The great white spirit vodka soared seemingly unfazed through the recession with no signs of deflating market share. Vodka’s buoyancy and durability is partly due to the sheer size of the category; it accounts for more than 32 percent of U.S. spirits volume, according to the Beverage Information Group’s 2011 Handbook Advance. That represents 61.9 million 9-liter cases in 2010, an increase of 5.8% over 2009 (15 million cases, an increase of 4.6 percent in the control states).
This phenomenal growth, far surpassing every other major spirits category, is also due to vodka’s wide diversity in both price points and variety of expressions, something for every taste and preference, and its dynamism, fielding the most new entrants, hosting intensive marketing campaigns, and engendering the greatest competition in the spirits marketplace.
“Vodka’s done amazingly well over the last year. It’s the most dynamic and exciting spirits category, with the most competition and the greatest number of entrants,” said Charles Gibb, president of Belvedere Vodka. “Overall, vodka looks strong and healthy, and the category is bound to grow because everyone wants to be a part of it.”
From a consumer standpoint, vodka offers something for everyone, which is the white spirit’s wide appeal. The category encompasses a product type and quality level for every occasion, from value brands to prestige labels. Vodka can be sipped on its own, enjoyed on the rocks, and mixed into a multitude of cocktails. The proliferation of flavored vodkas, from citrus, peach and pepper to root beer, bubblegum and whipped cream, inspires bartenders to greater creativity and aids consumers entertaining at home. And the selection keeps on growing in leaps and bounds.
“Over the past 12 months there has been the biggest increase of SKU’s I’ve ever seen,” reported Rob Locricchio, store manager at Liquor Mart in Boulder, CO, where vodka accounts for 25 percent of the store’s total liquor business. “It’s an easy category to get into and I think that’s one reason why it has gotten so big.”
All this category churn means intense competition at every price point.
“It’s a competitive category, there are a lot of skus, a lot of choices,” agreed Nick Nelson, senior brand manager for Finlandia Vodka. “In the vodka world there are a lot of occasions, taste profiles, flavors and consumer preferences. That’s why the category is so dynamic and interesting. There’s openness among consumers now to try different brands, something new. That’s why there is so much activity in the category.”
Possessing clear points of differentiation, having a compelling story to tell and communicating that to the consumer is as important as ever in the crowded vodka marketplace.
Tito’s Handmade Vodka is among the above-premium-priced brands that have continued to grow throughout the recession. The brand, from Austin, TX, has successfully positioned itself as an American craft vodka that can compete against imports. But its sales have jumped beyond what we usually think of as coming from a “handcrafted” product. Last year, the brand surged 28.2 percent to 364,000 9-liter cases.
Establishing the “liquid credentials” is how Adam Rosen, brand director for vodkas at Diageo, puts it. “Ingredients, origin and heritage have become increasingly important factors when consumers are deciding which brands to buy,” says Rosen.
The global drinks giant has covered all bases. Over the past few years, Diageo has become one of the most significant industry players in vodka with a portfolio that includes category leader Smirnoff (up 1.0 percent [5.2 percent in the control states]last year to sales of 9.6 million 9-liter cases) and prestigious labels Ciroc and Ketel One. The French import Ciroc introduced a popular coconut-flavored extension last year, as well as a Red Berry version, and with the continued marketing support from hip-hop entrepreneur Sean “Diddy” Combs the brand more than doubled its sales in 2010 to 750,000 9-liter cases. For its part, Ketel One also had a stellar year, with a 5.4 percent sales increase, to well over 1.9 million cases. The company also owns Popov Vodka, a major player in the value segment, and recently introduced other new vodka brands including Rokk Vodka and Moon Mountain Vodka. “It only makes sense that consumers expect vodka to deliver differently for different occasions and different tastes. Now, with our leading lineup of vodka offerings, Diageo allows for consumer access at any price point, while delivering on consumer trends across the board,” explained Rosen.
As always, the large-volume brands that are household names help drive the category growth. Besides previously mentioned Smirnoff and Ketel One, these include Absolut (sales of 4.6 million cases in 2010, 1.2 million in the control states), Grey Goose (3.4 million cases, 0.6 million in the control states), Svedka (over 3.2 million cases, up 18.2%), Skyy (2.7 million cases) and Stolichnaya (almost 1.9 million cases, 0.4 million in the control states), among others. Other brands like the value-priced Burnett’s (up 10.0 percent), Pinnacle (up 37.7 percent, 30 percent in the control states), UV (up 24.9 percent), Tito’s Handmade (up 28.2 percent), Fris (up 37.9 percent), Russian Standard (up 34.2 percent) and Ruskova (up 20.9 percent) also helped contribute to the category’s continued positive performance. And then there are some of the newer brands, such as Sobieski, Crystal Head, Godiva Vodka, 42 Below and 360 Vodka, to name a few, that continue to inject new dimensions into the category.
