A CLEAR WINNER

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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. in New Rochelle, NY. “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.

“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.”

The Adams Handbook Advance 1999 shows imported vodkas up 9.1% in 1998, as compared with a 0.7% increase for domestic brands (the total vodka category increased sales 2.3% to more than 33.65 million 9-liter cases). The top five leading imported vodkas were Absolut (3.65 million cases, up 6.1%), Stolichnaya (1.23 million cases, up 8.8%), Ketel One (450,000 cases, up 50.0%), Finlandia (220,000 cases, up 11.7%) and Tanqueray Sterling (180,000 cases, up 2.9%). 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 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, a 5.4% increase in 1998.

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.599vod1

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 are continuing 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 is benefiting from last summer’s repackaged introduction. Said Vidal, “We experienced a great surge in sales as the pipeline worked its way into retail stores.” He reports triple-digit growth “right off the bat” which has now settled down to 25% to 30%.

Finlandia has introduced new merchandising and is offering distribution tactics to keep that growth alive, including the introduction of new sizes, such as 1.75 ml and 1 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 “exploding” number of entrants into the category has proven “a bit of both 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.


LEADING BRANDS OF DOMESTIC VODKA
(Thousands of 9-Liter Cases)

BRAND SUPPLIER 1997 1998P % CHANGE
Smirnoff UDV North America 5,662 5,970 5.4%
Popov Vodka UDV North America 2,577 2,330 -9.6%
Gordon’s Vodka UDV North America 1,955 2,040 4.4%
McCormick Vodka McCormick Distilling 1,324 1,418 7.1%
Barton Vodka Canandaigua Brands 1,279 1,290 0.9%
Total Kamchatka UDV & Jim Beam Brands 1,054 1,047 -0.7%
Wolfschmidt Jim Beam Brands 1,032 1,000 -3.1%
Skol Vodka Canandaigua Brands 924 960 3.9%
Gilbey’s Vodka Jim Beam Brands 777 732 -5.8%
Skyy Skyy Spirits 594 697 17.3%
Total Leading Domestic Vodka 17,178 17,484 1.8%
Other 10,073 9,961 -1.1%
Total Domestic Vodka 27,251 27,445 0.7%
Source: Adams Handbook Advance 1999
a(p) 1998 Preliminary


LEADING BRANDS OF IMPORTED VODKA
(Thousands of 9-Liter Cases)

BRAND SUPPLIER 1997 1998P % CHANGE
Absolut Seagram Americas 3,440 3,650 6.1%
Stolichnaya UDV North America 1,130 1,230 8.9%
Ketel One Vodka Nolet Spirits USA 300 450 50.0%
Finlandia Brown-Forman Beverages 197 220 11.7%
Tanqueray Sterling Schieffelin & Somerset 175 180 2.9%
Total Leading Imported Vodka 5,242 5,730 9.31%
Other 419 478 14.08%
Total Imported Vodka 5,661 6,208 9.66%
Total Vodka 32,912 33,653 2.25%
Source: Adams Handbook Advance 1999
(p) 1998 Preliminary.


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% in 1998, from 300,000 to 450,000 cases. The company’s strategy, “discovery marketing,” which means training on- and off-premise people (bartenders, waiters, store owners and managers) through seminars and tastings. Company trainers explain how vodkas, and specifically Ketel One, are made.

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, however, the brand is moving back into gear, although 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. We don’t believe that Tanqueray is the appropriate product to compete with Belvedere or Chopin, nor do we believe it’s the arena that’s appropriate for the Tanqueray Sterling product.”

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

As one millenium slides into another, the vodka 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.” *


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?

Jonathan Notarius, co-owner with his brother Mark of Premium Wine and Liquors in upstate New York, recommends giving vodkas ample floor space. He places “no limitation on quantity. We won’t be afraid to try (a lot) of these boutique vodkas like Chopin or Belvedere. If one doesn’t work out, we look at the sales report — maybe there’s not the proper point-of-sale material on it, or the price might not be right — then we’ll do something about it.”

He also recommended merchandising vodka with “drink ideas on the shelf, like Stoli Ohranj and iced tea, a Martini using Belvedere, pre-made drink recipes, or something like that. You want to give customers an idea or two for the right occasions on how to use it.”

Brian Hue, vice president and general manager of Cork ‘N’ Bottle of Covington, KY, agreed, commenting that his colleagues need to remain open to accepting new brands and sizes. “The category is getting loaded with all the things that are coming out. I’ll put them in, generally, but we see how it goes. There are always going to be a few that are the losers, but you never know which ones until you try them out.”

“A new vodka comes out every day,” said Ron Junge, co-owner of Brown Derby Stores in Springfield, MO, “and you’ve got all these new flavored vodkas. Are they hot? I don’t think so, but they help the entire category.”

He stresses to customers how easy vodka is to drink. “Obviously, it’s the most mixable product we’ve got, so keep promoting that.” Brown Derby does that through recipes. Print ads feature a “Cocktail Corner” that tells readers how to make various drinks. Explained Junge, “It’s to make people aware that these drinks are still around; they’re oldies but goodies.”

Junge is also a believer or clearing space for new players in a hot category. “We’ve got 18 stores and two flagship-type of stores, and in those two stores we try and carry everything that’s available. Not necessarily every size of that item, but everything that’s available. We pride ourselves on selection.”

“As a category leader, we believe we should be receiving our share of the floors,” said Absolut’s Schleifer. “We provide retailers with the tools necessary, through our merchandising programs, to help them increase their sales. If they have a specific need we have a very strong field sales position for them to reach out and talk to them directly.”

Brown-Forman recommends against plunking all vodka in one spot on the sales floor. “There should be several display locations for vodka because vodka is consumed by both old and young, male and female, black and white, Hispanic and general market. They may take a lesson from what the grocers do with some of their more popular items. They have them in three or four different locations,” said John Vidal.


I KNOW WHAT YOU’RE
DOING THIS SUMMER

Not surprisingly, vodka suppliers have several interesting promotions planned for the summer of 1999.

  • 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 1-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.” Chief among the efforts will be a continuation of target-marketing efforts, as well as “a lot of trade education-focused programs.”
  • 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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