It all started with just a couple of shelves of vodka. Then like something out of the musical Little Shop of Horrors the vodka selection in mid-town Manhattan’s Park Avenue Liquor Shop began to grow rapidly. As the category exploded, with ever more exotic and pricy brands launching seemingly weekly, more and more shelves were gobbled up by the spirit. Soon a legion of vodkas had taken over a section of prominent real estate in the already overcrowded store. Not to mention the overflow stored in the basement and discreetly hidden in the store’s nooks and crannies. Park Avenue now stocks almost 200 different vodkas from around the world, which is about half the size of the store’s legendary single malt selection. ‘We could double it easily if we wanted to,’ said Jonathan Goldstein, the store’s vice president. He stocks so many vodkas, Goldstein added, ‘We’re literally bursting at the gills.’
Vodka’s demand for shelf space is only rivaled by Americans’ unquenchable thirst for the spirit itself. It is no secret that for the last several years sales of vodka have been driving the overall spirits business. In 2008, according to the 2009 Handbook Advance, published by The Beverage Information Group, vodka comprised just under 30% of overall industry spirits sales, which is far more than gin, rum and tequila sales combined. And from 2007 to 2008, while industry volume growth was about 2.1%, the vodka category grew by 4.9%, somewhat slower than in recent years, but a significant jump nonetheless.
What’s helping to keep sales of the spirit healthy is that there’s a vodka for every budget. While most of the new vodkas to launch over the last few years have gone after the super- and ultra-premium market, a number of brands have successfully targeted premium and value drinkers, such as the new Sobieski and even newer Ruskova vodkas, to name just two. ‘Right now, sales of high-end vodkas are lagging,’ said Jim Shpall, president of the 50,000-square-foot Applejack Wine & Spirits in Wheat Ridge, CO. ‘People are looking for good value.’ Through the early part of 2009, in fact, anecdotal evidence from retailers across the country suggest that value brands of vodka priced $10 and below are indeed selling well, as are large-size packages. At the same time, several vodkas priced $10-$14 also appear to be in a sweet spot, with solid sales throughout 2008. For example, category leader Smirnoff posted a 4.0% gain in 2008, according to the 2009 Handbook Advance, to sales of 9.375 million 9-liter cases, making it the top-selling spirit in the U.S., leveraging its rainbow of flavors as well as its inviting price. Also seeing notable success in that price range is Seagram’s Vodka, with its nine different offerings, which gained more than 10% in 2008 to sales of just under 1 million 9-liter cases. Even more compelling is the performance of moderately priced Svedka Vodka, which gained an astounding 37.6% in 2008 to 2.1 million 9-liter cases. Meanwhile, the Swedish Svedka also recently changed its look. The bottle design, which had been in development for over a year, remains relatively simple, with a new, slightly tapered shape and the brand’s name printed in white on a blue band. The company hopes that the new bottle will be easier for customers to spot on store shelves and behind bars. This should help the Svedka to continue its amazing growth.
Meanwhile, last year was the first time in recent memory, according to the Distilled Spirits Council of the United States (DISCUS), that sales of ultra- and superpremium vodkas actually declined. Still, though higher-priced brands are seeing slower growth, consumers are still spending big bucks to purchase these prestigious brands. For example, while it’s still too early to know what 2009 results will bring, Grey Goose saw a 4.0% rise in 2008 to 3.46 million 9-liter cases, and Ketel One gained 7.7% to just shy of 2 million 9-liter cases. Granted, the sizzling double-digit growth rate of many of these high-end brands has definitely moderated; however, many are still growing their franchise.
Vodka isn’t just a favorite of consumers but also of large drinks companies. Last year, some of the biggest vodka brands changed hands. The most significant news was that after intense negotiations and bidding, the French spirits conglomerate Pernod Ricard purchased the Scandinavian stalwart Vin & Sprit (V&S), makers of Absolut, for $8.3 billion. (It had previously been owned by the Kingdom of Sweden.) Absolut and its global sales of 11 million cases helped Pernod Ricard go from the fourth largest spirits company in the U.S. to the second largest. ‘The acquisition of V&S by Pernod Ricard is a fantastic opportunity and represents our third transformational acquisition since the Seagram and Allied Domecq transactions,’ said Patrick Ricard, chairman and CEO of Pernod Ricard, at the time of the purchase.
Not to be outdone, the largest spirits company in the world, Diageo, paid $900 million for a 50% stake in the Dutch superpremium brand Ketel One Vodka. (The deal also included 50% of the brand’s flavored Ketel One Citroen.) While the Nolet family, who owned the vodka, is known in Europe and has been making spirits for over 300 years, most of the brand’s almost 2 million cases are sold in the U.S.
The rights to sell and market Stolichnaya in America also recently changed. For the last several years, Pernod Ricard had imported the brand. But after the purchase of Absolut was completed, Pernod Ricard ended its agreement with Stoli. The Russian vodka, which was actually the first imported vodka to be sold in America, made a deal with the Scottish company William Grant & Sons, owners of a number of popular spirits including Glenfiddich, The Balvenie single malts, Grant’s blended Scotch and Hendrick’s Gin. ‘William Grant & Sons is incredibly excited for Stoli to join our portfolio,’ said Lisa Pfemming, group brand director. In addition to investing in Stoli, according to Pfemming, the company also plans to ‘reclaim our status as the pioneer of the vodka category.’ One of William Grant’s first moves was to consolidate the number of companies distributing the vodka brand. Charmer Sunbelt Group, Republic National Distributing Company, Wirtz Beverage Group and Young’s Market Company will now replace the 16 companies that had previously handled Stoli’s distribution across the country. At the same time, the company launched a new ad campaign to reflect ‘the adventure and intrigue of modern-day Russia,’ the company said.
But these trophy vodkas aren’t just sitting on their laurels. Their new owners expect them to not only make back their purchase price but, of course, also generate new profits. Pernod Ricard is already reporting an increase in Absolut sales outside the U.S. ‘The brand’s growth has been healthy,’ said Ian Crystal, brand director of Absolut Vodka. It also ‘adds a lot of size and scale to [Pernod Ricard’s] portfolio.’
And to grow sales even further the brand recently expanded its line to include a new flavor: mango. It is the tenth flavor that Absolut has introduced. The vodka has already been available in South America and at duty free and, according to the company, has been selling extremely well. Absolut has also taken to the airwaves. It is the first sprits company in years to advertise on a regular television network. (Ads for a number of spirits already appear frequently on cable channels.) The brand debuted its new 30-second ‘Hugs’ advertisement on CBS during the Grammy Awards show in early February. The ad, which was the first spirits spot ever to run during the Grammies, aired after 10 p.m. in 15 major markets across the country, including, Los Angeles, Boston, New York and Chicago. The commercial, part of the ‘In An Absolut World’ campaign, also ran a number of times the week after the award show. ‘We always look to be on the cutting edge,’ said Crystal. ‘We have pioneered categories and influenced the industry.’
The Flavor Imperative
There remains plenty of stiff competition in the vodka category. Store shelves are now packed with new flavors and brand extensions from numerous well-established brands. While it might seem odd that spirit companies keep introducing more varieties for customers to choose from, this strategy has proven to be quite successful. In fact, according to Jason Daniel, senior brand manager for Skyy, sales of flavored vodkas are growing twice as fast as the sales of unflavored vodka. Indeed, the U.S. is the world’s biggest market for flavored vodka and a new flavor can really drive sales. For example, in the summer of 2007, Finlandia introduced a grapefruit flavored vodka, which won top honors at the San Francisco Wine and Spirits Competition and is a favorite of many bartenders. ‘It tastes like freshly squeezed grapefruit juice,’ says Ryan Magarian, president of cocktail consultancy Liquid Relations and co-founder of Aviation Gin. The vodka’s popularity has been so great that it has increased the brand’s overall sales of flavored vodkas by almost 10%. And now Finlandia has just debuted another impressive flavor, Tangerine Fusion.
Arguably, no vodka brand has succeeded as much with new flavor launches as Three Olives, imported from England by Proximo Spirits. The brand, which retails for about $20 and below, saw a dramatic sales increase to 1.1 million 9-liter cases in 2008, a 29.4% gain from the previous year. Three Olives now boasts 15 flavors, with its latest two introductions of Three Olives Tomato and Three Olives Triple Shot Espresso. Tomato is meant to reflect the taste of the Bloody Mary, with infusions of fresh tomato, horseradish, pepper and spices. For its part, the caffeinated vodka, Triple Shot Espresso, is infused with imported roasted coffee beans and has hints of chocolate and caramel flavors, the company said. Another caffeinated vodka, p.i.n.k., has made a mark since its introduction a little over two years ago. Super-premium priced, p.i.n.k. is infused with guarana and caffeine and recorded sales of 20,000 9-liter cases in 2008.
Equally impressive is the performance of Pinnacle Vodka, from White Rock Distilleries, with its unmatchable range of 19 flavors. The French vodka, which retails for more than $20, is made from wheat and distilled with spring water from the Champagne region. Its sales have been phenomenal, more than doubling last year to 600,000 9-liter cases.
For its part, Dutch Van Gogh Vodka now offers a selection of 18 different flavors. The company added an acai-blueberry vodka in 2007 and introduced a grape flavored vodka last year. ‘We are constantly looking into creating new and exciting flavors to add to our portfolio,’ said Jonathan Bleiberg, president and C.O.O. of Van Gogh Imports. ‘We consider ourselves innovators in the flavored vodka category, so we keep a vigilant eye on trends and exciting ingredients.’ They must be doing something right: the brand finished 2008 with sales of 153,000 9-liter cases, a 25.4% increase.
The San Francisco-based Skyy Vodka has taken a very different approach to flavoring. Last year, the company announced that it was discontinuing its line of flavored vodkas and replacing them with a new line of vodka infusions, including a citrus, a cherry, a passion fruit, a raspberry and a grape. ‘The reaction has all been great,’ said Jason Daniel, Skyy’s senior brand manager. ‘The sales have exceeded our expectation.’ The past winter the brand added a new pineapple flavor to its infusion portfolio. It was a ‘completely natural fit,’ said Daniel. The company ‘looks for flavors that are really unique.’ The infused vodkas, especially the tropical flavors, have proven to be quite popular with bartenders, who like to use them in tiki drinks. According to the brand, the vodkas work so well in these cocktails because the drinks are lighter than if they had been made with the traditional rum. While the tiki trend has been building for a couple of years, according to Daniel, it will become even bigger in these economically troubled times. ‘People are looking for escapism and excitement,’ he said.
The Polish vodka Belvedere has also introduced an untraditional style of flavored vodka. The new 100-proof Belvedere IX (pronounced One-X) is flavored with nine ingredients, including ginseng, guarana, acai, ginger and black cherry. While it technically can be called a vodka, it is in fact more like a gin or an aquavit, except it is not flavored with juniper or caraway. ‘With the introduction of Belvedere IX, we have created a new style of vodka,’ said Charles Gibb, president of Millennium – The Vodka and Rum Division of Moet Hennessy, when the product was introduced in January. The vodka comes in a sleek black bottle designed by graffiti artist Andre Saraiva. While it is now only available in night clubs, it will be available in liquor stores this coming fall and retail for between $39.99 and $45.99 for 750ml bottle.
But some stores are dubious of the appeal of these exotically flavored vodkas. Many customers at Happy Harry’s Bottle Shops in North Dakota still stick to the ‘known quantities,’ said the chain’s general manager Dustin Mitzel. His customers look at the vodka selection and wonder ‘What am I going to mix that with?’ They usually prefer the more traditional flavors. As a result, the citrus and vanilla vodkas remain very popular, since they work so well with common mixers.
Ciroc hasn’t introduced any new flavors or brand extensions, but the brand does have a new face. Diageo, which owns the French vodka made from grapes, partnered with Sean ‘Diddy’ Combs, CEO of Bad Boy Worldwide Entertainment Group and a well known entrepreneur. Diageo splits the brand’s profits with Diddy and he in turn promotes and manages the brand. While unusual, this plan seems to be working, with sales of Ciroc more than doubling to about 245,000 9-liter cases in 2008. ‘Mr. Combs has had a big effect on the brand,’ said Tammy Thompson, manager of special projects for Ciroc. ‘His presence has helped to get the word out.’ While the slightly sweet vodka can be drunk on the rocks with club soda, it actually tastes great mixed with lemonade, which is supposedly Diddy’s preferred way to imbibe the spirit.
At the opposite end of the celebrity endorsement continuum is Tito’s Handmade Vodka, probably the most successful micro-distiller in the U.S. Begun a little over a decade ago in Austin, TX, Tito’s has grown to more than 250,000 9-liter cases through nothing more than word-of-mouth and newspaper advertising. The handcrafted vodka is made from 100% corn and distilled six times in pot stills.
While larger vodka brands have become bar staples, there is a new generation of up-and-coming vodkas that have launched over the last few years and are gaining increasingly more of the market. One of the most successful new companies is Russian Standard. The brand, founded by entrepreneur Roustam Tariko, was first imported to the U.S. four years ago. (It didn’t hurt that Russian Standard was already a hit back in St. Petersburg where it is made. The brand claims to be the number one premium vodka in Russia.) In addition to Imperia ($35), the company introduced Russian Standard Original ($21) in 2007 and this spring is rolling out Russian Standard Platinum ($28). The new vodka, like the Original, will be distilled four times and then filtered four times through charcoal. The Platinum is then silver-filtered another two times to make sure it’s completely pure. The brand notched sales of 85,000 9-liter cases in 2008, an 88.9% increase.
Sobieksi Vodka, from Imperial Brands, launched in the U.S. in August 2007 and by the end of 2008 the Polish import had garnered sales of 255,000 9-liter cases after less than two years on the market. The brand is the top-selling vodka in Poland and traces its heritage back to its distillery founded in 1846 (though the brand was introduced in Poland in 1996). Its rapid success, according to Timo Sutinen, Sobieski’s vice president of marketing and business development, is in part a result of ‘its positioning as a superpremium-quality vodka at a value price.’ The brand’s suggested retail is $10.99 for a 750 ml. The brand has been successful with its ‘Truth in Vodka’ marketing campaign, Sutinen said. ‘We are well-positioned for a tough economy,’ he added, and noted that the brand may be debuting new flavors in the coming months.
Another polish import, Ultimat, from the Patron Spirits Company, is fairly new to the U.S. Made from a blend of Polish potato, wheat and rye, the luxury vodka comes in a striking cobalt blue, hand-blown, decanter-style bottle. It retails for about $40 per 750 ml bottle and almost doubled its sales last year to 9,000 cases. Also from Poland is Bison Grass Vodka, from Adamba Imports, on the market since 2006. Bison grass is a grass herb found in the fields of eastern Poland, and its essence is used to flavor the triple-distilled potato vodka. At 82 proof, the brand has a suggested retail price of $28.99 for a 1 liter bottle.
Over the last three years, Square One has attracted a lot of attention for introducing the first American certified organic rye-based vodka. The truly green spirit has a developed a loyal following across the country. (California and its hordes of green customers are, of course, the brand’s largest market and account for about 30% of total sales.) In addition to the original unflavored vodka, last spring Square One introduced a cucumber flavored vodka. The company recently announced a new spirit called Square One Botanical. The neutral rye based spirit, which has been in development for the last three years, is flavored with eight organic botanicals, including pear, rose, lavender and chamomile. Square One Botanical, like Belvedere IX, is an untraditional vodka and belongs in a new category of spirits.
There are also a number of new brands from around the world fighting for store shelf space. Superpremium Double Cross, which is from Slovakia and launched last September, is distilled seven times before being filtered seven times through, of all things, diamond dust. In addition to the high number of distillations the expensive filter supposedly removes any of the spirit’s impurities. The brand claims that this process gives the vodka ‘the ultimate in purity and clarity.’ Right now Double Cross is only available on the East Coast, but at the end of the year it will be introduced across the country.
Joining Absolut and Finlandia is a new Nordic spirit: Karlsson’s Gold. While other vodkas may tout their number of distillations or their type of still, the Swedish spirit proudly brags about the quality of its potatoes. The base for Karlsson’s Gold is made from seven different varieties of artisanal potatoes. Even more unique than the company’s original Gold is a new low- alcohol spirit, which has an alcohol level of just 25%. It is one of the lowest proof vodkas on the market and is designed to be more drinkable.
While Karlsson’s is trying to differentiate itself from the regions other vodkas, its master blender and namesake BÃ¶rje Karlsson was one of the creators of Absolut. ‘I have always wanted to honor Sweden’s vodka heritage by creating a classic potato vodka,’ he said when the brand launched. ‘Using the finest potatoes from Cape BjÃ¤re, I have been able honor both my homeland’s vodka heritage and that of its superb potato farmers.’
And speaking of potatoes, Zodiac bills itself as a luxury potato vodka ($25 suggested retail for a 750 ml bottle). Just hitting the radar screen with 18,000 9-liter cases in 2008, Zodiac is made with Idaho potatoes and handcrafted in small batches using birch filtration. It features 12 different bottle designs, one for each sign of the zodiac and each one with its own horoscope.
Ruskova may not be made with artisanal potatoes, but it does have something else going for it – a very reasonable price tag. The brand’s 750 milliliter bottle usually sells for about $10 and its 1.75 liter bottle sells for under $20. The company’s slogan highlights its affordability: ‘pay for the vodka not the glass.’ Ruskova, which is distilled six times, has seen sales steadily grow from its initial launch in 2006. Last year, the Russian vodka shipped 65,000 9-liter cases, and in 2009, the company’s goal is 86,000 cases.
But vodka no longer just comes from Eastern Europe or Scandinavia. From the other side of the world come two new spirits, Pau Maui, which is the only vodka distilled and bottled in Hawaii, and the Vietnamese Kai, which like sake, is made from rice. Pau Maui was introduced last fall and is a very small-batch, ultra-premium vodka made from local Maui gold pineapples and has suggested retail price of about $100. One reason the spirit is expensive is that the gold pineapples take over a year to fully mature. It’s the only vodka in the world to use the sweet juice as a base and it is distilled in an unusual glass still.
Kai is also another small brand using an untraditional base. The spirit is made from yellow-blossom rice that is grown in the Red River Delta of northern Vietnam. The brand claims that unique ingredient gives the spirit a much smoother and sweeter flavor than vodka made from potatoes or grains. In addition to the unflavored Kai, the brand also has a sweet, lychee-flavored vodka.
Now, the only issue is trying to find room for all these vodkas on your store shelves.