Vodka’s Sweet Success

Strawberry Shortcake, Orange Cream Pop, Iced Cake, Candy Cane, Sugar Cookie, Pumpkin Spice, Root Beer Float, Rainbow Sherbet. When it comes to vodka flavors, liquor shelves seem to be turning into dessert aisles. Sweet expressions are not the only news coming out of the ever-growing vodka behemoth. SKUs of all sorts crowd retailers’€™ shelves. Low-cal offerings are emerging, new brands establishing footholds, off-beat niches finding eager-to-experiment consumers. The category is vast and varied enough to accommodate virtually every taste, trend and interest.

Vodka accounts for approximately one-third of all spirits volume in the U.S., according to the Beverage Information Group’€™s 2013 Handbook Advance, with 2012 volume was up 5.6% to 70.2 million cases nationally. In the control states, 2012 vodka volume increased 3.7% to almost 14.8 million cases. According to the Distilled Spirits Council of the United States (DISCUS), the vodka category accounted for 26% of all spirits revenues nationally, with 2012 revenues gaining 5.1% to $5.5 billion. The largest price segment, value brands, grew a respectable 1.7% to 26.6 million cases, while premium vodka jumped 5.7% in volume, and the super-premium expressions increased a significant 10% in volume and 9.5% in revenues, according to DISCUS.

‘€œVodka is an extremely dynamic category in the U.S. market; it continues to move up strongly, tirelessly and shows no signs of slowing down,’€ points out Leonid Yangarber, CEO of Russian Standard USA. ‘€œVodka is very versatile, which makes it accessible for many types of consumers, males, females, different age groups. The strength of the category is remarkable.’€

The top 10 leading vodka brands notched a solid 4.2% increase in 2012, to 36 million cases, which is well over half of the total category volume, according to Beverage Information Group’€™s 2013 Handbook Advance. Perennial category leader Smirnoff grew 2.0% to 9.9 million cases. The big winner was Pinnacle, now owned by Beam Inc., with an astounding 18.5% bump last year. Burnett’€™s Vodka was another stellar performer, breaking the 2 million case mark in 2012, with 10.2% volume growth. Also enjoying above-average increases were Ketel One and Barton Vodka; both brands grew 4.7% in 2012.

New and Notable

The chief characteristic of the vast vodka category is innovation and product churn. A number of contenders are launching new and noteworthy products into the marketplace.

One of the more unusual products to debut is Absolut Tune, a sparkling wine-vodka fusion. ‘€œAbsolut Tune is a real breakthrough proposition, a hybrid and the best of both worlds, encompassing the glamour of Champagne and energy of Absolut,’€ enthuses Maxime Kouchnir, VP Vodkas for Absolut parent Pernod Ricard USA. Consumer response is extremely positive, says Kouchnir. Tune received a strong PR launch and extensive sampling. ‘€œAbsolut Tune is versatile, ideal for a casual brunch, at a high-energy party, in the clubs or for entertaining at home.’€

If that weren’€™t enough, this spring Pernod Ricard launched Absolut Elyx. ‘€œElyx,’€ which means ‘€œluxury’€ in Swedish, is a true luxury proposition, declares Kouchnir. The liquid is made from grain sourced from an estate near the distillery in Sweden, which is blended with soft and naturally filtered water, and hand-crafted in an authentic 1929 copper rectification still. Due to the small quantity of production, Absolut Elyx will receive selective distribution. ‘€œClearly we see there is an appetite for handcrafted, single-estate products,’€ says the VP.

Continuing the tradition of limited-edition bottle designs, Absolut Mexico is available in the U.S. for the first time after its debut in Mexico last year. The design was created in partnership with renowned Oaxacan artist Dr. Lakra, aka Jeronimo Lopez Ramirez. The art celebrates three legendary icons from ancient Mayan culture’€”Hurakan (Hurricane), Kukulkan (Serpent) and Balam (Jaguar).

