A CLEAR WINNER

Just as there is no shortage of vodkas on retailers’ shelves across the nation, there is no shortage of explanations for high-end and imported brands’ explosive popularity.


From Absolut to Belvedere, Chopin, Grey Goose, Finlandia, Tanqueray Sterling and Ketel One, store shelves are filling with brands, sizes and flavors in this, the largest category in the distilled spirits business. Some point to the growing affluence of America and the tendency to drink less but better. Others mention vodka’s supreme mixability, while still others point to the dizzying popularity of the Martini in all of its incarnations.


Americans are also drinking their vodka straight, in Cosmopolitans, Bloody Marys and Screwdrivers, with tonic or 7 Up, and as a base ingredient for high-proof shooters. “We’ve heard so much about Martinis, but they’re really not the preferred way of consuming it nationwide,” noted John Vidal, brand general manager for Brown-Forman’s imported Finlandia Vodka. “Mixed drinks with tonic or other juices probably represents about 60% of vodka usage.” Overall, vodka has remained the best-selling spirits category in the U.S., increasing its market share to 23.4% of the total U.S. distilled spirits market.


‘GROWING LIKE CRAZY’


Seagram USA’s marketing director Jim Schleifer said he and his colleagues are continuing to see “strong” growth in the category. “We look at the vodka segment in basically four categories: superpremium, premium, standard and popular-priced. We’re seeing explosive growth in the superpremium category, which you would classify as luxury vodkas, priced above Absolut ($17 to $18). Depending on the market it could be $25 to $30 and up, in that general price range.”


“The top end of the market, the superpremium and premium imported vodkas, are growing like crazy,” agreed Bill Thompson, vice president of brand development for Sidney Frank Importing Co. “It looks like there’s a little bit of growth in the top end of the domestic vodkas, and the bottom seems to be suffering.” Sidney Frank markets Grey Goose Vodka, which is made in France and was introduced in the U.S. in May 1997. Grey Goose is priced at $24.95 to $27.95 for a 750 ml, and its sales more than doubled last year to about 50,000 cases nationally.


“There’s the high end and the higher end,” explained Vidal. “Absolut, Stoli, Finlandia and Ketel One are at the high end. Above us are the super- and ultrapremiums, and that seems to be where most of the new product entries are coming in.”


Adams Business Media Research shows imported vodkas up 14.2% in 1998 in the control states, as compared with a 0.7% increase for domestic brands (the total vodka category increased sales 2.5% in the control states to more than 7.4 million mixed cases). The top 10 leading imported vodkas in the control states all increased sales, from Seagram’s Absolut (up 9.7%) to Belvedere (up 80.3%, on much smaller volume). And few expect the popularity of the high-end imports to reverse itself any time soon.


At the same time, several domestic brands have also grown considerably. For example, the high-end Skyy Vodka, from Skyy Spirits, sold almost 700,000 9-liter cases nationally last year, a 17.3% sales increase. And Smirnoff, the top-selling vodka in the U.S., upped sales by more than 300,000 cases to almost 6 million nationally, a 5.4% increase in 1998. Smirnoff gained 6.1% in the control states, to 602,517 mixed cases.


The category looks “very positive,” said Steve Wallet, director of consumer marketing for white spirits for UDV Northeast. “The premium and superpremium segments have been growing, both at around the same rate — 3% to 5%, depending on the source you look at. The outlook is good. The economy is good, the brands are performing well, and overall we’re very pleased.”


Consumers, he also noted, continue to trade up. “People seem to be drinking more, and there is lots of interest in a lot of the new products that have come out on the marketplace. But the mainstream brands like Smirnoff and Stoli continue to perform extremely well.” UDV plans no new vodka products, line extensions, new flavors or sizes, he added.


Smirnoff, he said, is presenting a “Stir It Up” promotion to run through the summer. For the remainder of the year, Smirnoff will “focus on our new advertising theme and bringing all of it to life through advertising and the promotions.” The brand’s “talking silhouettes” print/outdoor ad campaign, introduced about a year ago, has been “very successful in terms of consumer response to it,” Wallet said.


