Imported vodka brands face a challenging environment in the U.S. market. Overall growth remains fairly flat and imports face competition from domestic vodka and American craft brands. And of course, brown spirits (especially whiskey) have made inroads against the most popular white spirit.
Successful brands are following a multi-pronged strategy of pricing adjustments, emphasizing points of differentiation and pursuing innovations in new releases and packaging to generate excitement in the retail setting. In this market, messaging is key.
Producers must communicate clear, concise and compelling brand stories while maintaining transparency about authenticity of origins and craft of productions methods. Overall, the major players in the import category remain positive about vodka.
“Vodka remains the most popular spirit in America and is often referred to as the backbone of the spirits industry,” notes Alex Tomlin, senior vice president at Diageo North America, while conceding that growth of imported vodka volumes is down slightly from the previous year. “Ketel One has seen improvements in performance as overall category volume has continued to trend upwards.”
While the total imported vodka category is flat at 0.5% volume growth, according to The Beverage Information & Insights Group Liquor Handbook 2017, the top 10 leading brands were up a full percentage point. In the number one spot, category leader Svedka posted gains of 2.9% Other impressive performers among the top 10 included Ketel One at a solid 2% volume growth and Ciroc, which rocketed 17.0%.
“Imported vodka brands have a strong, yet saturated, presence in the U.S. market,” says Clayton Wai-Poi, vice president of marketing, Vodka, Cognac and Gin at Beam Suntory, whose portfolio includes the Effen and Pinnacle brands. “Consumers are always looking for innovative brands to become their go-to,” he adds.
The Price is Right?
One of the key issues facing producers today is pricing. Some observers think the imported vodka market is following a larger economic trend – a widening of the gap between rich and poor — that’s causing value products and luxury products to do well, with mid-priced products losing share. Many imported vodkas occupied that midrange, priced just above the mass-market domestic brands, while a few import brands aimed at the luxury level. How is that terrain shifting today? Opinions are mixed.
“This is a trend in many categories and not unique to vodka. Mid-price brands tend to lose their identity. They lack the badge of premium-ness and therefore are not aspirational. At the same time, they are never the lowest priced on the shelf and don’t appeal to the value shopper,” says Roy Danis, president and CEO of Conecuh Spirits, LLC, exclusive U.S. importer for Nemiroff Vodka from the Ukraine. Most imported vodkas compete in premium and super premium positions, he adds, primarily due to higher cost of goods and higher costs to import. “We have sharpened our pencil so we can compete in a larger segment of the vodka category.” New to the US market, Nemiroff has an SRP of $17.99.
Joao Rozario, vice president of Absolut, would challenge the hypothesis that midrange brands are being squeezed. “The middle segment is still engaging consumers and impacting vodka growth, contributing to overall expansion,” he says, citing as proof the success of the brand’s latest launch of Absolut Lime. The product is the fastest-growing innovation in vodka in the U.S. in the last 12 months, and it sits squarely in that middle segment, he points out. “This not only validates the trends but gives us a look at the road ahead.”
“Historically, quality has been equated with luxury, but that has changed in recent years. Not just in the beverage alcohol space, but as consumers look for craftsmanship over label cache when making purchase decisions,” says Carl Evans, vice president, spirits marketing for Constellation Brands. Svedka hangs its hat on its distilled-five-times quality, he says, and offers that quality at a “cheap-chic” price point. Svedka has shown consistent growth year-over-year, and the imported vodka category remains a top choice for consumers due in large part to the quality/value proposition it represents. It’s a combination of quality liquid at an approachable price point, Evans says.
“In the U.S. market, we are seeing compression of price points, with only a dollar or so difference between premium, mid and value points. And superpremium has dropped to about $10 less than it used to be,” says Nicolas Guillant, president of Marie Brizard Wine & Spirits Americas. “Now consumers are questioning why they used to pay such high prices for those brands,” he explains. Sobieski Vodka’s price, on the other hand, has remained steady over the past seven years.
Other factors are also in play. “In the American vodka market, there is a distorting factor called Tito’s,” Guillant says. “If you look at the numbers, superpremium is down, the mid-price is flat, value is down; the only segment doing well is premium—and Tito’s is premium. If you exclude Tito’s, the picture changes dramatically. So the big players have reacted with increasing promotional and pricing pressures.”