Trading Up, Down and All Around
Vodka’s range and versatility helped the category weather the recessionary storm ably over these past few years. Sure some consumers traded down to lower-priced labels during the dark years – but they didn’t trade out of the category altogether. Customers kept imbibing mid-priced and value vodkas. Flavored vodkas kept customers happily mixing at home. And, of course, more than a few customers kept on indulging in the “affordable luxury” of superpremium quaffs. Finally, too, there are signs that customers are trading back up.
Kim Washington, senior director of vodkas for Beam Global Sprits & Wine, commented, “2010 marked a return to growth for the superpremium vodka category, which bodes well for success in 2011.” Beam markets Effen Vodka in the U.S.
“In 2009 and coming into 2010, there definitely was a trend where people were buying down,” noted Colorado retailer Locricchio. “But we are starting to see the trend come back to higher-priced vodkas over the past six months.”
“Customers traded down for sure,” echoed Broc Smith, owner of Sarasota Liquor Locker in Sarasota, FL. But, he said, “People have begun trading back up, and there were some customers that never traded down [from superpremium] to begin with.” The retailer adds that overall vodka sales continue to grow at his store.
“In 2009, we saw some trading down in the category as a whole, which we attributed to more at-home consumption and entertaining. People tend to trade down when they consume at home; when they go out it’s more about making a statement,” suggested Joe Metevier, Bacardi brand director for 42 Below Vodka and the newly introduced Eristoff Vodka brand. Bacardi USA’s portfolio also contains Grey Goose, the number-three brand in the U.S., with an estimated 3.4 million case volume (0.6 million in the control states), according to Beverage Information Group.
Now, Metevier noted, there’s been a rebound in the premium and superpremium brands. “That may be an indication that the economy has bottomed out and people are willing to treat themselves again. Grey Goose had a strong holiday season in 2010,” said the brand director.
“There are some customers who never stopped drinking Grey Goose or Belvedere during economic downturns,” added Chester Brandes, president of Imperial Brands, owner of the Sobieski and 4 Orange Vodka brands. He reports that 2010 was an excellent year for the company with depletions in the U.S. up nearly 50% for Sobieski.
As for customers trading back up again when the economy relents: “I believe that most of those consumers who have traded down will not trade back if they are happy with brands like Svedka and Sobieski that they tried during difficult times,” Brandes stated.
The economic crunch necessitated rethinking pricing structures for some brands as a strategy to retain market share. Maintaining brand integrity made re-pricing tricky.
“One of the biggest things we saw was a lot of big brands lowering prices,” said Reid Hafer senior brand manager responsible for Burnett’s Vodka. Owned by Heaven Hill Distilleries, Burnett’s Vodka line consists of an 80 proof vodka and 23 flavors. “Everyone was being aggressive from a branding perspective to try and keep their market share. We stayed solid, because we are already a very moderately priced brand,” continued Hafer.
Finlandia was one company that successfully adjusted its pricing. “With the economy getting soft, we were suffering along with the other premium and superpremium brands,” explained Nelson. “We realigned our price strategy to offer consumers a superior premium vodka at a great price, playing just below the Absolut’s and the Stoli’s of the world.” The brand responded really well, says Finlandia’s senior brand manager, turning around its performance around during 2009-2010 period to double digit increases.
Absolut was impacted by trading down at the peak of the recession, as were other high-end spirits, particularly as competitors started to get very aggressive and cut prices significantly, according to a Pernod Ricard spokesperson. “We eventually responded to selectively adjust our prices on a market-by-market basis, while still keeping our premium positioning and pricing at the high-end of the premium category.” Absolut’s performance has now turned around, as depletions were up 4 percent in the last half of calendar year 2010 (July-December), according to the company.
A Plethora of New Products
Hardly a week goes by without a new brand being launched, a new expression introduced, new packaging debuted. Unsuccessful products are naturally culled out by the intense competition, but the vodka shelves keeping getting more crowded with new arrivals.
