A Vodka Category Overview - Presents 3rd Quarter 2008 - Beverage Information Group
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Presents
A Vodka Category Overview
3rd Quarter 2008
© Beverage Information Group
All rights reserved
17 High Street
Norwalk, CTIntroduction
This Category Overview is presented by the Beverage Information Group – the leading
provider of information for the Beverage-Alcohol industry. It is a comprehensive,
category-specific analysis that provides a rich source of category and brand information,
consumption data, category trends and marketplace insights.
Each category report synthesizes information found in our Beverage Handbooks,
magazine editorial, and our syndicated in-store audit services along with other industry
sources.
These summary reports provide a compelling category assessment drawing on the latest
industry news, consumption and marketplace trends and up to the quarter data from our
vast data warehouses. The data tables provide a detailed picture of competitive display
and merchandising activity, shelf placement and share, and retailer feature activity. The
data tables are updated quarterly and sent to you as part of your Category Overview
purchase.
The Category Overviews are researched and written by industry analyst Tiziana
Mohorovic1 in conjunction with Beverage Information Group staff. Tiziana brings 20
years of qualitative and quantitative analysis experience to the reports and concisely
presents the stories behind the numbers.
Reports are available in the following categories: Cordials, Gin, Irish Whiskey, North
American Whisky, RTDs/Mixers, Rum, Scotch, Tequila and Vodka.
1
See Appendix for Ms. Mohorovic’s bio.Vodka Category Review—Third Quarter 2008
The evolution of vodka from a colorless odorless relatively low-priced spirit mixer to
high-end affordable luxury that comes in a variety of flavors meant to be consumed in
attractive stemware has been a boon to the category. Add upscale packaging, multi-
million dollar—somewhat evocative—advertising campaigns and bartenders concocting
enticing libations to the mix and you have a product that crosses gender lines and adult
age groups.
The versatility of vodka continues to fuel growth for the category, but rumblings are
starting to appear. The mother of all spirit categories is showing signs of over
expansion—too many brands and little differentiation among them.2 Retailers are
balking at the number of SKUs—particularly among flavored offerings. Bartenders are
abandoning vodka for spirits with more remarkable taste—namely gin—and consumers
too are on the lookout for something new and different.3
Consumption Overview
o Vodka’s dominance of the spirit category has not abated in the past few years—as
many predicted.
o In contrast, the vodka tsunami has surged. The vodka category has grown at twice
the rate of total distilled spirits over the past two years.
o Nearing 30% of total spirit case sales, the vodka category is the engine behind the
country’s distilled spirit growth. Ten years ago, vodka’s share of the spirit market
was less than 25%.
o Category growth is attributable to ongoing introductions of super-premium
offerings coupled with an endless array of new flavors joining the fray.
o Vodka claims six spots among the top twenty best-selling spirit brands in
America, up from five a decade ago. The main difference between the past and
today are the brands that made the list. Smirnoff and Absolut enjoyed the honor in
both years, but value brands Popov, Gordon’s and McCormick were usurped by
premium priced Grey Goose, Skyy, Stolichnaya and Ketel One.
o As with many other beverage alcohol categories, imported vodkas continue to
gain share at the expense of domestics. More than one-in-three vodkas consumed
2
See Appendix, Exhibit 1.
3
See Appendix, Exhibit 2.
-2-in the U.S. today are imported.4 This compares with less than one-in-four in
1998.
o Super-premium imported vodkas continue to make headway, as leading foreign
brands such as Absolut, Grey Goose, Stolichnaya, Ketel One and Svedka keep
growing. Meanwhile, leading domestic brands like Smirnoff and Skyy continue to
maintain their high sales levels. These seven brands dominate the category,
together accounting for almost half of all vodka case sales.5
o The Web has transformed nearly every aspect of consumer’s lives and virtually
every vodka brand has a Website. Marketers are focusing on creating interactive
sites that create a community and a connection with their brand with a strong
focus on mixology and new cocktails.
