Versatile vodka: mixability, variations of the Martini and new flavored products make vodka a favorite for all types of consumers.
It's summertime, and the sipping is easy, at least when it's a drink made with some sort of vodka. Summer's the time to take advantage of vodka's growing popularity. Vodka sales continue to outpace industry growth, and now account for almost a quarter of total spirits volume. While the news last year wasn't good for all brands -- where there are winners, there must inevitably be some also-rans -- there's a tremendous amount of excitement in the category as consumers continue to experiment and distillers and importers continue to innovate.Last year's mixed bag was the result of factors as varied as they were numerous, ranging from recession and industry consolidation to the terrorist attacks in New York and Washington. D.C. But consumer trends and enthusiasm dampened much of the negative effect of outside forces, and category growth kicked back into high gear by the end of the year.
The surge in growth of vodka in recent years, especially above-premium and imported brands has been largely due to the economic boom times of the '90s.
"We enjoyed 10 years of the longest economic expansion in US history with a corresponding expansion of personal income," said Douglas McCreadie, vice president of marketing, Nolet Spirits USA. 'Consumers have discovered new ways to express themselves in the things and brands they buy."
For the past decade, consumers have been trading up, and even the recession didn't change their behavior. The Wall Street Journal recently noted that even middle income consumers are buying more luxury brands. Consumers consider high-priced goods such as ultrapremium spirits and even bigger ticket items like cars, to be affordable luxuries, even in a down economy. On the other hand, consumers who are pinching pennies are turning increasingly to value brands. The divergent trends are putting a squeeze on some middle- of-the-road brands.
Younger consumers, from legal drinking age to their 30s, are perhaps even more brand- and image-conscious than older generations. This new generation of consumers isn't afraid to spend money on brands perceived to offer something in the way of image and quality. The demographic growth of this age group also has helped fuel growth of higher end brands.
The biggest wrench in the works last year was the events of September 11. The terrorist attacks put an immediate damper on the travel and hospitality industries. People stopped going to restaurants and bars where so many spirits brands are discovered and consumed.
Surprisingly even that didn't slow spirits sales much. A side benefit of people's fear of going out has been an corresponding increase in the amount of time they spend socializing at home.
"One of the positive repercussions of September l1 was a pick-up in off-premise business because people started entertaining at home more," said Steve Meyers, senior brand manager at Schieffelin & Somerset.
The shift to more "cocooning" also fueled another trend that has been growing in recent years. Consumers exposed to the explosion of flavored cocktails appearing in restaurants and bars are now trying to recreate them at home.
"It's curious how people walk into someone's home and ask for their usual drink -- a glass of white wine or Scotch on the rocks -- but put it down when they see a Martini shaker come out and someone offering Cosmopolitans," McCreadie said. "People aren't willing to give up luxuries, but they may be willing to change where they consume them."
Also surprising is how quickly consumers have shown a willingness to return to "normal." According to the National Restaurant Association, restaurant sales started to rebound in December, and exceeded year-earlier figures in January and February, too. The strongest gains, however, have been in casual dining, presenting a challenge to ultra-premium brands.
"White tablecloth restaurants saw the biggest hit from September 11," said Dennis Greenwood, national brand manager for Finlandia Vodka Americas, Inc., "but family-style restaurants saw growth. Finlandia saw growth because it's not priced as high as the ultras."
VODKA VOLUME UP
Vodka category volume last year was up 4.0% nationally to more than 37 million 9-liter cases. Volume in control states grew at almost the same rate, up 3.9% to more than 9.1 million cases.
Much of the growth has been the result of consumer interest in high-end products and flavored vodkas. The resurgence of classic cocktails like the Martini, has spurred interest in high-end brands. Younger consumers, though, are taking those classics to new places by demanding different flavors and experiences.
Vodka is an ideal spirit to use in mixed cocktails because of its neutral taste. Distillers are responding to consumer interest in new taste experiences by promoting drink recipes and encouraging on- premise accounts to come up with new cocktails.