“Liquor Mart is a big store and our vodka set is quite overwhelming,” emphasized manager Locricchio. “In my opinion, it almost scares off customers, the selection is so intimidating.” When new products are added, store staffers have to reset the shelving. “Anytime we have to do a reset in the section, it’s going to aggravate or confuse the customer,” pointed out the retailer. “If a customer is looking for a particular brand, he wants to be able to come in and grab it from the same location every time. If they can’t find what they are looking for, I think they’ll look elsewhere, buy something else.”
Concerns about retail-shelf real estate or backbar crowding hasn’t stemmed the flow of new additions to the vodka realm. Producers are still bullish on the category and launching new products and even new brands.
Most notable are Diageo’s newest entrants: the Rokk and Moon Mountain Vodka brands. “The consumer is demanding more variety than ever before,” insisted Rosen in answer to the question as to whether to category is too crowded. Driven by consumer trends, the biggest areas of opportunity include affordable imports, flavors and handcrafted/organic vodkas, he notes. “Rokk fits perfectly into this consumer desire by offering a high-quality, award-winning vodka from Sweden,” and Moon Mountain Vodka fits into the last category as a small-batch artisanal product.
Also new and notable are two “boutique expressions” of Belvedere, according to Belvedere president Gibb. First released last year was Belvedere Intense 100 proof, made from Dankowskie Diamond Rye and packaged in a signature black bottle with a gold tree branches motif. Another variation debuted last fall, Belvedere Intense Unfiltered 80. “We don’t filter it so the rye character really shines through,” explains Gibb. “Full bodied and creamy, it’s been called a vodka for whiskey drinkers. You can drink it neat or on the rocks.”
New to the U.S. but not the global market is the Eristoff Vodka brand. The vodka is triple distilled using the original formula created in 1806 by Prince Eristoff in present-day Georgia. Eristoff is not a new brand, emphasizes Bacardi’s Metevier, but one selling over 2 million cases in 37 countries, growing 13% over the last three years, and 20% over the last year with its expansion into Russia and its U.S. debut. “As Bacardi grows, we need to be a big player in vodka, to be in all of the segments,” explained the brand director. “We thought the time was perfect to launch a brand in that mid-priced segment to provide U.S. consumers with an alternative of great-tasting vodka.”
For its part, 42 Below Vodka is experiencing double-digit growth in terms of depletions, according to Metevier. Two new sizes were added this year, 375ml and 1.75L, which are helping to fuel growth for the New Zealand vodka.
Swedish import Purity Vodka debuted late last year in select U.S. markets; the national roll-out continues in 2011. Produced in a proprietary pot still at Ellinge Castle in the south of Sweden, Purity Vodka gets its character and smoothness from the castle’s artesian spring water rich in minerals and iron. Purity Vodka is packaged in an elegant, crystal-faceted bottle, with an SRP of $39.99 for 750 ml.
A vesica is formed when two circles with the same radius intersect so that the center of each circle lies on the circumference of each other. New Polish import Vesica Vodka features that ancient symbol on its label and it recurs in its uniquely shaped 1.75L bottle, which enjoins a liter bottle with a 750ml bottle. Vesica is a potato vodka triple distilled and triple filtered. Imported by Adamba Imports International, Vesica is available in all major U.S. markets with an SRP of $11.99 for 750ml.
Value brand McCormick Vodka is touting a lightweight plastic bottle with a built-in handle. Distilled from American grain, McCormick is the number-six player by volume in the U.S., according to Beverage Information Group, which estimates 2010 volume at 2.09 million cases.
A new bottle design is Finlandia’s news for 2011. “We are launching a new package globally to hit the U.S. market in June,” says Nelson. Dubbed “melting ice,” the design is an evolution of Finlandia’s original “frozen ice” motif, which has morphed through a number of permutations over the brand’s 40-year history. “The design has been updated to a contemporary style that meets today’s needs. We think it will elevate the brand’s presence and premium cues,” says Nelson.
Flavors in Favor
Nowhere in the category is there greater activity, interest and excitement than in flavored vodkas. Flavor is where the real action is at, say some observers.
“The growth of flavored vodkas continues to drive the overall category,” declared Washington at Beam Global. Effen’s flavors include Black Cherry and Dutch Raspberry. This spring, Effen launched its newest flavor, Cucumber Vodka. “When we decided to expand the Effen line, we searched for a flavor that fit the modern character and superpremium nature of our brand. We wanted a flavor that was unique, but not unapproachable or gimmicky and cucumber was a natural choice,” explained Washington. The flavor complements a current cocktail trend.