Flavor Infusion
o In 2000, less than 3 million cases of flavored vodkas were consumed. Today, that
number exceeds 12 million. Flavored vodkas account for more than 23 percent of
all vodka consumption. This varies quite a bit by brand—from about 8 percent for
Skyy to 20 percent for Smirnoff to more than 60 percent for Three Olives.
o Not only has consumption increased, but so too have the depth and breadth of
available single and dual-flavor vodka combinations.
o Citrus was the original flavored vodka. Various somewhat sweet flavors were
subsequently added to the fray—raspberry and vanilla, among others. Today,
savory flavors such as tomato, cucumber, rosemary, tarragon and saffron have
started to appear. Dual-flavored line extensions are also a new trend—grape
hibiscus, lavender lemonade, cucumber lime and honey mango melon, to name a
few.
o More than 360 flavored vodka brands are sold in the U.S., but a flavor slowdown
is expected. For instance, new Absolut owner Pernod Ricard has said it intends to
reduce the pace of new flavor introductions to one every other year.6
o Plus, marketers are realizing that flavors cannibalize the flagship brand. And
bartenders and consumers are increasingly creating cocktails by adding fresh
juices and purees to plain vodka.
o Among single-flavored vodkas: apple and lemon are losing share; cherry and
berry options are growing, and pomegranate and coffee are two flavors to watch.7
4
See Appendix, Exhibit 3.
5
See Appendix, Exhibit 4.
6
See Appendix, Exhibit 5.
7
See Appendix, Exhibit 6.
-3-Supplier Switches
o It’s inevitable. When something is on the upswing everyone not only wants a
piece, but looks for a way to obtain the prize in the quickest possible way. So it is
with vodka.
o Over the past few years, several marketers launched high-end vodkas only to
watch them become lost in the crowd. Paying top dollar for existing successful
vodka brands with growth potential has been the route several suppliers have
chosen.
o In 2004 Bacardi paid more than $2 billion for Grey Goose. In 2007 Constellation
purchased hot brand Svedka for $384 million. In 2008 Absolut joined the Pernod
Ricard portfolio, the U.S. marketing rights to Stolichnaya went to William Grant
& Sons and Diageo paid $900 million for a 50 percent stake in Ketel One. This
represents five big brands switching suppliers. Look for increased distribution,
deeper national account penetration and marketing changes for these powerhouse
vodka offerings.
o Wine and beer marketers have also joined the vodka bandwagon. New York
based wine and spirits importer 57 Main Street acquired U.S. rights to The Silk
Vodka brand in 2008. And, Anheuser-Busch-owned Long Tail Libations began
distributing Cape North last year. Cape North is distilled in France and rivals
ultra-premium vodkas such as Belvedere and Chopin from a price perspective.
Both 57 Main Street and A-B are utilizing current resources to capitalize on
vodka’s growth.
Advertising
o Advertising budgets for vodka have gone through the roof. Over the past ten years
advertising expenditures for vodka brands have more than doubled, according to
TNS Media Intelligence. Absolut continues to be the top spender, followed by
Ketel One, Grey Goose, Skyy and Belvedere.8
o The iconic Absolut ads perhaps started it all back in 1979. Grey Goose stole the
show two decades later with its grass roots marketing, coupled with exclusivity,
cachet and the magic touch of Sidney Frank—the man.
o Other vodka marketers have launched innovative and successful advertising
campaigns in an effort to make their brand stand out amongst the crowd. Svedka’s
robot, Skyy’s legs, Belvedere’s cutting edge “Luxury Reborn” campaign featuring
8
See Appendix, Exhibit 7.
-4-photography by Terry Richardson of Gucci fame, and Ciroc’s “Rat Pack”
commercial featuring mogul Sean “Diddy” Combs, to name a few.
o Somewhat provocative and unique advertising campaigns create buzz in the
media and in turn generate interest among consumers that subsequently leads to
trial. The most effective advertising vehicle of late has proven to be word of
mouth—something beverage marketers have not taken advantage of. Television
and online ads provoke word of mouth, but social networking is even more
important these days. Attracting influencers and having them in turn spread the
word about a brand is growing in popularity. Creating brand chatter leads to brand
sales, adds an exclusivity factor and makes people feel they are in the know.
Retail Advertising
Overall, retailers elected to place fewer branded vodka advertisements in newspapers, in-
store circulars and mailers during the third quarter of 2008 compared with the same
period the prior year. Ad incidence for vodka declined 3.2% representing one of five
spirit categories that decreased its ad incidence during the quarter, according to
Featuretrac.