Heaven Hill Distilleries, which owns the Burnett’€™s marque, is launching a premium brand, High Rise Vodka, this June in 11 select markets. High Rise Vodka is made from winter wheat grown in the Finger Lakes region of New York and the pristine limestone water that flows through the glacial soils of that landscape; the liquid is distilled five times to produce an aromatic and creamy vodka. Priced $12.99 for 750 ml, the brand debuts an 80 proof flagship plus Cherry and Citrus flavors. ‘€œWe have wanted to enter the premium segment for a long time,’€ reveals Reid Hafer, senior brand manager for Heaven Hill. High Rise Vodka, she says, has retro flair and a fun-loving personality, evoking the spirit of the good life.

The High Rise Vodka label designs capture fun-loving and fashionable social settings, from a rooftop cocktail party with suits and fedoras to a penthouse with martinis and shakers to a cabana party with swim caps and heels. ‘€œWe are going to focus 100% on retail for this brand, launching with an aggressive rebate program where legal, plus case cards and flavor-specific shelf talkers,’€ explains Hafer. A retro-styled bar cart is available for floor displays, as is a 50 ml counter dispenser with all three expressions for trial. Promotion will include social media advertising as well as rich media ads with high-impact creative on big network websites.

Backed by the Basics

Although flashy flavors grab most of the media attention, the workhorse of the vodka category is still the original, unflavored, 80 proof product, which continues to shoulder the bulk of growth.

‘€œThe unflavored vodka category is steadily growing and remains the lion’€™s share of vodka consumption,’€ says Jason Daniel, brand director for Skyy Vodka.

‘€œWe have seen in our businesses across the board that unflavored vodka options continue to be very appealing,’€ notes Deb Boyda, general manager at Beam Global Wine & Spirits. ‘€œThere’€™s general interest in vodka and the icing on the cake, if you will, is really the growth in flavors. It’€™s not, gee, unflavored is boring and uninteresting and not growing, and flavor is where all growth comes from.’€ Beam Global’€™s vodka portfolio notably includes Pinnacle, Skinnygirl, Pucker and Effen. ‘€œWe are seeing growth with both our unflavored and flavored variants,’€ adds Boyda.

‘€œRussian Standard is unique in that we are not doing flavors, instead we are doing different characters or expressions ‘€” Original, Gold, Platinum and Imperia vodkas,’€ explains Yangarber. Russian Standard is still relatively new to market; the above-premium-priced imported vodka had sales of 218,000 cases last year, an 11.8% increase. The company intends to upgrade packaging for its Platinum expression, and a new ad campaign will debut before the end of the year. ‘€œThe trend that quality and authenticity are important is a very strong tailwind for Russian Standard,’€ says the CEO.

Another brand that doesn’€™t play in the flavor arena is Ultimat Vodka, imported and marketed by Patron Spirits International. The ultra-premium Polish spirit is made from a unique combination of wheat, rye and potato, and is packaged in an elegant cobalt blue crystal decanter; it retails at $40 for 750 ml.

For its part, the ultra premium Purity Vodka, made in Sweden from organic malted winter wheat and barley, is distilled an amazing 34 times. The small-batch production process is noted on the packaging ‘€” each bottle is stamped with an organic seal and an individual batch and bottle number placed by the brand’€™s Master Blender. In addition, Purity recently debuted a clear, multifaceted bottle with an enhanced logo presentation.

Another newly visible 80 proof unflavored vodka is the Nordic expression Vikingfjord, from Kobrand Spirits. The brand hails from Norway and uses pure glacial waters in producing the vodka. Made from potatoes, Vikingfjord is naturally gluten-free and features a smooth, balanced taste. The brand also has two companion flavors – Eple and Sitrus – and carries a suggested retail price of approximately $13 for a 750 ml bottle.

Flavor Essentials

Flavor is the big story in the vodka category, as it is across the spirits spectrum. In fact, of the 171 vodkas introduced in 2012, the majority, 122, were flavored, according to DISCUS statistics. Lately, those variations have taken a sweeter dessert-like proclivity, but savory and off-beat vodkas are also coming to market.