FAVORITES REMAIN FAVORITES


Flavored vodkas continue to appear on the market, and according to Seagram’s Schleifer, they now account for about 4% of the total vodka category. Imported flavored vodkas, he added, account for 62% to 63% of the total flavored vodka category. Absolut Citron continues to enjoy a “very good” market share, with double-digit growth for four years running. Absolut Kurant also continues to grow.


Brown-Forman’s Vidal suggested that despite the fascination with the new, consumers will always come back to what they know and love, which augurs a coming shakeout in the segment. “There are so many new boutiques that continue to come out it amazes me,” he noted. “It seems like every day there’s a new product in some form or fashion that has the latest angle or the best new hook. But more than anything else it seems like the mainstays continue to get stronger.”


Finlandia has been benefiting from last summer’s repackaged introduction. “We experienced a great surge in sales as the pipeline worked its way into retail stores,” Vidal reported. He said the triple-digit growth that occurred initially, however, has now settled down to 25% to 30%.


Finlandia has introduced “simple merchandising and offering distribution tactics” to keep that growth alive, including the introduction of new sizes, such as 1.75 ml and liter bottles and a 375 ml replica bottle.


Brown-Forman is also repackaging and reintroducing Finlandia Cranberry, which has been on the market for several years. “It’s going to be a great identifier on the shelf. It will help us to stand out.” Point-of-sale materials will “speak to the flavor of cranberry.”


The swarm of entrants into the flavored vodka category have been good and bad, noted Sidney Frank’s Thompson. “It expands the category, obviously, and brings more attention to it, so from that standpoint it’s good. It also gives you more competition.” He pointed out that “a couple of flavors are doing well — lemon, citrus and orange. There is growth there. We’re not in the flavored segment at this point. I look at it as kind of a whole different category.”


ROOM AT THE TOP


Seagram introduced Sundsvall, which retails for about $30, last October in eight key markets across the U.S. The reason for the introduction, said Schleifer, is simple. “To capture some of the growth in this category. We feel there’s growth there. We think our product has a superb taste and unique proprietary distillation methods.


The Sundsvall drinker, said Schleifer, is the “same drinker that is drinking other superpremium vodkas; someone a little older, more male, professional, very self confident.” Seagram launched its advertising campaign for the new brand early in 1999. It will run in various publications across the country. Its focus is the product’s flavor and “the fact that it’s a vodka to be savored.”


For the balance of 1999, Seagram continue with what execs are calling a “discovery plus” strategy, which is “word of mouth, having people talk about the product. We believe once people try Sundsvall, they’ll pass the word along to their friends and associates.”


Absolut “continues to maintain its marketing mix, which has been very successful for the last 15 or 20 years,” noted Schleifer. The brand will keep on rolling out new ad executions, adding to a portfolio that now includes more than 600 ads. The company will continue its highly successful event- marketing department. And absolutvodka.com, the brand’s web site, continues the brand’s longstanding work with so-called “visionary artists.”


PRICE IS NOT THE ISSUE


Nolet Spirits USA, which markets the Netherlands-produced Ketel One Vodka, will not be among those vodka suppliers who are rushing brand extensions into the ultrapremium category.


“Over the last year and a half there have been a few brands that have gone into the $28 and $29 range, but pricing is not the issue in this case,” said Carl Nolet, executive vice president. “It’s the quality of product and how you make it, the ingredients you use in order to differentiate yourself from your competitors.” What Nolet will do is roll out a 375 ml size. A 175 ml bottle was introduced in 1997.


Sales of Ketel One, which sells for about $20 were up 50% nationally in 1998, from 300,000 to 450,000 cases.


Like Nolet, Schieffelin & Somerset will also resist the urge to jump on the ultrapremium bandwagon. In 1998, according to Carolyn Ellison, senior brand manager for Tanqueray Sterling Vodka, her company “took a step back for our franchise and looked at where we’re going, how are we thinking about the category.”


This year the brand is moving back into gear, though there are no plans for a line extension. “Belvedere and Chopin and some of the other vodkas that are playing in that new superpremium category — which is very real and very relevant — are about different things,” Ellison explained. “They’re about image and a social statement. We’re about heritage and authenticity.”