Category Totals for 3rd Quarter 2008 v. QYago
|--AD INCIDENCE--| |------AD SHARE------|
CUR % CHG CUR PT CHG
Vodka 40,013 -3.2 21.3 -0.4
North American Whisky 32,604 -4.8 17.4 -0.6
Rum 27,343 3.2 14.6 0.6
Scotch 19,618 -5.7 10.4 -0.5
Cordials & Liqueurs 17,334 0.1 9.2 0.1
Tequila 16,583 1.9 8.8 0.3
Gin 14,615 -3.3 7.8 -0.2
Prepared Cocktails & Mixers 9,168 14.3 4.9 0.7
Brandy 5,034 -6.7 2.7 -0.2
Cognac 3,472 -12.5 1.8 -0.2
Irish Whiskey 2,094 36.8 1.1 0.3
TOTAL 187,878 -1.4 100 0
Source: Featuretrac
For the twelve months ending September 2008 retailer branded vodka advertising
climbed 2.3% compared with year ago levels.
Vodka is not only the largest spirit category on a case sales basis, but also captures the
highest share of retailer advertisements tracked. More than one in five retailer ads feature
a vodka brand. Retailers are clearly attempting to lure consumers into their stores with
this versatile spirit.
-5-During the third quarter of 2008 the number of advertisements of flavored vodka brands
by retailers declined at a faster clip compared with their respective flagship. In general ad
incidence for the 750ml size performed better than the 1.75ml for higher-priced vodkas.
In contrast, value vodkas had a better showing in the other direction—more branded ads
featured larger sizes.
Smirnoff is not only the best-selling vodka in America, but also the one advertised most
often by retailers. Smirnoff’s ad share of brands tracked was 16.0% in the third quarter of
2008 representing a 1.0 point drop from the prior year.
Brand Totals for 3rd Quarter 2008 v. QYago
(All Line Extensions)
|--AD INCIDENCE--| |------AD SHARE------|
CUR % CHG CUR PT CHG
Smirnoff 6,392 -8.7 16 -1
Absolut 5,409 -10.8 13.5 -1.1
SKYY 3,186 5.4 7.9 0.6
Grey Goose 2,717 -9.6 6.8 -0.5
Stolichnaya 2,407 -10.5 6 -0.5
Ketel One 2,383 -16.4 6 -0.9
Svedka 1,994 27.2 5 1.2
Gordons 1,304 -5.7 3.3 -0.1
Three Olives 994 -4.9 2.5 0
Finlandia 970 -6.6 2.4 -0.1
Seagram's 941 27.3 2.4 0.6
Belvedere 850 1.2 2.1 0.1
Popov 778 -8.9 1.9 -0.1
Ciroc 349 85.6 0.9 0.4
Chopin 184 -8.9 0.5 0
All Other Vodka 9,155 3.9 23 1
TOTAL 40,013 -3.2 100 -0.4
Source: Featuretrac
From a flavor perspective, various new flavored vodkas—Smirnoff Passion Fruit Twist,
Smirnoff White Grape Twist, Skyy Infusions, among others—were featured at the
expense of older flavored brands.
Of all vodkas tracked, Svedka was the exception on all counts. Ad mentions for the July-
to-September period climbed more than 27% for the brand, with double-digit gains
enjoyed by both the flagship and all four flavors. Increased distribution by relatively new
brand owner Constellation assisted in turning Svedka into a national product.
Super-premium offering Ciroc, too, enjoyed double-digit gains in retailer ad incidence
during the third quarter of 2008 compared with the same quarter the prior year. Increased
-6-marketing efforts by Diageo and the Sean “Diddy” Combs tie-up has boosted consumer
awareness for the grape vodka.
While retailers elected to advertise most major vodka brands less often during the quarter,
the all other vodka category which includes smaller local brands posted gains during the
quarter. This suggests that retailers are moving toward specialty products that may be
unique to their establishment.
Retail Product Placement
The location of a product in a retail establishment can make or break a brand. Particularly
today when hectic consumers tend to run in and out of stores and the dizzying array of
products can make one’s head spin. Consumers that regularly shop at a specific store
typically know where their brand is located. Retailers may choose to mix things up to
inspire trade up purchases or trial of new products.
Most manufacturers covet the eye-level shelf, but of course that space may not be had by
all. Typically best-selling products for a specific store are placed at eye level. This
applies to the vodka category as well.
There is a correlation between top selling vodka brands and shelf facings. In general the
more a brand sells, the more facings it tends to have. There are exceptions however. The
number of iterations, for example, that a brand has may affect its facing count. By and
large, the more flavors a store carries for a specific vodka the more facings that brand
will have.