‘€œIt’€™s about flavor, flavor, flavor,’€ enthuses Diana Pawlik, vice president of marketing for Svedka Vodka. ‘€œFlavors are a really big trend that has had longevity, driving phenomenal growth the last couple of years across the entire category for vodka.’€ The Swedish import launched two new flavors this spring. Strawberry Colada is an extension of the successful Colada flavor introduced last year; Orange Cream Pop blends citrus and vanilla cream, which is a nostalgic nod to the Creamsicle frozen dessert on stick. Both flavors will get full 360 support, including POS, digital and social media, out-of-home campaign and print. The new flavors are packaged in a lacquered and sleek-looking bottle with a silver metallic cap and accents for a bold and impactful shelf presence, and a more premium appeal, says Pawlik. All of Svedka’€™s core flavors are transitioning into the new packaging, so the whole brand will carry the same look.

Just Desserts

‘€œCurrently, confectionary vodkas are driving sales by delivering more playful and decadent flavor, beyond fruit, that appeal to the female flavored vodka drinker,’€ says Brad Essig, VP Vodka North America for Diageo. The Smirnoff brand has seen growth with its fruit flavors, as both Smirnoff Peach and Smirnoff Coconut are currently experiencing double-digit growth, says the VP. Smirnoff is further tapping into that market this year with the launch of three new ‘€œconfections:’€ Smirnoff Iced Cake, Smirnoff Kissed Caramel and Smirnoff Root Beer Float. The brand plans more flavor introductions later this year. Diageo’€™s Ciroc brand introduced Ciroc Peach just before New Year’€™s 2012, reports Essig, which sold 800,000 cases of Ciroc Peach in just 12 months.

‘€œThere is definitely a trend now toward sweeter more dessert-oriented flavors,’€ declares Boyda, at Beam Global. ‘€œPinnacle instigated a lot of that with the introduction of Whipped a couple of years ago. That’€™s what consumers are desirous of right now,’€ she adds. Beam acquired the Pinnacle brand because of its reputation as a flavor pioneer. Pinnacle’€™s newest ‘€œdesserts’€ are Rainbow Sherbet, which combines the zesty, citrus taste of orange and sweet lime with a creamy raspberry; and Strawberry Shortcake, which evokes strawberries, whipped cream and pastry. ‘€œWe’€™ve come into the market with fresh, novel takes on well-loved flavors that you might not necessarily encounter in an adult form, which is the focus of our flavor strategy,’€ says Boyda.

Beam’€™s vodka portfolio also includes the Effen and Pucker brands. Superpremium Effen has encountered strong success with Cucumber over the past two years, and will introduce a new flavor this year, says Boyda. Pucker Vodka is an outgrowth of the cordials and liqueurs brand, which reached 162,000 cases last year. New this year is Pucker Watermelon Wow; another new Pucker flavor will debut before the end of 2013.

‘€œIt seems like they come out with a new vodka flavor every week,’€ exclaims Joe Minotti, owner of five Minotti’€™s Wine and Spirits retail stores in northern Ohio. ‘€œIt’€™s crazy and it’€™s almost impossible to carry them all.’€ The sweet flavors are popular, he notes, especially among younger legal age drinkers.

‘€œMillennials grew up with a global, more exotic and curious palate with access to premium and intriguing ingredients at Whole Foods, Trader Joe’€™s, farmer’€™s markets, and elsewhere. It is only natural they are exploring new taste options with vodka,’€ reports Daniel at Skyy Vodka. ‘€œThe biggest trend in the category again this year is the proliferation of flavors, particularly with exotic fruits and blends, and a bias for sweet flavors.’€ For its part, in the first quarter of the year, the brand introduced two flavors to its Skyy Infusions line: Wild Strawberry and Moscato Grape. Wild Strawberry was launched to coincide with Valentine’€™s Day. Trading on the current popularity of the sweet sparkler, Skyy Infusions Moscato Grape is the first-ever Moscato grape-infused vodka on the market available nationwide, claims Daniel. It is being supported with a multi-million dollar marketing and advertising campaign, including TV, digital and social media campaign, public relations and nationwide sampling.

In collaboration with the estate of Hollywood legend Marilyn Monroe, Three Olives Vodka is launching the celebrity vodka Three Olives Marilyn Monroe. Marilyn’€™s favorite fruit was strawberries, and this new strawberry vodka with a hint of cream celebrates the actress’€™ style and glamour. English import Three Olives attained sales of more than 1.5 million cases in 2012, a 3.4% increase. The brand boasts about 20 flavors.

