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VODKA

The drink
of most
resistance
Vodka’s growth in the US continues
despite the recession, and it still
outperforms the total spirits market.
However, as Camper English reports,
American consumers are trading down
from super-premium varieties

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THE MESSAGE put forth this year by the US: number of vodka brands This won’t stop some super-premium

or
Distilled Spirits Council of the United States, brands from pushing forward – and even

e
Year Classic Flavoured
or DISCUS, is that the spirits industry is expanding further into the on-trade.
recession resistant, not recession proof. 2003 410 223 Belvedere vodka launched Belvedere IX this
Vodka sales appear particularly resistant, 2004 432 249 February, a brand fortified for nightlife with
though consumer purchasing habits have 2005 462 292 ingredients like ginseng, guarana, and acai,
changed within the category. 2006 466 321 and which premieres in US nightclubs.
Despite the current state of the economy, 2007 484 357 As the worldwide brand owners of Ultimat
Source: The Distilled Spirits Council of the U.S.
spirits revenues in the United States vodka, Patrón Spirits is also putting its muscle
increased by 2.8% over last year according to behind the new (to them) super-premium

SUPER-PREMIUM BRANDS
figures released at the end of January. brand. “For a new brand like Ultimat vodka,

ALMOST INEVITABLY DO
Revenues were up, but by less than the marketing is extremely important. We know
average 6% annual increase since 2000. we have a distinct, high quality product, but

BETTER IN THE ON-


Growth continues, just at a slower rate. without marketing support it would be

TRADE.THE FACT THAT


Vodka did particularly well, as it has in difficult to introduce our vodka to consumers
recent years. David Ozgo, senior vice and raise awareness of what makes it so

ON-TRADE
president of economic and strategic analysis unique,” says John McDonnell, chief
for DISCUS, says: “Vodka grew fairly nicely operating officer of the Patrón Spirits

CONSUMPTION FELL PUT


again last year. The category was up about Company. “Despite the economy, we’re

SUPER-PREMIUM BRANDS
4.1 points in volume terms, compared to 1.6 continuing to spend at high levels to
for the total industry. This is consistent with introduce and market Ultimat, which in

AT A DISADVANTAGE
the trend we’ve seen over the last 10 years, turn helps support our retailers who are

PROPORTIONALLY
vodka volumes growing more quickly than selling Ultimat in their bars, restaurants and
total spirits. Vodka now accounts for almost liquor stores.”
29% of all industry volume.”
Premium category growth
On-trade slide Value brands like Skol and Barton’s vodka
Ozgo continues: “The first thing people give increased revenue by 3.6% in 2008 (1.8%
up in a recession is going out – they don’t go for all spirits), premium brands like Smirnoff
out as much. So we saw total on-trade fall and Finlandia vodkas’ revenue increased by
in 2008 after going flat in 2007.” 16.1% (4.4% total spirits), high-end
Total off-trade spirits volume increased by premium vodkas including Absolut and
2.9%, where on-trade fell by 2.2%. Stolichnaya increased their revenue by 1.9%
David Page, public relations manager for (1.3% total), and super-premium spirits like
Finlandia vodka, says: “We have seen a Grey Goose, Belvedere, and Level vodka
softening in on-trade sales. With the slowing revenue decreased by 3.6% (increase of
of the economy, consumers are enjoying 3.4% for all spirits).
spirits at home more.” Not surprisingly, the premium brands’
Jacob Briars, global brand ambassador for representatives were the most willing to talk
42Below vodka, says: “A far bigger about their sales. David Page of Finlandia
percentage of our sales globally come from says in the last fiscal year they grew by
the on-trade, so what we are seeing [huge almost 20% and just broke the 3 million-case
growth] is certainly inconsistent [with the
category]. However, this can possibly be US: vodka volumes by year and price category (‘000 9ltr cases)
explained by the decline in bottle sales in Year Value Premium High-end Super- Grand total
clubs which are more of a ‘status purchase’. premium premium
Most 42Below volume comes from cocktails 2003 20,123 10,541 9,286 1,905 41,855
and mixed drinks, the sales of which are 2004 20,827 10,752 9,878 2,631 44,088
holding up pretty well globally.” 2005 21,080 11,281 10,527 2,992 45,879
Ozgo adds: “Super-premium brands 2006 21,144 12,301 11,204 4,132 48,782
almost inevitably do better in the on-trade. 2007 21,891 13,976 11,651 4,720 51,237
The fact that on-trade consumption 2008 22,462 14,739 11,598 4,550 53,349
fell put super-premium spirits at a 03-08 growth (%) 11.6 39.8 24.9 138.9 27.5
disadvantage proportionally.” Source: Distilled Spirits Council of the U.S.