At the same time, retailers have limited shelf space. As new vodka flavors and brands are
introduced, older brands that may not be selling well or may no longer fit the retailer’s
model will be replaced. Retailers today are constantly reevaluating their inventory.
Consumer tastes change, economic conditions are a factor as are changing demographics.
Retailers are looking to suppliers and wholesalers for guidance in product placement and
with assistance in inventory selection that fits their specific establishment.
The average number of vodka facings per store increased by 3.9 during the third quarter
of 2008 compared with the prior year, according to Shelftrac. The vodka category was the
facings leader among the spirits categories.
-7-Category Facing Totals for 3rd Quarter 2008 v. QYago
AVG # FACINGS
CUR PT CHG
Vodka 149.5 3.9
North American Whisky 103.3 -0.1
Rum 96 0.8
Scotch 72.8 -0.2
Cordials & Liqueurs 63 -0.3
Tequila 59.3 -0.1
Gin 44.7 -0.3
Mixers 14 -0.1
Irish Whiskey 11.7 -0.1
TOTAL 454.3 -16
Source: Shelftrac
Looking at the brands Smirnoff added facings of two new flavors—Passion Fruit and
White Grape—at the expense of the flagship and remaining flavors in the line, on
average. Brands in the Stolichnaya line either increased facings across the board or held
steady during the quarter compared with year ago levels. Various super-premium
brands—Grey Goose, Ciroc and Belvedere—increased both store penetration and average
facings per store during the third quarter of 2008 versus the prior year. Facings for value
brands tracked—Popov and Gordon’s—have been on the decline for more than one year.
Shelf Stocking & Facings for Selected Brands
AVERAGE #
|--% of STORES STOCKING--| |--------SHELF FACINGS--------|
SEP '08 YAgo PT CHG SEP '08 YAgo PT CHG
Smirnoff 99.4 98.9 0.5 26.6 25.8 0.8
Absolut 99.9 99.8 0.1 18 18.5 -0.5
Stolichnaya 98.6 97.3 1.2 9.2 9 0.2
SKYY 97 97.9 -0.9 6.6 8.4 -1.8
Ciroc 69.4 64.9 4.5 1.9 1.6 0.3
Grey Goose 95.2 92.8 2.4 4.4 4.1 0.2
Ketel One 95.1 94.3 0.8 3.8 3.9 0
Belvedere 90 85.2 4.8 2.5 2.2 0.2
Finlandia 78.1 76 2.1 2.7 2.7 0.1
Gordon's 83.1 85.7 -2.6 4.8 4.9 -0.1
Popov 71.6 67.8 3.8 4.8 4.8 -0.1
Total Vodka Category 100 100 N/A 149.5 146.9 2.6
Source: Shelftrac
-8-In general, higher-priced vodkas such as Grey Goose, Ciroc, Level and Belvedere are
placed on the top shelf of a retail store or above eye level, according to Shelftrac. In
contrast, the majority of value vodkas are found on the bottom shelf or below knee level.
Smirnoff, Absolut, Stolichnaya and Skyy tend to be found on the eye level shelf. Ketel
one is somewhat evenly split between above eye and eye level.
Finlandia is a bit of an outlier and is not always placed with similar priced competitors.
About one third of retailers stock the brand above eye, about one quarter at eye level,
nearly 30% below eye and 15% at knee level. From a consumption standpoint, the brand
has seesawed over the past few years. It appears as though the brand has not found a
niche among consumers or retailers.
Shelf Stocking Location for Selected Brands
September 2008
ABOVE AT EYE WAIST KNEE
EYE LEVEL LEVEL LEVEL
Ciroc 63.5 29.8 4.4 2.3
Belvedere 62.8 25.4 5.6 6.2
Grey Goose 56.3 33.8 5.2 4.7
Ketel One 42.9 44.8 9.4 2.8
Finlandia 32.5 23.3 29.2 15
Stolichnaya 30.8 42.2 18.8 8.2
Absolut 29.8 43.8 19.4 7
SKYY 17.1 50.1 24 8.8
Smirnoff 9.5 42.5 35.4 12.6
Popov 2.3 9 13.7 75
Gordon's 2.2 10.7 32.7 54.3
Total Vodka Category 23.6 27.2 25.9 23.2
Source: Shelftrac
-9-Retail In-Store Displays
The ongoing trend of new product introductions among all consumer goods categories
has forced retailers to reevaluate their limited selling space. Setting up stand alone in-
store displays not only garners attention to a specific product, but also does not take away
valuable shelf space.
