VERSATILE VODKA

It’s summertime, and the sipping is easy, at least when it’s a drink made with some sort of vodka. Summer’s the time to take advantage of vodka’s growing popularity. Vodka sales continue to outpace industry growth, and now account for almost a quarter of total spirits volume. While the news last year wasn’t good for all brands — where there are winners, there must inevitably be some also-rans — there’s a tremendous amount of excitement in the category as consumers continue to experiment and distillers and importers continue to innovate.

Last year’s mixed bag was the result of factors as varied as they were numerous, ranging from recession and industry consolidation to the terrorist attacks in New York and Washington, D.C. But consumer trends and enthusiasm dampened much of the negative effect of outside forces, and category growth kicked back into high gear by the end of the year.

The surge in growth of vodka in recent years, especially above-premium and imported brands has been largely due to the economic boom times of the ’90s.

“We enjoyed 10 years of the longest economic expansion in US history with a corresponding expansion of personal income,” said Douglas McCreadie, vice president of marketing, Nolet Spirits USA. “Consumers have discovered new ways to express themselves in the things and brands they buy.”

Stolichnaya, from Allied Domecq Spirits USA, has debuted its new “See what unfolds” ad campaign.

For the past decade, consumers have been trading up, and even the recession didn’t change their behavior. The Wall Street Journal recently noted that even middle income consumers are buying more luxury brands. Consumers consider high-priced goods such as ultrapremium spirits and even bigger ticket items like cars, to be affordable luxuries, even in a down economy. On the other hand, consumers who are pinching pennies are turning increasingly to value brands. The divergent trends are putting a squeeze on some middle- of-the-road brands.

Younger consumers, from legal drinking age to their 30s, are perhaps even more brand- and image-conscious than older generations. This new generation of consumers isn’t afraid to spend money on brands perceived to offer something in the way of image and quality. The demographic growth of this age group also has helped fuel growth of higher end brands.

The biggest wrench in the works last year was the events of September 11. The terrorist attacks put an immediate damper on the travel and hospitality industries. People stopped going to restaurants and bars where so many spirits brands are discovered and consumed.

Surprisingly, even that didn’t slow spirits sales much. A side benefit of people’s fear of going out has been an corresponding increase in the amount of time they spend socializing at home.

Absolut Mandrin, introduced to great success last year by The Absolut Spirits Co./Future Brands, has continued its positive sales momentum.

“One of the positive repercussions of September 11 was a pick-up in off-premise business because people started entertaining at home more,” said Steve Meyers, senior brand manager at Schieffelin & Somerset.

The shift to more “cocooning” also fueled another trend that has been growing in recent years. Consumers exposed to the explosion of flavored cocktails appearing in restaurants and bars are now trying to recreate them at home.

“It’s curious how people walk into someone’s home and ask for their usual drink — a glass of white wine or Scotch on the rocks — but put it down when they see a Martini shaker come out and someone offering Cosmopolitans,” McCreadie said. “People aren’t willing to give up luxuries, but they may be willing to change where they consume them.”

Also surprising is how quickly consumers have shown a willingness to return to “normal.” According to the National Restaurant Association, restaurant sales started to rebound in December, and exceeded year-earlier figures in January and February, too. The strongest gains, however, have been in casual dining, presenting a challenge to ultra-premium brands.

Finlandia, from Brown-Forman, introduced both lime- and cranberry-flavored vodkas last year.

“White tablecloth restaurants saw the biggest hit from September 11,” said Dennis Greenwood, national brand manager for Finlandia Vodka Americas, Inc., “but family-style restaurants saw growth. Finlandia saw growth because it’s not priced as high as the ultras.”
VODKA VOLUME UP

Vodka category volume last year was up 4.0% nationally to more than 37 million 9-liter cases. Volume in control states grew at almost the same rate, up 3.9% to more than 9.1 million cases.

Much of the growth has been the result of consumer interest in high-end products and flavored vodkas. The resurgence of classic cocktails like the Martini, has spurred interest in high-end brands. Younger consumers, though, are taking those classics to new places by demanding different flavors and experiences.

Vodka is an ideal spirit to use in mixed cocktails because of its neutral taste. Distillers are responding to consumer interest in new taste experiences by promoting drink recipes and encouraging on- premise accounts to come up with new cocktails.

The Millennium Import Co. has staked out solid ultra-premium positioning with its Polish vodkas, Chopin and Belvedere.

Top brand Smirnoff led the pack last year in growth with an astounding 42.7% volume increase nationally. Sales in control states were up 11.2%. The brand was helped by incremental sales of new flavors it introduced last year, as well as the buzz generated by its “malternative” brand, Smirnoff Ice.

Number-two brand Absolut saw flat sales in control states last year. Nationally, sales dipped slightly last year, falling about 1.1%, as the brand adjusted to new ownership and a new sales force. It continues its award-winning ad campaign, however, with new executions that help keep the brand relevant with consumers.

A brand that fared well under new ownership last year was Stolichnaya. Overlooked in recent years, the brand is getting fresh attention from Allied Domecq, which took over the brand in January, 2001. Sales last year ended up 8.4% in control states. A new ad campaign tagged “See what unfolds” features the Stoli label folded into origami “animals” in natural settings. It’s the first new campaign for the brand in five years, and initial print ads are being supplemented by radio and new point-of-sale material this spring.
LEADING BRANDS OF VODKA IN THE CONTROL STATES
(9-LITER CASES)

Brand
Supplier
2000
2001
% Chg

Smirnoff
Guinness UDV
1,075,305
1,195,998
11.2%

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Absolut
Absolut/Future Brands
961,007
958,471
-0.3%

Aristocrat
Heaven Hill Distilleries
485,587
507,515
4.5%

Popov
Guinness UDV
493,950
459,566
-7.0%

Kamchatka
Jim Beam Brands
382,310
383,201
0.2%

Stolichnaya
Allied Domecq Spirits USA
294,093
318,919
8.4%

Nikolai
Sazerac Co.
282,648
287,973
1.9%

Gordon’s
Guinness UDV
308,656
275,273
-10.8%

Burnett’s
Heaven Hill Distilleries
245,343
274,606
11.9%

Five O’clock
Laird & Co.
224,958
234,763
4.4%

Total Leading Brands in the Control States
4,753,857
4,896,285
3.0%

Others
4,008,850
4,205,314
4.9%

Total Vodka in the Control States
8,762,707
9,101,599
3.9%

Source: Adams Business Research Database from NABCA data.

A summer program focusing on Stoli’s flavored vodkas features a patio umbrella display, drink cards and more to remind consumers that Stoli was the first vodka to introduce flavored varieties.

Another hot brand is Skyy. Up about 18.8% nationally last year, the brand continues on a roll with its “cinematic moments” campaign. Seven new executions are expected this year. Skyy Citrus also was a big factor in building both consumer calls and volume for the brand.

Skyy Citrus joined the vodka flavor parade last year, adding to the growth of the superpremium Skyy Vodka.

Like many brands, Skyy is focusing a lot of effort in on-premise accounts to build awareness. It’s distributing a “great martini moments” kit to accounts this spring that contains disposable cameras so bar patrons can take pictures of their “martini moments.” Off-premise sales will be supported with POS that ties into the ad campaign.

Finlandia is pushing its infusion program heavily in on-premise accounts in hopes of driving more consumers to off-premise. There, the brand is featuring lots of new p-o-s materials, including bins and racks, with a metal theme.

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