Clear Profit

For years now, the sight of your shelves teeming with bottles of vodka, spanning value brands and slick symbols of luxury alike, has been a familiar one. After all, vodka remains the country’s most sought-after spirit.

According to the Beverage Information Group’s Handbook Advance 2014, vodka is still the industry warhorse, accounting for about 34% of all spirits consumed in the U.S. In 2013, vodka sales volume was 71.8 million 9-liter cases, a 2.5% gain over 2012 totals. The wildly popular flavored segment, already crammed with different fruit and candy-inspired
permutations, but which shows no signs of relenting, now accounts for approximately 24% of all vodka sales.

Still, Rob Bralow, manager and wine buyer for Blue Streak Wines & Spirits in New York’s Long Island City, thinks some stiff competition in the form of brown spirits is finally making a dent in vodka’s massive appeal. “Whiskey has become the hottest category, primarily with new artisanal brands but also with line extensions from existing brands leading the market,” he says. “In addition, homemade cocktails are gaining in popularity, using bitters and different alcoholic ingredients, therefore stealing market share from traditional vodka drinks.”

The fact that the already saturated vodka category—one cluttered with all these imaginative flavor hybrids, as well as celebrity-endorsed newcomers, small-batch craft finds and reinvented classics—continues to thrive amid internal and external competition is compelling. In the world of vodka, this race to the top isn’t off-putting; in fact, it’s an invitation for ambitious new rollouts and activations. Make it, both distillers and marketers know, and the vodka lovers will come—no matter how many new options (or alternative spirits) they must contemplate in the process.

 

The In Crowd

The ability to stand apart from all those bottles is a significant mark of a brand’s success. One way that Pernod Ricard’s famed Swedish vodka, Absolut, has been able to differentiate itself from the pack is through its limited-edition City Series, which launched in 2007 with an ode to New Orleans in the form of mango and black pepper-flavored vodka. Los Angeles, Boston, Brooklyn, San Francisco, Miami and Chicago iterations followed, each with an originally designed bottle that beckoned from retail shelves, and in 2014 it’s the Lone Star State’s turn. Absolut Texas melds the flavors of bright cucumber and fiery Serrano chile, and according to Absolut brand director Afdhel Aziz, this annual creative ritual represents an “aspirational approach in keeping with the premium-ness of the Absolut brand.

“Absolut launched Absolut Peppar in 1986 and Absolut Citron in 1988, and the brand is considered a pioneer within the flavored vodka category,” Aziz continues. “However, flavored vodka is one of the most competitive sectors within spirits, with a new product launched almost every other day.” How does Absolut navigate that kind of pressure? By emphasizing what makes the brand unique. To corroborate Bralow’s point that sugary additives are giving consumers cause for concern, Aziz singles out one particular point of interest: that Absolut flavored vodkas are made from a base of natural ingredients. “We believe that the fact no sugar is added is a real differentiator, especially for health-conscious consumers,” he says. As the second best-selling vodka in the U.S., Absolut registered sales of 4.44 million 9-liter cases last year.

Stoli, now on its own [Stoli USA] after a run in the William Grant portfolio, is another renowned brand with an impressive industry past. “Stoli was the first authentic, premium vodka to enter the U.S. in the mid-1970s, and we have always committed to producing a quality product,” says brand director Sarah Gorvitz. “We are one of the only vodka brands that controls the entire production from grain to glass.” Stoli owns its own wheat and rye fields in Russia, and their water source is drawn from an artesian well underneath its own bottling facility in Riga, Latvia. To have this kind of connection to location is both rare for such a high-volume vodka brand and perfectly suited to the ever-growing roster of artisanal-minded customers.

“Right now, consumers love to re-engage with authentic, historic brands. Our challenge on a vodka as iconic as Stoli is to continually reinvent the brand with contemporary twists, products and advertising, making it relevant for today’s consumers, while still remaining true to our origins,” says Gorvitz.

To accomplish this, Gorvitz says the brand continually capitalizes upon the theme of innovation. For a brand known for many firsts—among them, in 1962 Stoli introduced the first flavored vodkas, Pepper and Honey and Herb, that led to today’s current flavor craze—in 2014 Stoli became the first vodka brand to create and market a non-alcoholic ginger beer mixer.

Upcoming programming initiatives include a number of off-premise driven activations. After completing its first promotional period around the Bloody Mary, spring saw an emphasis on the Moscow Mule—the ideal vehicle for that signature ginger beer. June will center on the classic summer pastime of ice-cold lemonades, paving the way to the holidays and toasting the season with Stoli Martinis.