There are three Tanqueray Sterling vodkas on the market: 80- and 100-proof versions and a citrus flavor. The vodkas generally retail for $14.99 to $19.99 for a 750 ml bottle.


As one millennium slides into another, the industry can expect more of the same. “The top end, the superpremium end of the vodka market, I think, is just going to continue to grow,” concluded Sidney Frank’s Thompson. “In fact we’re banking on it.”

LEADING BRANDS OF DOMESTIC VODKA IN THE CONTROL STATES
(Mixed Cases)

Brand
Supplier
1997
1998
% Change
Market Share

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Smirnoff
UDV North America
901,975
957,193
6.1%
15.2%

Popov
UDV North America
616,767
575,290
-6.7%
9.1%

Gordon’s
UDV North America
355,052
369,388
4.0%
5.9%

Kamchatka
Jim Beam Brands
266,979
283,994
6.4%
4.5%

Nikolai
Sazerac Co.
227,386
221,861
-2.4%
3.5%

Total Top Five Domestic Vodka
2,368,159
2,407,726
1.7%
38.1%

Other Domestic Vodka
3,904,989
3,906,272
0.0%
61.9%

Total Domestic Vodka, Control States
6,273,148
6,313,998
0.7%
100.0%

Note: Flavored line extensions not included.
Source: Adams Business Media Research Database from NABCA data.

 

 LEADING BRANDS OF IMPORTED VODKA IN THE CONTROL STATES
(Mixed Cases)

Brand
Supplier
Origin
1997
1998
% Change
Market Share

Absolut
Seagram Americas
Sweden
549,212
602,517
9.7%
54.6%

Stolichnaya
UDV North America
Russia
157,131
169,203
7.7%
15.3%

Absolut Citron
Seagram Americas
Sweden
77,887
89,776
15.3%
8.1%

Ketel One
Nolet Spirits USA
Holland
32,319
46,950
45.3%
4.3%

Finlandia
Brown-Forman Beverages
Finland
20,230
25,380
25.5%
2.3%

Total Top Five Imported Vodka
836,779
933,826
11.6%
83.6%

Other Imported Vodka
129,931
170,184
31.0%
16.4%

Total Imported Vodka, Control States
966,710
1,104,010
14.2%
100.0%

Total Vodka, Control States
7,239,858
7,418,008
2.5%
100.0%

Note: Flavored line extensions not included.
Source: Adams Business Media Research Database from NABCA data.

WHAT’S A RETAILER TO DO?


When it comes to the selling floor, everyone has an opinion. Vodka’s booming popularity, together with its burgeoning number of bottles, has pleased and pressured store operators. What, exactly, should liquor retailers be doing to sell more vodka?

Where possible, give brands ample floor space.
Place drink ideas on the shelf.
Stress vodka’s mixability to customers.
Place vodka displays at a few different locations throughout the store.
Carry as many exciting new brands and flavors as you can but weed out the inevitable losers.

I KNOW WHAT YOU’RE DOING THIS SUMMER


Not surprisingly, vodka suppliers have some interesting things planned for the summer of 1999. Here’s a cross-section of marketing and promotional plans:

Seagram will run a store merchandising program called Absolut Day Dream, which will include a large floor display with a picture of a cloud in the shape of an Absolut bottle, as well as shelf materials.
Finlandia is planning a value-added consumer gift package — a personal infusion jar. An off-premise package gives consumers a one-liter pitcher with a 750 ml bottle, together with recipe and directions for making their own in-home fusions. The program will break in June.
“White and light spirits in general are very heavily consumed in the summer months because they’re
refreshing and light,” noted Tanqueray Sterling’s Ellison, “so we will definitely be supporting all of our products very heavily.”
This summer will see a strong print media campaign for Grey Goose in such periodicals as The Wall Street Journal. Off-premise, there will be a decorative Father’s Day pack with a 750 ml bottle. The promotion will tie in to the company’s charitable contributions to the ASPCA.

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