Top brand Smirnoff led the pack last year in growth with an astounding 42.7% volume increase nationally. Sales in control states were up 11.2%. The brand was helped by incremental sales of new flavors it introduced last year, as well as the buzz generated by its "malternative" brand, Smimoff Ice.
Number-two brand Absolut saw flat sales in control states last year. Nationally, sales dipped slightly last year, falling about 1.1%, as the brand adjusted to new ownership and a new sales force. It continues its award-winning ad campaign, however, with new executions that help keep the brand relevant with consumers.
A brand that fared well under new ownership last year was Stolichnaya. Overlooked in recent years, the brand is getting fresh attention from Allied Domecq, which took over the brand in January, 2001. Sales last year ended up 8.4% in control states. A new ad campaign tagged "See what unfolds" features the Stoli label folded into origami "animals" in natural settings. It's the first new campaign for the brand in five years, and initial print ads are being supplemented by radio and new point-of-sale material this spring.
A summer program focusing on Stoli's flavored vodkas features a patio umbrella display, drink cards and more to remind consumers that Stoli was the first vodka to introduce flavored varieties.
Another hot brand is Skyy. Up about 18.8% nationally last year, the brand continues on a roll with its "cinematic moments" campaign. Seven new executions are expected this year. Skyy Citrus also was a big factor in building both consumer calls and volume for the brand.
Like many brands, Skyy is focusing a lot of effort in on-premise accounts to build awareness. It's distributing a "great martini moments" kit to accounts this spring that contains disposable cameras so bar patrons can take pictures of their "martini moments." Off-premise sales will be supported with POS that ties into the ad campaign.
Finlandia is pushing its infusion program heavily in on-premise accounts in hopes of driving more consumers to off-premise. There, the brand is featuring lots of new p-o-s materials, including bins and racks, with a metal theme.
FLAVORS ARE FAVORED
Flavored vodkas have given consumers that much more to play with in terms of drink combinations. Because flavored vodkas are not as sweet as liqueurs, they create a "more sophisticated cocktail than a drink with a paper umbrella in it," according to Susan Overton, director of marketing for Heaven Hill Distilleries, Inc.
"Younger consumers have grown up on a lot of different flavors even in products like cereal and oatmeal," said Overton, "They want those choices."
Flavored vodkas also appear to be adding incremental volume to the segment rather than stealing volume from core brands. Smimoff was helped tremendously last year by the introduction of flavors like raspberry, but base business doesn't appear to have suffered. Stolichnaya, which was the first to sell a flavored vodka, also has seen its core brand grow.
Finlandia introduced both lime and cranberry flavors last year. This month, the brand is launching a new package and ad campaign for Finlandia Lime.
"It's a challenging time for vodka," said Dennis Greenwood, Finlandia national brand manager. "You always have to be on the cutting edge. The category is very different than it was five years ago with all the flavors and ultras and packaging."
Last year's introduction of Grey Goose L'Orange gave that brand expanded drink opportunities, and sales in control state have about tripled in the past two years.
More brands are getting into the act. Burnett's, from Heaven Hill, has added vanilla, sour apple and coconut to its line, which already included citrus, orange and raspberry Brand sales were up 11.9% in control states last year.
Burnett's is reprising its "Summer Sparklers" promotion, offering co-packs with Borden's ReaLime where legal. Lots of new recipe ideas will help consumers figure out what to do with the new flavors.
Whether the market can absorb and support all these new flavors remains to be seen. "At some point, there will be a shake-out," said Rebecca Green, brand manager for Rain Vodka at Sazerac. "There are lots of the same flavors out there and a bar or retailer can stock only so many."
LUXE IS IN
While flavored vodkas battle it out for shelf space, high-end brands quietly appeal to consumer interest in quality. The smaller ultra-premium brands are counting on continued word-of-mouth to help build sales. Using grassroots education programs like brand ambassadors and bartender and waitstaff training, they're trying to build a ripple effect with small budgets.