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VODKA

TEQUILA AND RUM ARE


sales mark. Svedka cites a 50% growth in Notice the lack of la-di-da”. The vodka sells

PROBABLYTHE CLOSEST
dollar sales compared to the same period for $10.99. With a campaign based on
last year. The brand reached the 2m-case exposing super-premium spirits as not worth

COMPETITORS FORTHE
mark recently, growing from 1m cases in just the money and a few awards for taste under
two years. its belt, Sobieski’s sales may have been

SIMPLE REASONTHAT
Marina Hahn, senior vice president, helped by the economic recession. “When

THEY ARE HIGHLY


marketing, at Spirits Marque One LLC, we introduced [the brand to the market]
comments: “We attribute this tremendous conditions were a lot better, but the reality of

MIXABLE,ALTHOUGH
growth to the brand’s ‘cheap chic’ the situation is I think it plays well in these

WHISKY, SURPRISINGLY,
positioning and unique brand platform, difficult times,” says Brandes.
‘Svedka, Voted #1 Vodka of 2033’.” Briars, of 42Below, says: “The runaway

DID FAIRLYWELLTHISYEAR
Chester Brandes, CEO and president of growth at the ultra/super-premium end
Imperial Brands, picked a fortunate time and seems to be slowing – but this is not being
marketing strategy when launching Sobieski felt in our [premium] price point, and in fact
vodka (they are the sole US importer) in I think drinkers are likely to seek out new
August 2007. Sales in 2008 were 285,000 tastes and experiences by looking around at
9ltr cases. a cheaper price point, or trying something
Sobieski launched a “Truth in Vodka” new that is of roughly equivalent value.”
campaign with taglines such as: “We DISCUS’ Ozgo echoes that sentiment.
designed a bottle to suit the spirit inside. “You could make the argument that people
are trading down, but I don’t think that’s
US: vodka suppliers gross revenues including Fed. Est. Tax ($m) quite the case. I think they just saw a couple
Year Value Premium High-end Super- Grand total of very solid products within the [premium]
premium premium category and decided to buy,” he says.
2003 787 771 1,089 320 $2,966
2004 872 795 1,211 460 $3,338 Going forward with flavours
2005 883 854 1,300 546 $3,582 DISCUS reports no significant increase in the
2006 892 932 1,393 778 $3,994 sales or number of flavoured vodkas last
2007 923 992 1,449 933 $4,297 year, with preliminary numbers putting
2008 956 1,152 1,477 899 $4,485 flavoured vodka sales at 14% of vodka sales.
03-08 growth (%) 21.5 49.4 35.6 180.9 51.2 “You have new flavours come on the
Source: Distilled Spirits Council of the U.S. market that create interest and it’s

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substituting one flavour for another from a consumer
standpoint. My read on a lot of this is that if you’re a flavoured
vodka drinker you’re going to substitute another flavoured
vodka,” says Ozgo of DISCUS.
Brands surveyed for this feature didn’t report any massive
flavour rollouts planned and none admitted to planning to pull
flavours off the market. Page says that flavoured vodka sales of
Finlandia were up almost 8% in the US last year, and
30% globally.
Additionally, says Page: “We do not have any portfolio
reductions planned for this year and are planning on rolling out
a new flavour in the US this spring.”
Absolut just announced a new mango flavour, its 10th, and will
continue its limited-edition city-themed flavours (Absolut New
Orleans, Absolut Los Angeles) with a new city featured this
autumn. Sobieski will launch its first two flavours in the second
quarter of this year.
Marina Hahn of Svedka is upbeat about flavours, stating: “We
believe we have unexploited opportunities with our four flavours.
They will be supported with a heavier marketing investment
moving forward. Plus, as we move aggressively into the on-trade,
flavours will play a larger role.”
42Below’s Briars offered a different perspective, saying it hasn’t
released a new flavour since 2004, and that, “Most are brand
‘placeholders’ for the back bar, you don’t see bartenders doing
anything with them or listing them on the menu,” with the
exception of flavours specific to cocktails, like lemon vodka for
the Cosmopolitan and pepper vodka for the Bloody Mary.

The competition
“In the US, we have seen a resurgence in the art of
mixology. That bodes well for Finlandia because of its mixability,”
says Page.
The cocktail craze in the US is everywhere in the media.
Flavoured vodka’s static sales, as well as premium brands selling
better in the on-trade than super-premium, point to vodka’s use
in everyday mixology. But other mixable spirits are also selling
well. “Tequila and rum are probably the closest competitors for
the simple reason that they are highly mixable, although whisky,
surprisingly, did fairly well this year,” says Ozgo.
Super-premium gins (preferred by the top bartenders) saw a
43.7% volume growth last year, while premium gins were down
by 16.2%. Bourbon and Tennessee whiskies saw a 16.5%
increase in the super-premium sector; high-end premium
Canadian whiskies grew by 65.4% in volume; and Irish whiskeys
were up 17.4% in the high-end premium sector and 34.2% in the
super-premium sector. Super-premium Tequila volumes
increased by 10.6%.
Vodka showed a higher percentage volume growth than every
other spirit category except for Irish whiskey. Spirits sales are, as
DISCUS says, recession resistant, and vodka appears to be the
most resistant. It seems people have not given up drinking vodka
at all, they’ve just found new formats and less expensive ways to
do so. db