 

The Leaders & Fast Growers

Smirnoff, the best-selling vodka in the U.S., now stands at sales of 9.93 million 9-liter cases, and the brand continues to innovate to spur sales activity. Its latest is its new Cinna-Sugar Twist flavor. Svedka is now the third best-selling brand in the vodka category, with a panoply of flavored offerings helping it reach sales of 3.95 million 9-liter cases in 2013. Bacardi USA’s Grey Goose, the superpremium-priced import from France, notched sales of just under 3.4 million 9-liter cases last year, while Ketel One, another established high-end import, grew to more than 2.13 million 9-liter cases. Skyy Vodka, with its Infusions line of flavored expressions, reached 2.85 million 9-liter cases, while Pinnacle, with its extensive line of varied flavored offerings grew 8.6% to 2.77 million 9-liter cases. For its part, Burnett’s, also with an impressive lineup of flavors, saw sales rise by 15.3% last year, to 2.35 million 9-liter cases, while Ciroc, another high-end French import, registered sales of more than 1.91 million 9-liter cases.

One of the fastest-growing vodkas on the market is E&J Gallo’s New Amsterdam, which burst on the scene three years ago, a value-priced line extension to its already successful New Amsterdam Gin. Well, New Amsterdam Vodka has proceeded to grow dramatically, gaining 75.0% last year, to sales of just under 2 million 9-liter cases. ExclusivVodka is another brand that showed amazing growth, gaining 94.8% last year to 565,000 9-liter cases. Imported from Moldava and value-priced, the brand features an original version along with several flavors. A notable gainer is the Texas-produced Tito’s Handmade Vodka. The above-premium-priced brand has continued to successfully leverage its made in America heritage while keeping itself singularly “pure,” in the sense that it hasn’t gone the flavored route of so many top brands (not that there’s anything wrong with that!). Tito’s reached sales of 1.2 million 9-liter cases in 2013, an impressive 41.2% increase over the previous year. Other vodkas with significantly less volume also play up the fact that they focus on their core product without relying on flavor extensions. Among them are the above-premium-priced Russian Standard; Ultimat Vodka, the high-end brand imported from Poland; the ultra-premium-priced Purity Vodka, imported from Sweden and made with organic malted winter wheat and barley; and Vikingfjord, which debuted last year and is produced with pure glacial water from Norway.

 

Dream Machine

When Stoli made its flavored debut in the 1960s and Absolut in the 1980s, the brands could not possibly have envisioned the hundreds of flavor renditions that would transpire in the coming decades. Earlier this year, Swedish breakout brand Svedka expanded its budding flavor portfolio with Svedka Mango Pineapple, flaunting tropical island aromatics, as well as Svedka Strawberry Lemonade, infused with ripe berries and featuring notes of juicy lemon pulp.

Another brand successfully navigating the flavor wave is Beam’s made-in-France Pinnacle, flaunting over 40 whimsical innovations.

According to senior brand manager Mallika Monteiro, “there isn’t another vodka brand that has as much fun as we do.” Although Pinnacle’s Whipped flavor, combining vanilla and cream, put the brand on the map, Monteiro is quick to point out that was only the beginning. “It was certainly a strong boost,” she says, “but we haven’t rested on our laurels and continue to surprise our drinkers with flavors—our unflavored vodka has grown considerably as well—they haven’t seen before.”

Case in point: Pinnacle Cinnabon Vodka. Pinnacle partnered with cinnamon roll behemoth Cinnabon to bring to life this creation mingling the flavors of cinnamon, brown sugar, cream cheese frosting and caramel. “We are the first in the market to co-brand a flavor with another major category leader, and have the results to show for it. We challenge ourselves to make sure that our flavors are not only reflective of consumers’ appetites, but also that we lead the market in innovation,” says Monteiro. The popularity of Pinnacle’s retail national sampling program is another boon, “providing a great opportunity for off-premise engagement.” Up next: pushes for Pinnacle Tropical Punch this summer, and Pinnacle Pumpkin Pie and Pinnacle Pecan Pie this fall.

Amid the skyrocketing flavor boom, Skyy Vodka has seen its Infusions line post double-digit growth. Says Kathleen Schuart, senior director of the brand, “The unflavored vodka category is steadily growing and remains the lion share of vodka consumption, but flavors is where growth and innovation is centered. Millennials grew up with a global, more exotic and curious palate with access to premium and intriguing ingredients at Whole Foods, Trader Joe’s, farmers’ markets and other outlets. It is only natural they are exploring new taste options with vodka.”

