In a way, the vodka market is not as clear-cut as it used to be. With what one supplier termed “a barrage” of new products entering the market, vodka is evolving into a category that not only represents huge sales volume but also dynamic change.
For many years, the vodka category could be divided among the superpremiums, which were all imports, and the premium and price/value brands, which were all domestics. The arrival of some upscale U.S.-produced brands, beginning with Skyy in 1992, began to complicate that simple division.
The more recent introduction of several brands, all priced higher than vodkas have ever been before, have muddied the waters even further. Some suppliers refer to these brands — such as Belvedere and Chopin from Millennium Import Company, Grey Goose from Sidney Frank, Cristall, now imported by McCormick, and Stolichnaya Gold from Carillon — as ultrapremiums. Other suppliers have shifted the terms around. They call this newest segment superpremium, while referring to brands such as Absolut and Stolichnaya, the top two imported vodkas, as premium.
In a way, however, the terminology is moot; it’s the trend toward upscale imagery and higher price positioning that is having an effect on the category.
Meanwhile, although the category as a whole is essentially flat — Adams Handbook Advance 1998 projects a growth of 0.1% in vodka consumption for this year — vodka still stands as the largest-selling spirit in the U.S., by far, with a market share of 23.4%. Much of the positive movement has been among the imports, with high-flying Absolut gaining almost 2.4% in 1997 to an impressive 3.42 million 9-liter cases. Stolichnaya’s sales were up 7.1%, to 1.13 million cases. And Ketel One, one of the first so-called ultrapremiums, exploded to more than 300,000 cases. Overall, the imported vodka segment gained 7% in 1997, while the entire vodka category declined 0.9%. Among American-made vodkas, Skyy grew by almost 19%, while three price/value brands from Barton, Barton Vodka, Fleischmann’s Royal and Crystal Palace, were all up, by 7.8%, 4.6% and 1.2%, respectively.
|LEADING BRANDS OF DOMESTIC VODKA
(Thousands of 9-Liter Cases)
|Smirnoff||IDV North America||5,951||5,787||-2.8%|
|Popov||IDV North America||2,805||2,577||-8.1%|
|Gordon’s Vodka||UD USA||2,000||1,990||-0.5%|
|Barton Vodka||Barton Brands||1,187||1,279||7.8%|
|McCormick Vodka||McCormick Distilling||1,206||1,271||5.4%|
|Kamchatka||Jim Beam/IDV North America||1,150||1,080||-6.1%|
|Wolfschmidt||Jim Beam Brands||1,063||1,032||-2.9%|
|Skol Vodka||Barton Brands||928||924||-0.4%|
|Gilbey’s Vodka||Jim Beam Brands||858||777||-9.4%|
|Aristocrat Vodka||Heaven Hill Distilleries||600||605||0.8%|
|Fleischmann’s Royal Vodka||Barton Brands||569||595||4.6%|
|Total Domestic Vodka||27,586||26,913||-2.4%|
|(p) 1997 Preliminary.
Source: Adams Business Media Research Database.
Imports Lead The Way
It was the first imported vodka brands that originally opened the public’s eyes to higher-image, higher-priced vodkas. “It was Absolut, Stolichnaya, Finlandia and Tanqueray Sterling that were first able to create a new category [in vodka],” said Ronald Lewos, vice president of marketing for Nolet Spirits USA, the company behind Ketel One.
Indeed, many suppliers say that the interest in superpremium and ultrapremium vodkas is just one result of general trends. “It’s very reflective of all the other spirit categories — whiskies, tequilas, brandy, even gin,” said John Vidal, senior brand manager for Finlandia at Brown-Forman. “It also reflects the growing affluence of the American market and consumers’ growing taste appreciation, a trend that, in the mid-1980s, led to the growth of the fighting varietals in wine. We see the same trends now in the movement toward fine cigars, tasty dishes, gourmet coffees and microbrewed beer.”