Display Incidence by Category
3rd Quarter 2008 v. QYago
|-----DISPLAY INCIDENCE %--
---| |---------DISPLAY SHARE---------|
CUR YAGO PT CHG CUR YAGO PT CHG
Vodka 90.3 86.8 3.5 27.8 28.6 -0.8
Tequila 66.5 63.1 3.4 9.1 8.8 0.3
Scotch 49.5 52.2 -2.8 7.4 7.6 -0.1
Rum 80.2 79.6 0.6 16.3 17.4 -1.1
Prepared Cocktails & Mixers 54.9 52.3 2.6 10.3 9.3 1.0
North American Whisky 77.5 77.1 0.4 14.2 14.4 -0.2
Irish Whiskey 14.3 11.5 2.8 0.9 0.7 0.2
Gin 53.7 55.1 -1.4 5.7 6.1 -0.4
Cordials 57.4 56.7 0.7 8.4 7.1 1.3
TOTAL 97.4 95.6 1.8 100.0 100.0 0.0
Source: Promotrac
For the 3rd quarter 2008 90 percent of stores audited had a vodka display—a 3.5 point
gain over the quarter year-ago, according to Promotrac. September 2008 reflected the
same overall change as compared to September 2007 with a 4.1 point gain.
With the exception of Grey Goose, however, the increase was due to smaller up-and-
coming vodka brands—Svedka, Ciroc and Belvedere, most notably. All three of these
brands are in growth mode and are backed by large supplier advertising campaigns.
Display incidence for Smirnoff, Absolut, Stolichnaya and Skyy were off for both the
flagship and the majority of respective flavors in both the 3rd quarter and in September
2008 compared with the same periods in 2007. Single digit point gains were recorded
for Grey Goose, Finlandia, Svedka and Belvedere.
- 10 -Display Incidence for Selected Brands
3rd Quarter 2008 v. QYago
|-----DISPLAY INCIDENCE %-----| |---------DISPLAY SHARE---------|
CUR YAGO PT CHG CUR YAGO PT CHG
Smirnoff 61.6 64.5 -3 30.7 33.7 -3
Ciroc 2.9 1.5 1.4 0.6 0.3 0.3
Gordon's 12.1 12.4 -0.3 2.5 2.5 0.1
Popov 8.6 7.4 1.2 1.7 1.4 0.3
Absolut 49.6 52 -2.4 23.6 23.8 -0.2
Stolichnaya 31.9 35.9 -4 9.1 9.9 -0.8
SKYY 39.2 41.5 -2.3 9.5 10.4 -0.9
Grey Goose 17.1 14 3.1 5.4 4 1.4
Ketel One 25.3 26.4 -1.1 6.4 6.4 0
Finlandia 10.7 7 3.7 2.4 1.5 0.9
Svedka 21.6 16.4 5.2 5 3.7 1.3
Belvedere 8.5 6 2.5 1.7 1.1 0.6
Chopin 1.8 2.5 -0.7 0.4 0.5 -0.1
TOTAL 90.3 86.8 3.5 27.8 28.6 -0.8
Source: Promotrac
In terms of display locations for vodka, primary endcap is the most popular among
retailers audited, followed by in category section and the main entrance or cash register.
Super-premium vodkas tend to have a special display in the entrance area or by the cash
register and low-priced offerings are most often displayed in the category aisle. Brands
that are on sale, offer a manufacturer POS, or are being phased-out tend to make a special
appearance at the entrance of the store.
Display Incidence for Selected Brands by Location
3rd Quarter 2008
|------------% DISPLAYS BY LOCATION------------|
MAIN PRIMARY IN OTHER
ENTRANCE ENDCAP AISLE LOCATION
Smirnoff 21.4 46.7 41.1 4.3
Ciroc 27.3 39 32.5 2.6
Gordon's 7.2 45.6 44.4 5
Popov 14.5 27.8 53.3 5.7
Absolut 20.2 44.7 40.5 3.3
Stolichnaya 17.8 46 39.5 4
SKYY 16.7 44.4 41.1 3.1
Grey Goose 26.4 41.9 31.9 1.8
Ketel One 21.4 48.1 36.2 2.5
Finlandia 11.3 51.4 33 4.6
Svedka 11.9 46.2 39.1 5.8
Belvedere 26.3 29.5 41.1 4
Chopin 21.3 23.4 55.3 -
Source: Promotrac
- 11 -A Crowded Field
o The introduction of new vodkas has not abated. The category leads in terms of
new spirit products launched.