To that end, off-premise tastings remain a priority for Skyy, especially with the arrival of the new cocktail-friendly Skyy Infusions Georgia Peach, tasting of the state’s signature juicy fruit, and Skyy Infusions Vanilla Bean, with slightly toasted caramel tasting notes reminiscent of rich vanilla bean ice cream. Beyond the array of Infusions flavors, consumers can look forward to a packaging upgrade of Skyy Vodka’s iconic cobalt bottle.

Another brand that clearly taps into what consumers want is Burnett’s. Senior brand manager for Burnett’s Vodkas, Reid Hafer, says that, “First and foremost, Burnett’s is in an incredible sweet spot with the product, price and package message. That is what we built our sales base on. It is an easy message and one that our customers understand. As a result, it has been easy to stay true to the brand and build tremendous consumer equity in it. The growth preceded the slowing economy several years ago and continued to build in spite of those tough times.”

To tap into its popular flavor lineup, Burnett’s is about to debut a new advertising campaign, ‘More fun with every flavor,’ that builds on the success of its portfolio. “It’s an exciting, lifestyle-focused message that highlights fun party occasions that the Burnett’s core consumers, social men and women, enjoy. The new advertising effectively places Burnett’s at occasions, which our consumers relate to. We tied the campaign to flavors as Burnett’s consumers have evolved. Now, consumers are demanding flavor variety, a trend we see across the entire industry,” Hafer says.

Burnett’s newest offerings, Ruby Red Grapefruit, Mango Pineapple and Red Berry, perfectly capture, Hafer points out, “fun flavors that make an occasion better. Traditional flavors, like Cherry, Citrus and Sour Apple began moving off the shelf. Then, more uncommon flavors, like Sweet Tea and Whipped Cream, began to emerge and prove some additional growth. We captured each of these trends with the right flavors at the right time. That, too, has been a major factor in our ten years of growth.”

UV is another high-volume, competitively-priced brand that features a wide lineup of varied flavors. The brand registered sales of 1.61 million 9-liter cases last year.

Obviously, flavored vodkas are also numbered among higher-end brands, such as the aforementioned Absolut, Grey Goose, Ketel One and many others. The handcrafted, superpremium Polish import Belvedere Vodka also includes several flavors in its portfolio, the newest of which is it Mango Passion. Another brand that boasts its Polish heritage is Sobieski Vodka. With its regular expression and a handful of flavors, the competitively-priced brand reached sales of just under 1 million 9-liter cases last year. One of the more unusual brands touting flavors is Ivanabitch Vodka. Imported from The Netherlands, the value-priced Ivanabitch features tobacco-flavored (and menthol tobacco-flavored) expressions. The brand hit sales of 192,000 9-liter cases last year.

 

Sense of Place

While it is true brand loyalty is especially important to longtime vodka drinkers, it cannot be overlooked that today’s customer is one who is drawn to a certain authenticity steeped in local and regional ingredients. Take Purity, the vodka made in a 13th-century still in a Swedish castle, or Hophead, Anchor Distilling Company’s vodka distilled from two types of hops from Washington’s Yakima Valley. Woody Creek Distillers, based in Basalt, CO, makes its own vodka from freshly picked potatoes grown on the owner’s farm, that are then batch-distilled without filter.

This predilection translates to good news for Suntory’s new Ao Vodka. “Yes, the vodka category is over-saturated, but there is no other vodka made in Japan, which has 500 years of distilling history, from 100% Japanese rice,” says Arnaud Brachet, Ao’s brand director. “Thanks to this ingredient and to unique small-batch pot still distillation and bamboo-based filtration processes on Kyushu Island that use pristine Japanese water, Ao Vodka has distinct characteristics. It’s a smooth vodka, with clean, crisp flavors and a subtle rice note. It is perfect for simple cocktails with fresh garnishes. We don’t know any similar vodka on the market today.” Because of this interesting background the key to Ao’s success, says Brachet, is to let people taste it as much as possible. “This is quite innovative in the world of vodka, since very few unflavored vodka brands would organize in-store tastings. Retail stores have been very excited about the opportunity to let their consumers taste Japanese vodka made from rice,” he points out.

Newfoundland-made, small-batch Iceberg Vodka, made with real iceberg water courtesy of an iceberg harvester, was already well known and appreciated because of its use of such pure water. In the last year, Iceberg grew 10% on a global basis. Yet recently, Iceberg’s CEO, David Meyers, unveiled a new look for the brand. “We’re coming up on our twentieth anniversary and had a bit of a dated feel on our label. We thought it was time to update our overall look. The bottle is iconic as it looks like a block of ice, or a chunk of an iceberg. It was meant to evoke a feeling of cold, pure ice,” he says.