Price & Quality Differentiation
Each boasts a point, or several points, of differentiation. Grey Goose, for instance, is made in the Cognac region of France, while Smirnoff Black, unlike the other Smirnoff products, is an import, made in Russia using copper-pot stills. Ketel One, which also uses copper-pot stills, is made by the Nolet family in Holland, who have been producing vodka since 1691. Cristall, which, when introduced as Stolichnaya Cristall by Pepsico in the late ’80s, was one of the first ultrapremium vodkas on the market, has a history of being one of the most well-regarded vodkas in Russia, according to its present marketer, McCormick Distilling. Millennium positions its two brands, Belvedere, a single-grain vodka (made of rye), and Chopin, a potato vodka made in small batches and bottled by hand, both imported from Poland, as “luxury vodkas.”
Some ultrapremium brands seek to point out their differences, especially in price, from the others. “There are a lot of new products out there that say they are better and are more expensive,” said Ketel One’s Lewos, who noted the smooth taste and authentic history of his brand. Meanwhile, Sazerac positions Rain as an ultrapremium but prices it at about $16 to $18, compared with the approximate $25 price tags of some of the others. “With these brands, the consumer is paying for the packages, which are very nice,” said product manager Rebecca Green. “We didn’t feel we needed to go out that far.” Launched in the fall of 1996, Rain is a “harvest-dated” vodka made from organic grain. And Canadian Iceberg Vodka, introduced at the end of 1997 by 21 Brands, a division of Remy Amerique, touts its distinctiveness partly based on the purity of its water, which is obtained from icebergs floating off the coast of Newfoundland. The brand retails for about $16.
It’s In The Bottle
Pointedly, Smirnoff — America’s best-selling vodka — has launched a new ad campaign, with the tagline, “All vodka, no pretense.”
“We feel that it very neatly captures what we are trying to say, which is that when choosing Smirnoff, consumers express confidence in their individuality,” said Nick Nocca, the marketing manager for Smirnoff at IDV North America. “Smirnoff isn’t necessarily caught up in the latest fashion trends; it transcends what’s fashionable at the moment. It’s a classic brand: we’ve heard that from consumers many times.”
Nocca, like many other suppliers, noted that as consumers grow more sophisticated not all are choosing the most fashionable or the most expensive vodka brand on the market. “There is a kind of dichotomy,” he said. “While there is some interest in designer packaging and fashionable claims, there is, on the other hand, growing interest in brands that reflect more enduring values.”
“Honestly, what I see is that [ultrapremium] is not being defined by the product in the bottle,” said Carolyn Ellison, senior brand manager of Tanqueray Sterling at Schieffelin & Somerset, “and Smirnoff is attacking that whole premise.”
Smirnoff is not the only one. According to Ellison, Tanqueray Sterling’s focus is on the quality of its product — and the recent awards it has received. Meanwhile, Melissa Lilly, director of marketing at Skyy Spirits, said, “We’ve seen the arrival of the $30 vodka and will use that interest in quality to highlight the great value Skyy represents.” And Rebecca Gordon, senior marketing manager for white spirits at UD USA, said of Gordon’s Vodka: “With so many brands on the market, with consumers being hit by a barrage [of brand names] all the time, Gordon’s is a known entity: a great value for the money.”
Barry Younkie, senior brand manager for Frïs at Hiram Walker, believes that distilled spirit consumers are, in general, becoming more sophisticated about what they consider to be super- and ultrapremium. “Against all the categories, the biggest trend is that people are looking in a more appreciative way at how things are produced,” he said. “In other words, they are looking for credible marketing claims in products such as single malts, bourbons and vodkas. “
The Flavor Wave
The success of the flavored vodkas is good news for the vodka market as a whole. Because these products, all extensions of existing vodka brands, are especially popular among younger consumers, they are bringing vodka in general to the attention of the newest generation of distilled spirit
For the most part, the orange or citrus vodkas are the largest and fastest-growing of all the flavors. “Absolut Citron is evolving into a flavor unto itself,” said Seagram’s Bob Bernstein, reporting that the brand, with annual sales of almost 400,000 cases, has been experiencing double-digit growth for the last several years. Absolut’s flavors, which also include Kurant and Peppar, account for about 15% of the brand’s overall sales.