o Recent new entrants include: Estonia’s Saaga 1763 (MHW Importers), Camitz
Sparkling Vodka (O2B Brands), Purus (Anheuser-Busch’s Long Tail Libations),
Sobieski (Imperial Brands) and Boomerang (Foster’s America).
o Virtually all vodka brands introduced today are high-end. Plus, in an effort to
differentiate themselves in a crowded field all new brands are attempting to tell a
story and offer something unique. Some are successful, but many are not.
o The definition of success is different for different people. Several new vodka
launches are local, artisanal and organic—capitalizing on the locavore movement.
These brands do not intend to become national. Many do not have the capacity or
resources to do so and are quite happy staying within their community.
o These relatively small local brands may not become top sellers, but they are
competitors and will chip away at the big guys—particularly as more retailers and
consumers embrace the local movement.
Consumer Behavior
o Unlike any other spirit category, vodka consumers are fairly equally split from a
gender perspective, according to Simmons Market Research. Moreover, vodka is
enjoyed among all adult age groups—something no other spirit category may
claim.9
o Vodka’s universal appeal coupled with its versatility as a mixer and the cachet
high-end products brought to the category has and continues to attract adult
consumers.
o Flavored vodkas are heavily favored by females. Males, however, take the lead
among several brands—Absolut Kurant, Stoli Citros, Stoli Ohranj and Stoli
Cranberi, according to Simmons.
o According to Simmons, the older the brand the older the consumer. Stolichnaya
drinkers tend to skew older than Absolut imbibers. And Absolut drinkers tend to
skew slightly older than Grey Goose consumers. Among unflavored vodkas,
Belvedere scores highest in the 21-to-24 age group.
9
See Appendix, Exhibit 8.
- 12 -o Younger adult consumers gravitate toward somewhat sweet flavors—vanilla and
raspberry. Whereas older consumers prefer classic cocktails that are savory in
nature.
o All consumers are moving toward a healthier lifestyle and a greener planet.
Consumers too are increasingly supporting products with a cause.
o Several marketers are incorporating natural and green elements in their products.
This is a trend that is expected to continue.
o Skyy replaced its flavored vodkas with Skyy Infusions—a proprietary infusion
process that allows the capture of true-to-fruit taste. The brand is supported by a
marketing campaign anchored by the tagline “Go Natural.”
o Limited edition products that benefit local causes such as Absolut New Orleans
and Absolut Los Angeles are another trend that is expected to gain a following.
o Overall, consumers are moving away from sweet cocktails into the savory area.
This may not bode well for several flavored vodkas.
In Summary
These are challenging times. Studies show that consumers are dining out less, but
entertaining more at home. As a result consumption of adult beverages off-premise are
growing at a faster clip compared with on-premise—a shift that began in the second half
of 2007.
Adult consumers continue to enjoy beverage alcohol, but are trading down to less
expensive offerings. Value has become a big part of the equation and has usurped status.
It has become chic not to spend.
In response to the shift to off-premise: retailers are reconsidering inventory, redesigning
stores that create specific spaces for products with good value and training staff on those
products. Retailers are also turning their stores into a destination and offering more
tastings—where permitted by law. Signage and description of products, tasting notes,
food pairings and drink recipes are also popping up at retail locales across the country.
Retailers, too, in an effort to differentiate themselves are seeking out products that make
their establishment a destination. More are carrying local and artisanal products. During
economic downturns more consumers tend to shop at big-box stores. Here too, smaller
beverage alcohol retailers are counteracting by offering unique products, service and
product knowledge.
Working in tandem, suppliers, wholesalers and retailers can garner consumer awareness
for a specific product. A retailer advertisement, in-store display or shelf placement that
- 13 -dovetails a supplier consumer advertising campaign is one way to stimulate purchase.
One of retailers’ biggest gripes is that suppliers do not follow-up regarding sales.
The vodka category is expected to forge ahead, but changes within the category are
likely. Big brand supplier switches, growing interest among small local offerings, a flavor
fallout, a shift to off-premise purchases and challenging economic conditions will change
the category landscape.
