Posted on | July 2, 2013
Written by | Jeffery Lindenmuth
Flashy flavors aside, the original neutral spirit remains strong, with distinct appeals for different customers.
The Distilled Spirits Council of the United States recently called vodka “the backbone of the spirits industry,” noting it accounts for 32% of total volume. By any measure, this marks a startling success story; as a newcomer to the U.S. in the 1950s, vodka comprised a mere 1% of spirits consumed in the U.S. Capitalizing at first on its provocative Russian roots and clean taste, carried into the 1990s by luxury aspirations, then reinvigorated as a craft-cocktail canvas and reinvented with bursts of flavor for the new millennium, vodka has grown too big to fail. Over the course of 2012, 65.2 million 9-liter cases of vodka were sold.
To accomplish those kinds of sales, you need a lot of different people enjoying vodka—a lot of the time. According to Jim Short, director of marketing and merchandising for the Pennsylvania Liquor Control Board, the appeal of basic unflavored vodka spans all seasons and a great diversity of drinkers, an audience that Pennsylvania serves by casting a wide net with close to 200 unflavored vodka SKUs (including multiple sizes). “I just reviewed an analysis of basket sales where we look at the types of spirits in a basket with whiskey—what else that individual purchases. And the other spirit they bought most was vodka. It could be restocking, having a party or a spouse drinking it, but we recognize that whatever someone buys, they are also a potential vodka buyer,” says Short.
Pennsylvania sells “a ton of vodka,” with figures even greater than the national average. Unflavored vodka accounts for 26% of spirits (35% with flavors included) and a full 12% of total wine and spirits sales. Even so, the challenge for any vodka brand, in Pennsylvania and elsewhere, is harnessing space on a shelf that already covers every price and every imaginable proposition, from organic to glacial to celeb-studded.
“Choosing brands is a tough decision,” says Short. “We’re presented with another 20 to 40 different vodkas all looking for a pricing gap, but there are no gaps.”
Vodka for Value Hunters
Vodka is everyone’s drink, but not everyone drinks the same vodka. At the entry level, vodka drinkers themselves appear aware that their spirit of choice presents a wealth of options and narrow breadth of flavor, suggesting that these vodkas are prone to commoditization. “At the low end, you see little loyalty. That consumer is shopping price,” confirms Short.
At American Way Wine & Spirits in Lakewood, NJ, store manager Andrew Howard, has succeeded with new value brands, finding these drinkers willing to make a switch. “A lot of our value vodka drinkers were won over when Wave came along. We were able to offer it on sale for $15.99 and sell a lot
of it,” says Howard.
In many cases, these newcomer value brands, including Wave and Pinnacle, appealed to a younger demographic and drove trial with proprietary flavors. Lured in by Pinnacle’s Whipped or Wave’s Chocolate Covered Pretzel, consumers accepted the brands and soon adopted their unflavored offering as well. It’s a reverse engineering of the flavor extensions that has earned fast growth for these young upstarts. Given that about four of every five bottles of vodka sold in America today is unflavored, the ability of a flagship neutral vodka to attract new fans can be crucial to the overall health of a vodka brand, no matter how many flavors are in the line.
Just as entry-level consumers are prone to shop across brands, they similarly show little allegiance to retailers. “They are going to shop us on price. If someone has it a dollar cheaper, we will do our best to price match. This drinker is very price-sensitive,” says Howard. To help counteract the diminishing margin, Howard uses the appeal of vodka value to move customers through the store. “I have vodka everywhere, in the front of the store and in the back,” he says, noting that Svedka is also a hot brand among value hunters.
Few brands in any spirits category have enjoyed the enduring brand loyalty of Absolut Vodka, even with its over-$20 price tag and countless extensions over the years. Also in this elevated pricing tier, Cîroc, Ketel One and Grey Goose drinkers have developed firm brand allegiance by most accounts.
In young and fashionable Miami, family-owned Global Liquors is doing brisk business in these luxury brands. Francisco De Abreu, who owns and operates Global Liquors with his brother and sister, says the brands that are selling well are a direct result of high profile on-premise placements and celebrity allure. “What customers are most interested in is what is sold in the nightclubs,” says De Abreu. “Go party in South Beach and see what people have on their table, and that’s what people will want to have at home. Grey Goose does a great job in putting bottles in the nightclub and that’s why it’s the vodka that sells the most in our store.”