Meanwhile, Stolichnaya’s Ohranj, introduced in 1994, continues to grow by about 23% per year, according to Carillon’s Ernie Capria. Stolichnaya’s 10 flavors make up approximately 10% to 15% of that brand’s sales, he said.
And Smirnoff’s one entry into the flavored market, Citrus Twist, also continues to do well, with IDV North America introducing a 750 ml version of its signature “twisted” bottle and supporting the brand with advertising that, while it echoes that of its mother brand, is “a little edgier in tone,” according to IDV’s Nick Nocca.
Gordon’s Citrus is the largest of its three flavors, having sold 69,000 cases in 1997, while the brand’s Orange followed with 24,000 and Wildberry sold 20,000. According to Rebecca Gordon of UD USA, the flavors as a group grew by more than 30% last year.
These suppliers continue to pay attention to all their flavors. Stolichnaya supports each of its 10 flavors with its own advertising and sponsors a cooking show, “Dessert Circus,” hosted by the pastry chef from Le Cirque 2000. Meanwhile, Absolut has been working on marketing projects designed to raise awareness of Kurant, including a series of performance art events.
What do the marketers of Absolut and Stolichnaya, arguably the two brands that started the image-based marketing of vodka brands, think of the latest developments in their category? For starters, they are not worried. Absolut, now the third-largest distilled spirit brand of any type in the American market, “obviously continues to grow and is still the brand that defines the category demographically and psychographically,” said Bob Bernstein, senior marketing director at Seagram Americas. “It continues to maintain its share and pull new consumers into the category with its huge share of voice.”
Meanwhile, Stolichnaya continues to grow its base brand as well as expand into the flavored-vodka market with its 10 flavored brands and into the ultrapremium market with Stolichnaya Gold, launched in May 1997.
And other suppliers see opportunity in the red-hot market. Brown-Forman entered the vodka category in the fall of 1996 when it became the U.S. marketer of Finlandia. It is backing the brand with a five-year, $60-million marketing campaign that has, so far, introduced a new ad campaign, launched this past November, and new packaging, launched in May. According to John Vidal, Finlandia’s senior brand manager at Brown-Forman, the brand’s sales increased by double-digit percentages this past year, as well as climbing 22% in sales just for the month of December 1997 versus the previous December. “Finlandia is on a tear,” he said.
Though the price/value end of the vodka market continues, as a whole, to decline, some suppliers see room for optimism. “Our vodka brands are all up and are extremely healthy,” reported Sharon Keld, marketing manager at Barton Brands, a company whose brands include the nationally distributed Barton Vodka, Fleischmann’s Royal Vodka and Crystal Palace as well as several regional brands. Jim Beam’s vice president of brand management, Alan Cohen, commented, “We have noticed that people are either trading up to premium and ultrapremium brands or [are] purchasing price brands that provide good quality for the money,” noting that three of his company’s brands rank in the top 10 domestic vodkas. All the developments — the new brands and the new marketing approaches — are keeping the vodka market hot. “Whenever someone comes up with something new, that is great for the category,” concluded Schieffelin & Somerset’s Ellison.
|LEADING BRANDS OF IMPORTED VODKA
(Thousands of 9-Liter Cases)
|Ketel One||Nolet Spirits USA||200||305||++|
|Tanqueray Sterling||Schieffelin & Somerset||165||175||6.1%|
|Frïs Skandia||Hiram Walker & Sons||80||85||6.3%|
|Total Imported Vodka||5,395||5,770||7.0%|
|(p) 1997 Preliminary. (++) Greater than +50%.
Source: Adams Business Media Research Database.