In-store visibility is extremely important to Meyers, and one of the reasons he decided to take this new design initiative. “It’s obviously critical, and this is one of the main features we focused on in the redesign of the label,” says Meyers, who notes they have now incorporated a 3D holographic iceberg image on the first thermo-chromatic vodka label; when the bottle is chilled to 38 degrees Fahrenheit or cooler, part of the blue iceberg morphs into a red maple leaf.

“We also participate in a number of near-pack and other added value promotions. One of our innovative promotions for the retail environment includes a counter unit, which dispenses 60 miniature bottles in our three flavor offerings of Cucumber, Chocolate Mint and Crème Brûlée,” Meyer notes.

While Tito’s has successfully played off of its Texan origins, other lesser-known brands have likewise played up their American roots. American Harvest Organic Spirit identifies its origins as Snake River, USA. The small-batch, handcrafted brand gets its water from the aquifers beneath Idaho’s Snake River plain, and uses organic American winter wheat in its production. Prairie Vodka is another handcrafted, organic brand (original and cucumber-flavored versions) that features its American pedigree, particularly in its use of organic corn from Benson, MN, in its production.

 

Celeb-Backed Vodkas

Sometimes, a celebrity push gives a vodka brand a new direction. Just think of the sales magic Sean “Diddy” Combs performed for Ciroc. For its part, Smirnoff just launched its new positioning and marketing campaign, “Exclusively for Everybody,” wherein exclusivity is mocked in the short digital film “The Party,” with Adam Scott of Parks and Recreation and Alison Brie of Community. Additionally, Smirnoff joined forces with Spotify for the Ultimate House Party Program, wherein customers submit their favorite house party song via the website spotify.com/smirnoff, and then Smirnoff will select four winners to be treated to a blow-out summer party.

When Dan Aykroyd launched Newfoundland-made Crystal Head Vodka—joining the Infinium Spirits portfolio that also includes the familiar brand Seagram’s Vodka and its sweet tea-flavored spinoff—it caused quite a stir, not only for the man behind it, but its striking bottle designed as a skull. It was a keepsake and that got customers equally excited about the liquid inside, which upheld the dynamic story promised in the package because it was quadruple-distilled and filtered through Herkimer diamond crystals.

Or think of the rapper Pitbull, the international superstar who also happens to be Voli Vodka’s main shareholder. Not only has he been greatly involved in the development of the vodka, which is made in Cognac, France, from multi-distilled wheat, pure spring water and a natural infusion of flavors, he also came up with the Vojito, a spin on the Mojito using vodka that taps into home cocktailing trends. “Voli Vodka has an aggressive marketing plan, which includes various initiatives engaging the consumers via social media and traditional media. The plan provides for various creative programs that will help increase brand visibility and awareness in the off-trade,” says Jorge Guitierrez, CEO of Liquid Assets Group, which manages the sales and marketing functions for Voli. For 2014, the brand has a completely new creative campaign; be on the lookout for how we #TurnuptheVOLI.” This year, Voli will maintain its current lineup with Voli Original and five flavors, Lemon, Orange Vanilla, Mango Coconut, Raspberry Cocoa and Espresso Vanilla, with consideration of potential new flavors in 2015.

Going back in time, one of the greatest celebrities is now gracing the latest Three Olives Vodka expression, with its Three Olives Elvis Presley Coconut Water-flavored vodka. Long dead, the King still lives as a marketing machine. Three Olives also features a Marilyn Monroe Strawberry-flavored expression.

The newest flashy, celebrity-backed addition to the vodka scene is VDKA 6100, conceived of by Robert DeNiro and Artisan Spirit Merchants. Anna Battiloro, senior brand manager, knows the market is especially cutthroat, but still feels it is the right time for another vodka—one that is different from any other. “There’s no question that vodka is a highly competitive category, but we believe the unique raw ingredients we have used to create VDKA 6100 sets us apart,” she says. VDKA 6100 is distilled from seasonal whey sourced from grass-fed cow’s milk and natural spring water from New Zealand, distilled three times and filtered through a bed of carbon, “producing a silky, ultra-smooth liquid, a very different vodka experience than what people are used to,” Battiloro points out.

Although the ultimate goal is to roll out VDKA 6100 nationally, the primary emphasis is on building the presence in New York, New Jersey and Connecticut markets. “We believe our liquid stands up for itself, so the initial initiative is for people to taste VDKA 6100. We have a long list of tasting and sampling scheduled at various off-premise locations to introduce the brand,” she says. “VDKA 6100 is our contemporary take on vodka. Being that we are the only vodka distilled with whey, a non-traditional ingredient, we’re challenging the old guard.”

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