Fris Vodka also introduced two new flavors this past year, along with an eye-catching new package design: Fris Citrus Freeze and Fris Orange Freeze. Not to be outdone, the venerable Stolichnaya launched the unusual Stoli Salted Karamel flavored vodka last year.

Too Far Out Flavor?

Some critics carp that vodka has gone overboard with wild and weird flavors. Notable examples include Alaska Distillery’€™s Rhubarb, Fireweed and Smoked Salmon vodkas; Caledonia Spirits’€™ Barr Hill Honey Vodka; Van Gogh’€™s PB&J Vodka; Philadelphia Distilling’€™s The Bay Seasoned Vodka; and Anchor Distilling’€™s Hophead Vodka, to name just a few. Proponents cry, give us more.

‘€œVodka is so versatile, it’€™s expected that it can deliver some far-out innovation,’€ points out Daniel at Skyy.

‘€œWe have noticed that the category got a little crazy with some off-the-wall, wacky and dessert-focused flavors,’€ says Hafer at Heaven Hill. ‘€œFor Burnett’€™s Vodka, we are seeing success in flavors that are more traditional, ones that consumers are used to consuming in a drink. Consumers still want ease in making cocktail, something they can enjoy simply.’€ That isn’€™t to say that Burnett’€™s doesn’€™t make a few sweeter offerings, such as its Whipped Cream and Sugar Cookie flavors, which sell well. Early this year the brand debuted Strawberry Banana and Cherry Cola. Two more new flavors followed in May, Tropical Fruit and Blackberry. Last year Burnett’€™s introduced its first seasonal flavor with Candy Cane and plans a new fall seasonal with Pumpkin Spice.

While Pinnacle will continue to explore the sweet side of flavors, the company is keeping a sharp eye on the market. ‘€œWe are always very keenly aware of the twists and turns and changes of the consumer palate. If down the road there is an emerging interest in say, sweet and savory, or hotter, spicier flavors, we would innovate in those spaces as well,’€ notes Boyda.

For its part, Absolut recently launched Absolut Hibiscus. ‘€œThat’€™s one of the hottest trends in food and very timely,’€ notes Kouchnir. In May Absolut introduced the first-ever cilantro-flavored vodka. ‘€œThere is a lot of interest in Latin cuisine today, a strong Hispanic population, and I think the new flavor will resonate well with those trends,’€ concludes the VP.

Light and Lively

One niche that has gotten some attention in the past few years is low-calorie vodkas. These products seem to have a special appeal for female consumers, and many low-cal brands take straight aim at that demographic.

An early pioneer is Voli Light Vodka. The French import boasts fewer calories per serving than the leading vodka brands. Flavors include Espresso Vanilla and Coconut Mango.

New to the market is Skinnygirl Vodka, an extension of the Skinnygirl low-calorie prepared cocktail line, which posted impressive sales of 96,000 cases in its first year. ‘€œWe have had extraordinary success with the Skinnygirl Vodka line,’€ declares Boyda. This spring the brand introduced Skinnygirl White Cherry Vodka. ‘€œConsumer interest in low-calorie offerings is very strong and consistent, and that’€™s an area we will continue to explore.’€

Another crossover is Little Black Dress Vodka, sister to the line of Little Black Dress Wines. Both beverages are targeted at female consumers. The vodka contains a mere 100 calories per 1.5-oz. serving, and it sold 35,000 cases in its first year.

But the big news in the low-cal subsegment, and an indication it is gaining traction, is the recent foray into the light arena by Smirnoff. This spring the category leader launched the Smirnoff Sorbet Light line, initially in three flavors: Raspberry Pomegranate, Mango Passionfruit and Lemon. Sorbet Light counts just 78 calories per 1.5-oz. serving. ‘€œSmirnoff Sorbet Light delivers just what consumers are looking for and is as fresh tasting, cool and delicious as a real scoop of sorbet,’€ says Diageo’€™s Essig. The launch is supported by a fully integrated marketing campaign, including TV, out-of-home, print, PR and digital.

Advertising Jingle

Powerful and compelling marketing campaigns keep many brands front-of-mind with consumers. There are a number of intriguing developments on that promotional front.

