Stolichnaya was the first Russian vodka to be imported to the U.S., starting in 1946, and it became more widely distributed in 1972 when PepsiCo struck a barter agreement with the Russian government to enter that market. Sixty-three years later, the brand still leads the industry—but make no mistake, this is not your father’s vodka.

So how does a brand that’s known for being an innovator—Stoli introduced the first flavored vodka in 1986 with Stolichnaya Limonnaya, and in August of 2009 added its 10th flavor, Gala Applik, the first red-apple-flavored drink—keep fresh and appeal to a new audience?

“We wanted to reach the 25-to-34-year-old urban professional, and we had to take a very radical step to do it,” says Andrey Skurikhin, partner at SPI Group, Russia's largest exporter of vodka, and owner of the Stolichnaya brand. “In the '70s, when Stoli first was prominently available in the United States, it was very important to us to be identified as a true Russian vodka, not made anywhere else,” unlike Smirnoff, which is produced in the United States, the United Kingdom, and Asia, he says. The brand started experiencing changes in 1980, when consumers shortened the name to “Stoli,” and the easier-to-pronounce name stuck.

And while the wheat-based beverage is still steeped in its heritage, the Stoli brand is pushing into new territory. “When people think of Russia, they think of intrigue, mystique, adventure. But you don’t have to travel there to have a taste of that life.” Skurikhin explains. “That’s how we came up with ‘Russia of your mind.’ The emotional aspect of adventure and desire can be captured by a bar in Manhattan. This is what Stolichnaya is in the modern world. It doesn’t have to be associated with a specific country.”

Amid an economic downturn that has put pressure on alcohol sales, Stoli’s sales have slowed from 2 million cases sold in 2008, according to the Beverage Information Group (BIG), to about 1.7 million cases in the U.S. in 2009, according to Just-Drinks.com, an online portal for beverage professionals. “The vodka category is still growing,” says Lisa Pfenning, category director, Stolichnaya, at William Grant & Sons USA. “But the ultra-premium category has declined across the board and has been challenged by the current economic environment,” she adds.

Still, BIG ranks Stoli as the sixth-bestselling imported vodka in the U.S., led by Smirnoff. Overall, the brand is estimated as bringing in between $400 million and $500 million in 2008 and is reported to own approximately 5 percent of the nation’s vodka sales. (Stoli does not release total sales figures.)

Despite the downtick in cases sold, response to the new campaign has been good, Skurikhin says, and he adds that the number of bars and restaurants that order Stoli has increased since the new campaign began in August.

That has prompted the company to spend more on its advertising efforts that it has in the past. “Compared to our historical expenditures, we’ve increased our ad campaigns and marketing efforts—substantially,” says Skurikhin.

The premium drinks market is very competitive with both established brands, like Grey Goose, and plenty of boutique brands trying to take a share of Stoli’s profits. But at a time where some liquor companies have to cut costs, Stoli is banking on the future and not worrying so much about short-term struggles, thanks to its status as a private company. “When you’re publicly traded, you’re worried about sales for each quarter. And I’m not saying that we don’t care about our immediate profit margins, but we can afford to take a longer-term look at the market and say ‘this is a great time to spend,’” he says. “This is unfortunately not true for some of our competitors who are forced to look at earnings per share. But this is how we leverage our vision in this type of environment.”

However, Stoli is feeling the crunch with its ultra-luxury product, Elit by Stolichnaya. Russian for elite, the premium beverage sold out within two months of its 2004 launch, according to Interbrand. But with a price tag of $60 for a 750-milliliter bottle—the comparable base Stoli and flavored products run $20 to $24 per bottle—the offering has seen some challenges. Customers report liking the bottle design and the taste, but they don’t always understand the price. “Going into 2010, one of our key initiatives will be to explain to consumers why this brand differs both costwise and tastewise from the others,” says Skurikhin.