One new flavor plays off a classic cocktail. “This year, our most exciting launch is Belvedere Bloody Mary,” enthused Gibb about the new flavor. Belvedere uses a maceration process to create its flavors; for the Bloody Mary, seven ingredients-tomatoes, horseradish, black pepper, red pepper, chile peppers, vinegar, lemon-were individually macerated and blended. “Lots of real ingredients were harmed in the making of this vodka,” quips Claire Smith, head of spirit creation and mixology for Belvedere, referring to the maceration process. “Just the smell of Belvedere Bloody Mary should transport you to Sunday brunch,” she adds.
Another take on the flavor creation process is Imperial Brands’ 4 Orange. “4 Orange is actually distilled from four different varieties of oranges rather than adding flavor to grain neutral spirit,” explained Brandes. “It’s a totally different animal; the vodka really smells and tastes like oranges, with no artificial chemical flavors.” Right now the company is focusing on developing the Florida market, where the citrus groves are located.
In a sort of reverse twist on the flavor game, Brown-Forman has released Chambord Flavored Vodka. The iconic French black raspberry liqueur has been combined with French vodka to produce an unusual hybrid. Packaged in a signature orb-shaped bottle, Chambord Flavored Vodka retails for about $24.99 in the U.S.
Another unusual branch of flavored vodka is the line of Sweet Tea Vodkas from Firefly Distillery in South Carolina. Drawing upon a Southern predilection for sweetened tea, the company has created a complete vodka line, which includes Sweet Tea, Raspberry Tea, Peach Tea, Mint Tea and Lemon Tea. The “sweet” comes from local sugarcane, but now Firefly has developed the low-calorie Skinny Tea Vodka, which is made with Truvia, an all-natural sweetener made from the stevia leaf.
All of these innovative approaches demonstrates how vital the flavor segment is.
“Flavors remain a strong trend in vodka,” says Diageo’s Rosen. “We are continuing to meet this interest with Smirnoff flavors, and Godiva Vodka, the first chocolate-flavored vodka from an authentic chocolatier.” Also new from the Diageo stable is Ursus, which was launched late last year. Unlike colorless vodkas, Ursus flavors are appropriately colored as well. The bottle features a high-tech label that changes color to indicate the proper serving temperature.
Eristoff’s two flavors, Red and Black, are also colored, red and black, respectively. Red is flavored with sloe berries; black is made from Georgian wild black berries. Varying viscosities allow the vodkas to be colorfully layered in a glass or floated on top of a drink. “Bartenders are having fun playing with that aspect of the flavors,” says Metevier.
In 2010, Phillips Distilling added to new flavors (and colors) to its UV Vodka line. UV Coconut Vodka is white and UV Sweet Green Tea is a Zen-like pale green. The company also offers Phillips Vodka, one of America’s first vodka brands, introduced in 1947.
“Our mainline vodka continues to grow, but a higher percentage of our growth is coming from our flavored line, which is bringing a lot of new consumers to the brand,” says Hafer at Heaven Hill. Currently Burnett’s offers 23 flavors, including Fruit Punch and Pineapple launched last year and two new debuts this year, Limeade and Orange Cream. “We stay relevant with new and innovative flavors and still offering all the core fruit flavors,” says Hafer. Ease of use is key to the popularity of flavors, she posits. “The consumer doesn’t have to do much, just pour and serve.”
Following on the successful debut of Absolut Berri Acai, Pernod Ricard launched a new flavor at the beginning of the year, Absolut Wild Tea. With an SRP of $19.99 for 750 ml, the vodka is flavored with oolong tea and trendy elderflower. Another, as yet undisclosed, flavor will launch this summer, according to the company.
The Flavor Game
Virtually every major vodka brand is playing the flavor game to some extent. Stolichnaya’s newest flavor is Wild Cherri; the brand’s 10 flavors include unusual ones like Gala Apple. Rising Swedish star Svedka, owned by Constellation Brands, has five flavors in its portfolio, including Clementine. In 2010, Ketel One debuted the naturally flavored Oranje. A few years ago, Skyy Vodka totally revamped its flavor line, switching to an infusion process to impart natural essences; the company recently debuted two new infusions, trendy Blood Orange and Dragon Fruit, reputed to be the latest superfruit, tasting of juicy red berries; SRP for both is $18.49 for 750ml. Late last year, Sobieski unveiled three new flavors: Orange, Karamel and Raspberry; with an SRP of $10.99 per 750ml, the new flavors join Sobieski’s Cytron and Vanilia.