This spring, the Phillips Distilling Company rolled out a new ‘€œbe UV’€ advertising campaign for its UV Vodka brand. The campaign includes a new website, an interactive photo sharing tool, print and online advertising, sponsored events and newly designed social media. The ‘€œUV Ad yourself’€ photo sharing tool allows users to upload pictures of themselves and with a custom editing feature to create and share their own ‘€œbe UV’€ advertisement. Value-priced UV reached 1.6 million cases last year, growing by 33.3%.

Smirnoff’€™s DJ competition TV show, ‘€œMaster of the Mix,’€ is going into its third season, which will air on VH1, which include a scripted integration into the season 2 finale of VH1’€™s Single Ladies this past fall, according to Essig. Last year, Ketel One Vodka launched ‘€œA Gentleman’€™s Call,’€ a nationwide search to find a $100,000 idea that exemplified the values of craftsmanship, entrepreneurship and heritage. As a result of the program’€™s success, this campaign has evolved into the Modern Craft Project, with an international scope.

Canadian brand Crystal Head Vodka, an ultra-premium vodka founded by actor Dan Aykroyd, has joined forces with The Rolling Stones to create an exclusive, limited-edition Rolling Stones 50th Anniversary Gift Set. The collectible set includes a handcrafted case with a real zipper (recalling the band’€™s Sticky Fingers album cover), which encases a two-CD compilation of the Stones recorded live, and Crystal Head’€™s unique skull-like decanter whose top is engraved with the iconic lip-and-tongue logo. The limited-edition package retails for $89.95-$99.95.

Aligning itself with the classy sport of golf, Belvedere Vodka has been named as both the ‘€œOfficial Vodka of The PGA of America’€ and ‘€œThe Official Vodka of the PGA Championship.’€ The sponsorship will be highlighted through an integrated marketing campaign that features advertising, social and digital media activation, country club viewing parties, retail store promotional programs and consumer experiential programs at the PGA Championship.

Advertising pays. ‘€œIn the Miami market, we are seeing an upswing some of the more publicized brands, Ciroc, Grey Goose,’€ notes Grant Muench, manager of the retail store in North Miami Beach, Fla. for the Total Wine & More chain. Smirnoff is number-one in the market and here in the store, says Muench, and is doing well. But, he adds, ‘€œHere in Miami, customers are less concerned about the price of the vodka than they are the brand and the status associated with it.’€

Fast-Rising Stars

A number of brands achieved stellar performances last year and continue their rising trajectories.

Ciroc, the superpremium grape-based vodka imported from France, increased sales by an amazing 700,000 cases nationally last year (up 53.0%), exceeding the 2 million case mark. Besides an 80 proof, the brand’€™s portfolio includes Red Berry, Coconut and Peach flavors. Hip hop star Sean ‘€œP. Diddy’€ Combs has also continued to help boost awareness and sales.

Tito’€™s Handmade, the above-premium-priced vodka from Texas, enjoyed yet another year of phenomenal growth last year, up 46.0% to 850,000 cases nationally.

New Amsterdam Vodka, a companion to the successful New Amsterdam Gin. The competitively priced vodka from E&J Gallo more than doubled its sales in 2012 to 650,000 cases nationally its second year on the market. The brand released two new flavors last year: Red Berry and Peach.

Value-priced Sobieski Vodka, a Polish rye sold 980,000 nationally cases last year, a respectable 4.3% increase. Bruce Willis is spokesperson for the brand, which also features flavors such as Orange, Karamel and Raspberry.

The Future

‘€œFrom a category perspective, we are projecting continued growth in 2013 and beyond,’€ predicts Boyda. Beam is very committed to the vodka category, she adds. ‘€œWe expect strong growth trajectories in Pinnacle business. Skinnygirl is not just a vodka brand, but we have seen extraordinary growth in the vodka line, and we are projecting a continuation of that growth. We expect to grow as fast, if not at a faster clip, than the category,’€ she concludes. Kouchnir at Absolut is philosophical. ‘€œThere is a lot resting on where the U.S. economy will go. I am an optimist, I think the trends are going back in the right direction, at what pace, I don’€™t know but the category has shown strong momentum.’€

‘€œVodka continues to be a dynamic category that has sustained exceptional growth beyond market expectations,’€ says Diageo’€™s Essig, ‘€œand we expect 2013 to be any different.’€

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