These consumers are less likely to be lured out of their way to save a few dollars, so De Abreu has a strategy to boost sales, one that appeals to their conspicuous consumption and self esteem: a promotion of two large 1.75L bottles of Grey Goose for $99. “We run that sale every three or four months. It’s an enticing deal because it does save the consumer money, around $15, but it does not treat them like bargain shoppers,” he says.
As a relatively new retailer, open just two years, Global Liquors offers about 40-50 unflavored vodkas, focused on those with established popularity and broad branding efforts. The old selling points about filtering, origin and base ingredients are merely trivia. “The educated client that cares how vodka is filtered and distilled, whether it is it from rye, potatoes, grain or grapes, is a small minority. We are a nightclub culture. It’s about the name, about appearances,” says De Abreu, noting that Cîroc, with the investment of P. Diddy, and Pitbull’s participation with Voli, have helped to bring these brands into
the clubbing circle.
In Pennsylvania, the state often hosts celebrities in-store for signings and tastings, and Jim Short has observed mixed results. Dan Aykroyd draws the most when he comes, and his Crystal Head sells well. Ditto Bethenny Frankel of Skinnygirl.
With a mantra to persuade people to “drink better,” Nick Conti, assembles an interesting selection of vodkas for his website drinkbetter.com and his partnership in two Connecticut retail locations by focusing on intrinsics that matter to modern consumers. “I think 10 years ago people were very brand loyal, including vodka drinkers, but that has disappeared for several reasons. One, flavors drove people to try other brands, and also smaller brands are speaking to people and communicating a story,” says Conti. “There is a shift away from loyalty across the board.”
The organic status of Square One Vodka, and local, artisanal nature of Tito’s are stories that consumers relate to and remember, according to Conti. “I follow the consumers, and they are telling me they like brands with a personal touch,” he says. Other vodkas that successfully sell organic include Rain, Purus and Crop.
A surprise success for Conti, Froggy B. Vodka takes a page from the political playbook by adopting the opponent’s platform: Froggy B. is a French vodka, produced from wheat and distilled in Cognac. With brand intrinsics closely aligned to some higher- priced brands, many drinkers have proved willing to leave the premium price and the pretense behind, making it a breakout
brand, notes Conti.
Top Shelf Rising
While value brands have benefitted from the recession years, the recently resurgent stock market bodes well for the renewal of luxury. For 2012, super-premium brands again lead vodka category growth, increasing 10% by volume. At Ludwig’s Fine Wine & Spirits in Marin County, CA, Magid Nazari has evolved the vodka selection along with his family’s business, which caters to affluent residents and connoisseurs of good living. “Most of these people have a rather broad but trained palate. They love great single malt, fine Napa Cab and the best of everything. It’s not that vodka is a particular passion, but part of their lifestyle” says Nazari.
To that end, Nazari offers about 60 vodkas, all super-premium, only 10 of which are flavored. “I pretty much don’t sell flavors unless they are locally produced, like Hangar 1. It’s not our thing,” he says.
So what are the vodkas that seduce wine lovers? “I sell a lot of Grey Goose, Belvedere, Ketel One and Stoli Elit, which is a very different style, more distinctive than a lot of luxury vodkas which try to be very smooth and round,” says Nazari. From here, the selection ascends to extreme-premium, including Beluga Vodka Gold, priced at $100, and Vallure at $230. “I don’t want to compete with bigger stores on Stoli and Absolut. I would be competing on price. I prefer to compete on selection, to relate vodka to the producers of spirits that do everything on a small but premium scale,” says Nazari.
The encouraging news regarding vodka is that there is no shortage of buyers and brands that suit them. With new labels still proliferating and the category continuing its decades of dominance, these savvy sellers recognize vodka’s broad appeal and ample opportunities mean it’s still a great shot at success, especially for those who know their particular market.
Vodka Calling Cards
Today’s vodka shelves are not unlike a crowded bar, or a job fair—the more players there are, the more alike they appear. With vodka, the sense of sameness is accentuated by the simple fact that unflavored vodka aspires to neutrality. But, of course, the distinctions are quite real—ranging from texture, viscosity and finish to packaging and specifics of origin and production. Every reseller of straight vodka is forced to make decisions on what to carry. One natural approach is to spread the options across multiple price points; another is to offer a balance of imported and domestic, big brand and craft/local.
Whatever tack one takes, however, the key is to know what’s on offer. Every vodka has a story; sales staff and bartenders should be able to sum up a vodka’s reason for being on the shelf whenever a customer asks. Think of it as a calling card, an elevator pitch, an opening line.
A few examples: