Vodka is not only the biggest spirits category, and one of the fastest-growing, it is by far the most exciting, churning with new brands, new products, and perhaps, most importantly, new innovations. Indeed, vodka’s vigor is the chief driver in the U.S. spirits market. Stats indicate the category is seeing a return to premiumization. In terms of innovation, vodka sets the bar high, not only with a palette of flavors encompassing whipped cream, peanut butter & jelly and wedding cake, but also in emerging subcategories such as organic, brightly colored, kosher and low calorie. There’s a vodka to appeal to every consumer ‘ and that’s the category’s biggest appeal.
Behemoth
‘Vodka is still the most exciting category in the world and specifically the U.S. market with growth in every part of the category, at the bottom, middle and the top,’ declared Charles Gibb, president of Belvedere Vodka.
Despite the lingering recession last year, the category grew a robust 6.0% in volume, to 65.85 million 9-liter cases, according to the Handbook Advance 2012, published by the Beverage Information Group. Vodka now accounts for nearly one-third of all spirits volume, and at least 25% of all spirits revenues.
‘Vodka continues to be the king; it’s a behemoth,’ said Jason Daniel, brand director for Skyy Vodka and Campari, for S.F.-based Campari America.
‘Vodka is the number-one liquor category at our store, it accounts for about 30% of our business,’ reported Bob Pearson, manager of the downtown store of Crown Liquors, a 20-store chain based in Indianapolis, IN. He added, ‘It seems like there’s a new vodka coming out every week.’ Naturally, his observations are echoed by retailers across the country.
Star Labels
Lighting up the vodka firmament are a number of rising stars as well as solid performances from established labels. Indeed, the top 10 brands outperformed the category; the group was up 6.3% in volume, to a projected 34.6 million 9-liter cases, according to the Handbook Advance 2012.
Among the stellar performers: Swedish import Svedka boosted sales in 2011 by nearly 400,000 cases to just under 3.7 million cases, an 11.8% increase. Value-priced Burnett’s sales jumped 10.2% to over 1.67 million cases in 2011, that growth fueled by 26 flavors, including a new Blue Raspberry, and two more just-released flavors: Burnett’s Pear Vodka and Burnett’s Sugar Cookie Vodka. Breaking the million-case mark for the first time (1.1 million cases) is French import Ciroc; the superpremium grape-based vodka increased sales by 38.4% last year, thanks in part to flavors Red Berry, Coconut and Peach.
Value-priced Sobieski sold 950,000 cases in 2011, up 24.2%. ‘The brand is doing extremely well, awareness is climbing and consumers seem to like our messaging,’ noted Timo Sutinen, vice president of marketing and business development for parent Imperial Brands. Actor Bruce Willis continues as spokesperson and new executions are slated for Sobieski’s Truth in Vodka campaign, including a return to outdoor billboards.
Other brands showing solid growth include Tito’s Handmade, which was up 59.9% to 582,000 cases last year. With a new look and strong retail merchandising support, Platinum 7X Vodka grew 16.1% in 2011, to 548,000 cases. E&J Gallo’s entry New Amsterdam Vodka garnered sales of 300,000 cases.
The most significant growth came from Pinnacle Vodka, which grew an impressive 92.9% to 2.7 million cases. Key to Pinnacle’s success is its inventive flavors; 34 at last count, including Cotton Candy, Atomic Hots, Gummy and Cookie Dough. Whipped Cream was a breakthrough flavor; Pinnacle sold 850,000 cases last year, and extended that sweet subcategory to Cherry, Orange, Chocolate and the new Key Lime Whipped.
‘Whipped Cream is not something consumers have to acquire a taste for. We create flavor profiles that are more palatable to the novice drinker,’ points out Pinnacle CEO Paul Coulombe. ‘And flavors are very mixable.’ The company’s website contains over 100 recipes just for the Whipped flavors alone. Pinnacle has moved from print to TV advertising on cable channels like Bravo and Oxygen, targeting women between ages of 21 to 35. ‘It seems like we are introducing new flavors every other month,’ quipped Coulombe. Peach and Blackberry were launched this spring; Atomic Hots is one of the newest flavors, a riff on the spicy cinnamon candy. Under consideration are limited-time seasonal flavors such as Pumpkin Pie in the fall. ‘There’s plenty of room for more flavors, as long as they appeal to the American palate,’ declared Pinnacle’s CEO.
Of course, category leader Smirnoff, at sales of almost 9.7 million cases, also boasts a successful lineup of flavors (though not quite as flamboyant), as does Absolut, the second best-selling vodka in the U.S. Indeed, Absolut has recently released several new flavors to its lineup, the latest being Absolut Cherrykran, which features rich cherry flavor followed by notes of white cranberry and sweet plum, the company says.
Flavor in the Driver’s Seat
The flurry of flavor introductions is a chief driver of category growth. Virtually all of the major brands introduced one or more new ones last year. Attendant marketing support for these launches along with hubbub in print and the blogosphere around some of the wilder concoctions have kept vodka firmly in consumer’s top-of-mind. Indeed, while sales of regular vodka grew by 1.0% last year, sales of flavored vodkas increased a whopping 18.0%.
And one of the latest examples is the fast-selling Svedka, which is adding another interesting, new flavor to its vodka portfolio, Svedka Colada. Available nationwide beginning in June, Svedka Colado is a coconut-flavored vodka with a mixture of pineapple and tropical fruit flavorings.
The many introductions are taxing retailers’ already burgeoning shelves.
‘We’ve been adding so many more skus that I don’t know where I’m going to put them all,’ commented Rick Ostrand, spirits buyer for Stateline Liquors in Elkton, MD.
‘The flavor segment continues to be a key growth driver,’ said Clare Kanter, Absolut brand director. ‘Consumer demand for new flavors remains strong.’ Absolut Peppar debuted back in 1986, spicing up Bloody Marys, and subsequently Absolut Citron became a main ingredient in the ultra-trendy Cosmopolitan. A few months ago the company introduced Absolut Grapevine, featuring white grape balanced with trendy dragon fruit and papaya. ‘We’ve also translated our flavor innovation into our limited-edition ‘City’ series,’ added Kanter. Following Los Angeles, Boston, Brooklyn, and SF is Absolut Miami, combining citrus flavors, passion fruit and orange blossom.
The Absolut Greyhound campaign was launched this spring; it’s a collaboration between the brand and innovative music artists featuring tracks, videos, a TV commercial, print ads and a Facebook application where consumers can create their own remixes. The first national ad featured the DJs/producers Swedish House Mafia, who created an exclusive song and music video inspired by the Absolut Greyhound cocktail; that will be followed by cocktail-inspired singles from Little Dragon and Dan Black.
Grey Goose introduced its first new expression in five years: Grey Goose Cherry Noir debuted in April, supported by an extensive multi-million dollar marketing campaign, with a new TV spot, large print campaign, an increased digital presence. ‘There’s been a lot of energy in flavors, lots of innovation and launches,’ noted Grey Goose vice president and managing director Shane Graber. ‘But a lot of flavors are here today, gone tomorrow. At Grey Goose, we are very particular about how we launch new products, and it’s taken us years to find something that meets our standards.’ Cherry Noir is made from 100% natural fruit, black cherries hand-picked in France, with no sugar, or artificial ingredients. The fourth best-selling vodka in the U.S., Grey Goose sold more than 3.4 million 9-liter cases last year.
Another popular imported vodka, Stolichnaya, also launched new flavors this spring: Stoli Hot and Stoli Sticki. Featuring the spicy, hot, peppery taste of jalapenos, Stoli Hot has a label illustrated with crimson and green jalapeño peppers. In keeping with its honeyed flavor, Stoli Sticki’s label depicts a dipper dripping with golden honey.
‘We’ve taken a different approach to flavors,’ says Gibb at Belvedere. The company takes its cues from popular drinks, like last year’s Bloody Mary Vodka and this year’s Belvedere Lemon Tea. ‘We designed the new flavor to be drunk as a long drink with lemonade or ice tea’or both,’ explained Gibb. To produce Lemon Tea, eight ingredients are macerated in vodka for four to six weeks, then redistilled and blended. ‘It’s a great at-home drink where people can mix a delicious cocktail simply with one or two ingredients.’
Revamped & Re-Energized
Skyy Vodka revamped its flavors business several years ago, replacing it with the more artisanal Skyy Infusions. The overall brand increased sales to 2.74 million 9-liter cases last year; however, Skyy Infusions and its natural flavors was up double-digit percentages, according to Campari America. ‘Skyy Infusions has helped the whole franchise’made us a bigger player in the real growth driver of the category right now,’ explained brand director Daniel. ‘Skyy Infusions are a bold sensory experience that makes cocktailing at home or in a bar much more exciting.’ The company introduced Dragon Fruit and Blood Orange Infusions in 2011; new this year is Coconut. This follows a lot of consumer interest in coconut water and coconut flavor in other spirits categories. The debut is fully supported with advertising and marketing support, including a print campaign, active digital advertising, PR support and launch parties.
As its name implies, Cupcake Vodka has a confectionary angle. The new brand from Underdog Wine & Spirits, a division of The Wine Group, offers Devil’s Food Cake, Chiffon and Cupcake flavors.
Another flavor innovator is Proximo Spirits’ Three Olives. The English import grew 8.5% in 2011, to about 1.48 million cases. Its 20 flavors include Bubble (gum flavor), which struck a resonant chord with consumers, as well as the playful Loopy (a take-off on a popular cereal) and Cake flavors. Last year’s flavor debut was the popular Dude, a riff on a lemon-lime soft drink.
Not to be outdone, Beam has just added to new flavors to its relatively new line of Pucker Vodkas. The new flavors in incredibly colorful packages (highlighted by puckered lips) include Pucker Lemonade Lust Vodka and Pucker Raspberry Rave Vodka. Both products are quadruple distilled and retail for about $15-$16 for a 750 ml.
For its part, Sobieski currently offers eight flavors; the latest are Espresso, Cynamon and Bizon Grass. ‘Professional mixologists are making all kinds of housemade infusions and bitters, but most consumers can’t do that, which is where Sobieksi helps with our innovative flavors,’ said VP Sutinen, explaining flavors’ continuing popularity. The company plans to add more flavors later this year.
Wedding Cake is the newest flavor extension for Pearl Vodka; a liquid expression of vanilla almond cake with hints of buttercream frosting. The premium-priced brand increased its sales in 2011 by 50.4% to 170,000 cases.
With over 20 flavors in its portfolio, this spring Van Gogh Vodka introduced its most unexpected flavor to date: PB&J. Master Distiller Tim Vos taste-tested plenty of peanut butter sandwiches matched with various jellies to create this unique combo.
Another unusual flavor comes from a fledgling Sazerac Co. brand, Naked Jay’s Big Dill Vodka. Inspiration came during a football tailgate when Jason Zimecki ran out of mixers and started combining vodka with leftover pickle juice. Also available in original and Whip Cream, the American-made product has a suggested retail price of $14.99 for 750 ml and is only available in Virginia, Illinois and Kansas, with expansion to more markets planned in the near future.
‘Our store is near a college campus, so if we add a crazy flavor it sells well, but then popularity dies off as a new flavor comes along,’ explained Pearson at Crown Liquors. This week, he reported, Three Olives’ Loopy, Pinnacle’s Gummy and Smirnoff Melon are selling well. But that changes from week to week, and juggling all the new vodkas and flavors is a difficult job, the retailer noted. ‘We have to continually reconsider whether to continue with a flavor or make space to add a new one; it’s not easy to balance and make everybody happy.’
Premiumization Is Back in the Black
‘We are seeing a classic pattern post-recession, a consumer return to premiumization,’ said David Ozgo, DISCUS senior vice president of economic and strategic analysis at the organization’s annual industry briefing in January.
DISCUS numbers back up that claim. Most of vodka’s growth in 2011 came from the superpremium subcategory: volume was up 12.7%, versus 3.3% for value brands; in terms of revenues, superpremium was up nearly 16%, boosted by high price points, while value revenues grew 4.4%.
‘The high end is doing well, and there are so many new entries,’ reports Ostrand at Stateline Liquors. He notes that the mid-tier price range has suffered attrition as customers traded down to less-expensive alternatives, and now again as they’ve traded up.
‘The superpremium category is driving overall category growth,’ says Kim Washington, senior director of Vodkas for Beam Inc. Washington adds that Beam’s vodka brand Effen grew faster than the superpremium category through the latest 13 weeks. ‘We are finding that consumers are trading up to vodkas that meet their interest in discovering unique brands and flavors,’ she said. Last year, the brand launched Effen Cucumber, which it continues to focus on in 2012. A new advertising campaign, ‘Inspired By Design,’ launched in April, featuring up-and-coming design talent in fashion, furniture and graphic design. Effen continues its second-consecutive year sponsoring Diffa’s Dining By Design Tour, and Art of Design events. Additionally, Effen is partnering with fashion designer Richard Chai, with several initiatives running throughout the year.
‘Superpremium vodka is on fire right now,’ echoed Graber at Grey Goose. He concedes that consumers may have been trading down during the depths of the recession, but that is changing. ‘We’re seeing a rebound in superpremium. Consumers are taking a step back and realizing that now they are looking for quality,’ he concludes. Supporting all that is continuing media activity: the ‘Grey Goose 19th Hole’ on the Golf Channel spotlights new spokesperson professional golfer Matt Kuchar. The Sundance Channel just green-lighted the sixth season of ‘Iconoclasts,’ a partnership with Grey Goose Entertainment.
‘Ultra premiums were really bouncing back in 2011, they exceeded growth trends of lower value brands,’ affirms Daniel at Skyy. ‘We see premiumization coming back and Skyy is well positioned.’ The company will focus on the Skyy core with some big investments for the near future. ‘As soon as the consumer starts to get a little more disposable income, they won’t want to sacrifice quality to save a few dollars,’ he pointed out. ‘Spirits are a reward; it’s an area that they want to splurge on. The movement in ultra premium signals a pent-up desire.’
Indeed, one of the higher-end vodkas on the market, Karlsson’s Gold, has just released a line extension: Karlsson’s Batch 2008, a limited-edition vodka made solely from the 2008 harvest of the Gammel Svensk Röd (‘Old Swedish Red’) potato from the Cape Bjäre region of southern Sweden. The Gammel Svensk Röd is one of the seven distinctive potato varieties used in producing Karlsson’s Gold. Suggested retail is about $80 (750 ml bottle) for the limited distribution vodka.
Emerging Niches
The vodka category is so vast and open to experimentation that it contains some interesting niches, reflecting current and emerging trends. Notably, that includes organic vodkas, local micro-distilled products, brightly colored spirits and one-offs such as low-calorie and kosher concepts.
‘We are seeing strong consumer interest in new and exciting products,’ commented Ozgo at the DISCUS industry briefing.
Organic vodka is a small but growing niche. There is carryover from consumer interest in organic fruits and vegetables, both at home and when dining out.
‘There is a certainly interest for organic spirits, as well as for handcrafted options that were not mass-produced,’ said Washington at Beam.
Among the fledging subcategory offerings are Prairie Organic Vodka, from Phillips Distilling, and American Harvest Organic Spirit, from Sidney Frank Importing. Indeed, a spokesperson for Sidney Frank explained the American Harvest is already finding real traction in the markets it’s in. Diageo’s Moon Mountain Vodka is made from organic grain in small batches using copper pot stills; the brand recently hit sales of 14,000 cases.
‘There is definitely viability in the organic spirits category for expansion and more players,’ proffers H. Joseph Ehrmann, brand ambassador for Square One Spirits, a pioneer in the organic arena. The Square One brand continues to grow year over year due to the quality of the product rather than its provenance. ‘We are not out there screaming that we are organic, we’re screaming that we make great spirits first and foremost,’ Ehrmann contends. Made with 100% organic American rye and pristine water from the Teton Mountains, Square One’s portfolio consists of the original, Cucumber, Eden (a botanical infusion) and Basil. ‘The ultimate message is that by starting with organic ingredients, and an organic-certified process, you are inherently in a better space to produce a quality spirit.’
The only EU and U.S. certified-organic distillery in Sweden, Kanon Organic Vodka is being distributed in key U.S. markets. At the 16th-century Gripsholm Distillery, Kanon is made from 100% organic wheat sourced directly from local farmers and fermented with naturally occurring yeast. The distillery is powered solely by wind and water-generated energy. The Kanon bottle is made from recycled glass.
In a similar vein, is Fair Quinoa Vodka, the world’s first Fair Trade Certified vodka, according to the Paris-based company. The vodka is made from organically farmed quinoa grain from a co-operative of 1,200 independent farmers in the Andean Altiplano of Bolivia, which is shipped to the Cognac region of France, where it is fermented and distilled. The brand’s tagline is ‘Think Human, Drink Fair.’
Following in footsteps of the restaurant industry’s farm to table movement, micro-distilleries have been springing up across the country like mushrooms after rain. Call it the ‘ground to glass’ trend, these locavore spirits have an appeal for consumers.
‘Anything local tends to sell well,’ concurs Pearson at Crown Liquors. The store stocks Indiana Vodka made right in Indianapolis, 18 Vodka distilled in Indiana, as well as Death’s Door from nearby Wisconsin. ‘Quite a few of our customers are getting into craft spirits,’ says the retailer.
‘People love to support local producers, that’s what’s driving the micro-distillers,’ says Gibb at Belvedere. ‘A few of them are doing very well, gaining traction.’
‘We stock a lot of the micro-distilleries,’ says Ostrand at Stateline liquors, ‘and they sell well.’
In what seems inevitable in this era of skinny cocktails, the world’s first low-calorie version debuted recently. Voli light vodkas average 25%-40% fewer calories than leading brands, according to the company; each serving is no more than 81 calories. Made from French wheat and spring water in Cognac, France, Voli is distilled five times and filtered four times, and enhanced with electrolytes. Besides Voli Lyte, the line includes Lemon, Espresso Vanilla, Raspberry Cocoa and Orange Vanilla. It has a suggested retail price of $19.99.
Boasting that it is the world’s only vodka certified Kosher for Passover, No. 209 Vodka is produced at Pier 50 in San Francisco at the only distillery in the world built over water. To get around the prohibition against leavened (i.e. fermented) grains, No. 209 Vodka is made from sugarcane, and inspected by Rabbis from the Orthodox Union.
Italy is better known for grappa than vodka, but that might be changing with the introduction to the U.S. market of I Spirit. Created in partnership between restaurateur Arrigo Cipriani (proprietor of Harry’s Bar), Lapo Elkann of the Fiat family, Friulian distiller Marco Fantinel and Venetian entrepreneur Francesco Cosulich, I Spirit Vodka is created by distilling the high quality grains and white grapes from the Fruili DOC region. It has an SRP of price of $34.99 for 750 ml.
Finding the Spotlight
One downside to the thriving and exuberant vodka category is standing out among the crowded retail shelves.
‘Standing out in the marketplace is the big headache that everybody has,’ concedes Sutinen at Sobieski. ‘Even though vodka is one third of spirits, very seldom do retail stores give it one third of the sales space.’
There are a host of brands that use their packages to great advantage, from Skyy’s distinctive blue bottle to the increasingly popular peekaboo-style bottles. And, when a brand can place a large group of its flavors on the shelf, it can project a striking billboard effect.
‘As the category gets more crowded, it’s becoming more difficult for brands to stand out,’ believes Gibb at Belvedere. ‘It’s important first and foremost that you have a fantastic-tasting liquid inside the bottle.’ After that, marketing and social media, he thinks, are more important than merely standing out on retail shelves. ‘It’s not just the retail space, but the consumer mindspace that you have to be occupying.’
Still, given vodka’s excellent track record and the gradually brightening economic picture, most of the category’s players were bullish about the future.
‘Regardless of the competition, the fact remains that vodka still dominates the marketplace and continues to grow,’ remarks Absolut’s Kanter.
‘I remain very optimistic for 2012 and beyond. The vodka category remains vibrant, interesting and we’re taking full advantage of that,’ adds Gibb at Belvedere.
‘I don’t see anything taking the place of vodka in the near future,’ posits Pinnacle’s Coulombe. ‘The future is extremely bright.’