- 14 -APPENDIX
About the Editor
Tiziana Mohorovic is head of Acorn Research LLC and a long-time consultant to the
Beverage Information Group. Tiziana specializes in identifying and tracking trends in
the beverage-alcohol industry. Her knack for uncovering the "stories behind the
numbers" draws on her 20-plus years of experience in statistical analysis, demographics,
consumer behavior and economic analysis. With more than 17 years of experience in the
beverage-alcohol industry alone, Tiziana led the updating of the Adams Handbooks—the
preeminent source for beverage alcohol consumption in the U.S.—and the development
and launch of the Cheers On-Premise Handbook. Earlier in her career, she served as
Research Analyst in the Economic Analysis Department of The Dun & Bradstreet
Corporation. As a recognized authority on beverage alcohol trends, she is frequently
quoted by the media. Tiziana holds a B.S. in computer science from Queens College in
New York.
- 15 -Exhibit 1.
US: Campari prepares fruity Skyy vodka
extension
11 March 2008| Source: just-drinks.com editorial team
Gruppo Campari has unveiled a flavoured extension of its Skyy vodka brand in the US.
The company announced yesterday (10 March) that Skyy Spirits, its wholly-owned
subsidiary, will release Skyy Infusions across the country this Spring. The variant will be
available in five flavours – citrus, cherry, passion fruit, raspberry and grape – and will
begin to hit stores in April ahead of a full US roll-out in May.
“When we took a look at the flavoured vodka category, it was easy to realise it was over-
saturated with products that had no real point of differentiation,” said Gerry Ruvo,
president and CEO of Skyy Spirits. “With Skyy Infusions, we are going a completely
different direction. We are introducing a proprietary infusions process that allows us to
really capture that ‘true-to-fruit’ taste, while meeting a real consumer desire for all-
natural products.”
Skyy Infusions will be available in 50ml, 750ml, 1-litre and 1.75-litre (for the citrus
variant only). The brand will be supported by a marketing campaign anchored by the
tagline ‘Go Natural’. Marketing support during the launch will include extensive on- and
off-trade sampling, a nationwide advertising campaign, point of sale materials and
bartender education. Skyy Spirits will also embark on a two-month cross-country mobile
sampling tour.
To coincide with the launch, Skyy Spirits has prepared a new-look bottle, not only for
Skyy Infusions, but also for its flagship Skyy vodka. While the labelling stays the same,
the bottle is taller and thinner, in an attempt to help the brand stand out on the back bar.
- 16 -Exhibit 2.
On-Premise Moving Away from Vodka
Many cocktail enthusiasts scorn the legally flavorless and colorless liquor as an
uninteresting base ingredient thus causing a backlash against vodka at cutting-edge bars
and restaurants. In an essential way, vodka adds little more than alcohol to a cocktail, no
matter how well it is crafted.
For instance, at the recently opened Clover Club in Brooklyn, N.Y., headed by
nationally-recognized bartender Julie Reiner, not a single vodka cocktail is listed among
the two dozen or so on the menu. And Clover Club is not the only place in New York or
San Francisco, two cocktail-crazed markets, where this is happening. True, these bars are
far from average, but places like Clover Club are often laboratories for future trends.
Source: Excerpt from Cheers On-Premise Handbook 2008.
Exhibit 3.
Leading Imported Vodka Brands
(000 9-Liter Cases)
Brand Supplier Origin 2007 Share
Absolut Pernod Ricard USA Sweden 5,013 9.5%
Grey Goose Bacardi USA France 3,325 6.3%
Stolichnaya William Grant & Sons Russia 2,185 4.2%
Ketel One Diageo/Nolet Spirits USA The Netherlands 1,858 3.5%
Svedka Spirits Marque One/Constellation Sweden 1,526 2.9%
Three Olives Proximo Spirits UK 850 1.6%
Total Leading Imports 14,757 28.1%
Total Imports 17,783 33.9%
Total Domestics 34,735 66.1%
Total Vodka 52,518 100.0%
Source: Liquor Handbook, The Beverage Information Group.
- 17 -Exhibit 4.