“Just when you think that they can’t possibly come up with another vodka flavor, that everything has been done by this point, Pinnacle comes out with Whipped Cream Vodka,” exclaims retailer Smith at Sarasota Liquor Locker.
Indeed, White Rock Distilleries Pinnacle brand has created quite a stir with its off-beat Whipped Vodkas. It’s proven so popular, Pinnacle extended the idea to Cherry Whipped, Chocolate Whipped and Orange Whipped. In the same realm, Pinnacle offers Cotton Candy flavored vodka.
In a similar mode, Proximo Spirits’ Three Olives has also garnered a reputation for off-beat flavors like, Bubble, Root Beer and Rangtang. Lately, Three Olives made a splash with Dude, a greenish-colored vodka with a taste reminiscent of a popular lemon-lime soft drink.
Of course, all these new products and flavors need to be supported by advertising, marketing and publicity campaigns and in-store POS materials to thrive or just survive. Most of this marketing offers a big slice of social media-Facebook, twitter, et al.-because vodka’s targeted demographic is firmly linked in and receptive to online promotions.
Belvedere is supporting its recent debuts Intense Unfiltered and Bloody Mary with consumer advertising and social media channels, according to president Gibb. At the retail level, Belvedere will be running various promotions and in-store displays. The company also launched a partnership with (Red), a charitable organization founded by Bono of U2 with the aim of eliminating the scourge of AIDS in Africa. To support those efforts, Belvedere will release a Red Special Edition with 50 percent of the proceeds from those bottle sales donated to the cause. Additionally, rap star Usher will be the face of this project.
Imperial Brands has slated some new executions for its Truth in Vodka campaign to support Sobieski. Additionally, a new pr campaign will launch with actor Bruce Willis as the spokesman; the focus will be on an as-yet-undisclosed charitable cause.
Skyy Spirits’ global marketing program launched with a U.S. print campaign and increased advertising spending to promote its core brand. The campaign features striking images by photographer Raymond Meier that give the brand’s iconic cobalt blue bottle a pop art stance.
Much of Finlandia’s messaging will focus on the new bottle package, according to senior brand manager Nelson. Another push will be to communicate to U.S. consumers Finlandia’s 40-year history and how strong the brand is globally; at 3 million cases, the 5th best-selling premium vodka in the world, says Nelson. On the retail side, that means informative bottle neckers, case cards, banners and coupons. Finlandia is also considering truck-wrap advertising. Additionally, the brand is revamping the look and feel of its various digital media channels.
Pernod Ricard is investing heavily in a new “Drinks” campaign, communicating that Absolut perfects cocktails. “We have reached threshold level media spending and are sharply focusing our investments against all key audiences (consumers plus the on- and off-premise trade) to activate the ‘Cocktails Perfected’ message,” according to a company spokesperson.
New in-store merchandising materials will support the launch of Effen Cucumber, including shelf talkers and recipe cards, says Washington. And consumers can expect to see a continuation of Effen’s “Provocatively Premium” campaign as well as the brand’s sponsorship and participation in design and fashion promotions nationwide, such as signature Art of Design events and a partnership with DIFFA: Design Industries Foundation Fighting AIDS for its 2011 Dining By Design Tour.
Burnett’s Always Your Favorite campaign will be focused mainly on the brand’s 23 flavors this summer, especially Pink Lemonade and Sweet Tea, as well as the new debuts. In May, Burnett’s began a national out-of-home advertising campaign in nine markets, offering a lot of additional support to drive initial traffic, according to Hafer.
Bacardi plans a strong focus on digital vehicles for its vodka brands, websites, Facebook, iPhone apps and foursquare. All its in-store promotions drive consumers to social media. “Vodka consumers are comfortable with digital technology,” points out Metevier. “It’s an ideal way to engage consumers in a two-way dialog, which gives us insights for new promotions, new products and new brands.”
Wave of the Future
The future is always uncertain and prognostications difficult. But given the category’s current momentum and glimmers of a gradually brightening economic picture, it seems likely that vodka’s reign will continue, with ever more new brands, new expressions and new flavors to fill retail shelves and restaurant backbars.
“Vodka continues to be a dynamic category that has sustained exceptional growth beyond market expectations,” said Diageo’s Rosen, “which we expect will only continue as consumer interests grow and evolve.”