“In fact, we see most of the action in the mid-price tiers,” says Keenan Towns, Diageo’s vice president of Influencer Brands. “Tito’s is arguably the most successful brand in vodka at the moment, and it is neither luxury nor value. On the value end, Platinum 7x is doing well, indicating space for growth. The ultra-premium category ($25-$50) doesn’t have the same momentum,” Towns concedes. “While domestic brands are primarily concentrated in the popular and value price tiers, imported brands compete beyond the premium categories. Imported vodka exists across price tiers and largely pursues a consumer based on quality and craft, rather than price.”
For vodka brands, brandishing the word import on the label is no longer enough for today’s consumers. Taking a page from whiskey, vodka focuses on points of differentiation, provenance and production. The buzzwords today are authenticity and transparency.
“The declining importance of being imported and changing consumer preferences have continued to evolve how consumers behave and how brands act in the marketplace. To that end, we’ve seen brands carefully targeting niche audiences with unique offerings to gain a consumer following,” says Wai-Poi.
Beam Suntory positions Effen as a quality, superpremium vodka with a clean, smooth taste because it is distilled at cooler temperatures than most other vodkas. In fact, the word “effen” translates to “smooth” in Dutch, a nod to the spirit’s heritage. The brand is finalizing a new campaign called “Different By Design,” which rolls out in 2018. For Beam Suntory’s Pinnacle brand, says Wai-Poi, the opportunity is to communicate with consumers why the vodka’s French origins are important to the final product.
“The distinction of domestic versus imported is less relevant,” Danis says. So it is important to create other points of difference. As Nemiroff debuts in the US market, it will bill itself as “Vodka’s Dark Side,” with a tagline, “Unleash your bad ass, tap into your dark side.”
“Consumers today want truth and transparency,” Guillant says. “There are opportunities for brands that are real and are differentiated. For a long time, vodka was vodka was vodka. Consumers (and especially bartenders and retailers) are waking up to the differences in vodka.” Sobieski Vodka focuses on its 100% pure Dankowski rye vodka, which offers a better structure and richer flavor than other grain vodkas, he says. “And Sobieski gets a lift from the current interest in rye whiskey.”
“One of the main driving forces in the industry is that consumers are paying more attention than ever to where ingredients come from. Consumers will continue to demand transparency regarding whether a product’s ingredients are entirely natural,” says Tom Spaven, brand director for Grey Goose Vodka. The brand touts the use of soft winter wheat from the Picardy region of France and pure spring water from its well in Gensac-la-Pallue, along with a single distillation process overseen by Cellar Master Francois Thibault.
“More than ever consumers want transparency from brands on what goes into the product,” Rozario says. “Which is more important than whether a vodka is imported or not.” For Absolut, that message starts with production. All the ingredients are sourced within a 75-mile radius of Åhus, Sweden. The distillery is also carbon-neutral, and Absolut contains no added sugar or artificial flavors.
Ketel One also cites sustainability as a defining characteristic, Tomlin says, as well as using 100% non-GMO grain. The brand celebrates its heritage — the Nolet family has been crafting fine spirits at its home distillery in Schiedam, Holland since 1691.
Repacks Pack A Punch
While creating new vodka expressions and flavors take research and time, re-packaging is a relatively easy way to grab consumer attention anew. That’s especially true of bottle wraps and sleeves, which can be easily redesigned and slipped over the original bottles to fit the occasion.
Absolut Sequins, for example, brightened the holidays with a fun wrap that changes its look with the swipe of a finger. The brand plans similar limited wrap releases.
In summer 2018, Sobieski will introduce an update of its packaging, to hit shelves in the U.S. around Memorial Day. The new look will have a more modern feel and call out the 100% rye more forcefully, while still honoring the brand’s heritage of Polish King Jan III Sobieski.
Grey Goose will continue to leverage its iconic wine-bottle shape through limited-edition seasonal packs, Spaven says. Sporting a fresh new look timed to the 20th anniversary of the brand, the Grey Goose Limited-Edition Riviera Bottle celebrates the brand’s French heritage. The design features classic marinière stripes and was defined by visible brush strokes reminiscent of France’s Impressionist Art Movement.
Despite the challenges, the major players in the imported vodka category remain upbeat about the future.
“While there are many new players and trends in the spirits world, we’ve found vodka drinkers to be extremely loyal and steadfast in their support of the overall category,” says Tomlin at Diageo. “Vodka remains a highly competitive category with continuous innovation, and hundreds of new vodka brands emerging in just the last few years.”
Thomas Henry Strenk is a Brooklyn-based freelance writer with over 20 years experience covering the beverage and restaurant industries. In his small apartment-turned-alchemist-den, he homebrews beer kombucha, and concocts his own bitters and infusions.