Ketel One is leveraging its heritage as a hand-crafted product that has been handed down from father to son. In time for Father's Day, the brand is creating a micro-CD featuring a video story of how the brand was created. The CD will be given away on a bottle-necker where legal.
Grey Goose, imported from France, continues to tout its taste in print ads, having won a blind taste test conducted by the Beverage Testing Institute in Chicago. The brand has grown dramatically in the last few years, jumping from sales of 100,000 9-liter cases nationally in 1999 to 600,000 last year, an increase that was "goosed" by the successful debut of the flavored Grey Goose L'Orange.
Rather than push flavors, brands like Belvedere, Chopin and Wyborowa leverage their heritage. All three are marketed as authentic Polish vodkas, with Belvedere and Chopin positioned as ultra-premiums and Wyborowa a little more attainable.
The former, marketed by Millennium, use event marketing at elegant functions like last year's wedding ceremony for actress Angie Harmon and New York Giants defensive back Jason Sehorn.
Wyborowa, recently purchased by Pernod-Ricard, is concentrating on getting word out to the trade this year, and has plans for a consumer ad campaign next year.
Vox, in just a short time, has grown to the numberthree ultra-premium nationally behind Belvedere and Grey Goose. It recently introduced two new sizes and will increase its sampling push this year. "Vox Martini Week" will celebrate the classic cocktail, not its flavored cousins, in top restaurants around the country. New p-o-s is designed to highlight the virtues of pure and clear martinis made with Vox.
Sazerac's Rain Vodka also is eschewing flavors in favor of people who appreciate the subtle nuances among really fine vodkas. The brand is concentrating on education programs, explaining the brand's point of difference to bartenders, waitstaff and retailers, and giving consumers the opportunity to sample the product where legal.
"You can't really tell the brand story in ads," said Green. "You have to have time to explain and give consumers the opportunity to taste. When you talk about volume, you have to have off-premise sales. We hope the ripple effect will drive those sales."
Another relatively new superpremium, Thor's Hammer, imported and marketed by Barton Brands, has taken a more ambitious tack. Last year, Barton supported the brand with a fairly heavy schedule in The Wall Street Journal. And it features a full line of offpremise merchandising materials as well as a line of quality on-premise materials. In addition, "in 28 markets we run Viking Night promotions, where we feature various giveaways (T-shirts, etc.) and make it fun for bartenders and consumers," said Ed Gualtieri, Barton's director of marketing. Searching for more brand awareness, Thor's Hammer debuted a national radio campaign on the Howard Stern show last month.
Gualtieri believes the brand, intropduced a year and a half ago and available nationally, has a distinctive story to tell. Made from 100% wheat, Thor's Hammer is produced with water from an underground lake that has a unique chemical composition, including a high ph. "The result is a vodka with a very smooth mouthfeel and lots of clarity," he said. "Depletion percentage gains have been in the solid duble-digits; however, the brand is still in its infancy." Because of its clarity and smoothness, Gualtieri said the brand is most popular in Martinis, "but it is also good in Cosmopolitans and Gimlets."
Malternatives have impact
One phenomenon that's likely to help create even more demand for vodka is the introduction of a spate of new flavored malt beverages.
Last year's successful launch of Smirnoff Ice has led to a half dozen new products in the past few months. Anheuser-Bush teamed with Bacardi to launch Bacardi Silver. Miller Brewing teamed with Allied-Domecq on Stoli Citrona and Sauza Diablo, with Skyy Spirits on Skyy Blue, and with Brown-Forman on a Jack Daniel's malternative.
Finlandia is testing a malt beverage in Australia and Puerto Rico this summer, and may roll it out here next year. More are likely coming. The benefits to the brands, judging from Smirnoff's experience, are enormous.
"I think the malternative [Stoli Cintrona] will help our base business," Kietecka said.
"Miller is spending $40 million on Skyy Blue compared to the $10 million we spend on Skyy Vodka," said Gerard Ruvo, senior vice president of sales for Skyy Spirits, "essentially quadrupling our ad budget."