Leading Vodka Brands
(000 9-Liter Cases)
Brand Supplier Origin 2007 Share
Smirnoff Diageo USA 9,015 17.2%
Absolut Pernod Ricard USA Sweden 5,013 9.5%
Grey Goose Bacardi USA France 3,325 6.3%
Skyy Skyy Spirits USA USA 2,390 4.6%
Stolichnaya William Grant & Sons Russia 2,185 4.2%
Ketel One Diageo/Nolet Spirits USA The Netherlands 1,858 3.5%
Svedka Spirits Marque One/Constellation Sweden 1,526 2.9%
Total Leading Brands 25,312 48.2%
Total Vodka 52,518
Source: Liquor Handbook, The Beverage Information Group.
- 18 -Exhibit 5.
FRANCE: Absolut set to drop flavours -
Pernod
29 May 2008| Source: just-drinks.com editorial team
The prospective head of Pernod Ricard has warned that there could be a reduction in the
number of flavoured editions of the Absolut vodka brand going forward.
Speaking exclusively to just-drinks in Moscow earlier this week, Pierre Pringuet, who
will replace Patrick Ricard as CEO of Pernod in November, said that the vodka brand had
been the victim of “some dilution” of its image, following the release of a slew of
different flavours by its current owner, Vin & Sprit, in recent years.
“My feeling is that there have been too many flavours launched one after the other –
something like twice a year, recently,” Pringuet said. “On the one hand, this is useful for
increasing Absolut's facings in a bar, but I feel there are still too many, lending
themselves to some dilution of the brand's image at the turn of the century.”
“In 2004, they (V&S) clearly refocused the strategy around the blue label original vodka.
We believe that's the right direction, and V&S's management agrees with us.”
“It's too early to say if there will be a reduction in the flavour portfolio as it stands,”
Pringuet added, “but, my opinion is that there will be. The final decision, however, will
be taken by the new brand owner, which is the existing Absolut team.”
Pringuet conceded that new flavours would be released in the future, but “at a much
lower frequency and with something that will be distinctive”.
Pernod is set to take ownership of V&S this summer, after it acquired the company from
the Swedish government earlier this year for US$8.88bn.
- 19 -Exhibit 6.
New Vodka Flavors Launched in 2008
Blackberry
Cucumber
Cucumber Lime
Grape Hibiscus
Honey Mango Melon
Lavender Lemonade
Passion fruit
Root beer
Rosemary
Saffron
Tarragon
Tomato
Exhibit 7.
Advertising Expenditures for Vodka, 1998 versus 2007
($ Thousands)
Brands Supplier Origin 1998 2007
Absolut Pernod Ricard USA Sweden $29,508 $23,631
Ketel One Diageo/Nolet Spirits USA The Netherlands -- $22,965
Grey Goose Bacardi USA France $517 $21,060
Skyy Skyy Spirits USA USA $3,784 $13,686
Belvedere Moet Hennessy USA Poland $1,381 $11,415
Others $33,385 $74,536
Total Vodka $68,575 $167,292
Source: TNS Media Intelligence.
- 20 -Exhibit 8.
Percentage of Drinkers by Gender and Age Group
Age Groups
Brand Male Female 21-24 25-34 35-44 45-54 55-64 65+
Vodka 48.9% 51.1% 8.0% 22.0% 21.0% 20.9% 15.2% 13.0%
Bourbon 70.4% 29.6% 7.3% 16.5% 20.2% 22.6% 17.9% 15.5%
Blended Whiskey 66.5% 33.5% 5.2% 13.1% 20.1% 23.5% 17.4% 20.7%
Canadian 66.0% 34.0% 7.3% 13.9% 18.9% 23.4% 18.4% 18.2%
Scotch 72.1% 27.9% 3.9% 14.2% 17.5% 22.8% 20.4% 21.2%
Gin 56.1% 43.9% 6.4% 16.8% 19.5% 21.3% 19.2% 16.9%
Rum 52.0% 48.0% 9.2% 21.5% 22.5% 22.1% 15.5% 9.2%
Tequila 52.6% 47.4% 10.1% 20.4% 24.2% 23.1% 14.9% 7.5%
Brandy/Armagnac 52.7% 47.3% 8.2% 14.5% 15.8% 21.2% 19.9% 20.4%
Cognac 59.8% 40.2% 8.8% 18.0% 18.6% 20.7% 18.8% 15.1%
Cordials & Liqueurs 41.1% 58.9% 6.4% 16.1% 20.5% 23.3% 17.4% 16.4%
Note: Includes consumers aged 21 and over only.
Source: Simmons Market Research Bureau; Fall 2007 Study of Media and Markets.
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