 4 declaration, Edrington noted that the manufacturer’s own labels on the bottle in the sample photo indicated that it had been bottled no later than November 2021.

In addition to importing Edrington and Beam Suntory liquors, the former local management team has created new supply options. Denview is also marketing a brand of Belarusian vodka, called Schmidt, named after a family of German blacksmiths who settled in imperial Russia in the time of Catherine the Great. 

The distillery where the vodka is bottled is now state-owned, while the brand’s beneficial owners are shareholders in a company registered in Estonia — an EU member country. Maxxium Cyprus owns 50 percent of the business, while Belarusian partners Andrei (40 percent) and Danila Schmidt (10 percent) own the rest.

In practical terms, the arrangement forces customers in Russia to buy low-end products in order to keep their access to premium brands. 

“Now, to buy a case of Macallan, you have to order three times as many incomprehensible drinks that Maxxium has included in its updated portfolio,” complained a manager at one regional buyer, speaking on condition of anonymity so as not to put their business relationship at risk.