With that kind of money being pumped into media, brand awareness will rise, and the whole segment likely will benefit as consumers are drawn by the imagery of these new products.
Whether sipped straight up in an elegant martini, mixed in a tall, cold vodka-tonic, or as an ingredient in a wild, flavored concoction like a "chocolatini" or "watermelon-tini," vodka is likely to be your hottest seller this summer.
LEADING BRANDS OF VODKA IN THE CONTROL STATES (9-LITER CASES) Brand Supplier 2000 2001 Smirnoff Guinness UDV 1,075,305 1,195,998 Absolut Absolut/Future Brands 961,007 958,471 Aristocrat Heaven Hill Distilleries 485,587 507,515 Popov Guinness UDV 493,950 459,566 Kamchatka Jim Beam Brands 382,310 383,201 Stolichnaya Allied Domecq Spirits USA 294,093 318,919 Nikolai Sazerac Co 282,648 287,973 Gordon's Guinness UDV 308,656 275,273 Burnett's Heaven Hill Distilleries 245,343 274,606 Five O'clock Laird & Co. 224,958 234,763 Total Leading Brands 4,753,857 4,896,285 in the Control States Others 4,008,850 4,205,314 Total Vodka in the 8,762,707 9,101,599 Control States Brand % Chg Smirnoff 11.2% Absolut -0.3% Aristocrat 4.5% Popov -7.0% Kamchatka 0.2% Stolichnaya 8.4% Nikolai 1.9% Gordon's -10.8% Burnett's 11.9% Five O'clock 4.4% Total Leading Brands 3.0% in the Control States Others 4.9% Total Vodka in the 3.9% Control States Source: Adams Business Research Database from NABCA data.
RELATED ARTICLE: TASTING "TASTELESS" VODKA
Vodkas, especially the ultra-premiums, are in a war of wards aver which is better. Finlandia, for example, is in the process of using independent labs to prove that it is the "purest" vodka available. Why all the fuss over a spirit that by definition is supposed to be odorless, colorless and have no taste at all?
Even though vodka is a neutral grain spirit, it does have a certain taste and mouthfeel. The objective of a good vodka is to be as smooth as possible on the palate. A number of factors will affect both smoothness and taste.
Primary ingredient, The ingredient used to make a particular vodka will influence its taste. Traditional Polish vodkas such as Belvedere and Wyborowa, for example, are made with rye. Absolut boasts about its Swedish wheat, Stoli is made with winter wheat. Finlandia uses six-row barley. Rain uses only organically grown grains, mostly corn. Some vodkas are made with potatoes. Each will impart its own subtle flavor.
Distillation. How vodka is distilled, as well as how many times, can have an effect on vodka's smoothness. Some claim continuous distillation is better than distillation in a pot or column still, and there's disagreement about which of those two types of stills is best, Some, like Vox, are distilled as many as five times, the idea being that each distillation removes more impurities from the alcohol, Several, such as Rain, discard the "heads" and "tails" of each distillation, again to remove impurities.
Filtration. Once vodka has been distilled, it's usually filtered to remove even more impurities, often through charcoal, Wyborowa is triple-filtered. Stolichnaya is filtered first through quartz sand, then through birch charcoal.
Water. The other main ingredient of any spirit is water. The mineral content certainly can have an effect on taste. Thor's Hammer, for instance, draws its water from an underground lake in Sweden, 200 feet beneath the surface, which provides a unique chemical composition. Glacial water is big with a number of brands. Limestone is another, Again, each brand will suggest its water results in a superior, distinctive taste.
Ultimately, taste is on the tongue of the beholder. When you sample vodka, however, look for flavor notes when it first touches your tongue such as sweetness, citrus or floral tones, or a hint of grain such as rye. Next, look for mouthfeel of the alcohol and smoothness as it hits the back of your mouth and throat. Is it soft or harsh? Finally, look for a minimum of aftertaste in the finish.
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