Bar wars: vodka strikes back

By playing the taste card, gin and white rum have made small inroads into vodka’s dominance of the white spirit market. Ironically, flavoured vodkas are now extending vodka’s lead, says Patrick Schmitt

YOU THOUGHT the jostling was in front of the bar, actually it’s behind it. While brightly dressed, braying youth may be vying for attention from the barman, smartly packaged premium white spirits are scrambling for a share in the shaker.

And vodka’s leading the pack, although gin and rum are putting in an impressive fight. Tequila, on the other hand, is still trailing some way behind. 

The key to success is the mixability of the spirit as well as marketing by the big brands, and the real innovation seems to be occurring at the more expensive end of things – these neutral spirits are going upmarket.

Typically, however, volume is driven by the more mainstream versions. In fact, the white spirits market as a whole is notable in being controlled primarily by only three brands – Smirnoff vodka, Gordon’s gin and Bacardi rum.

Out of these three categories, vodka, the best selling white spirit, has led the way in building a prestige image for itself in bars across Britain, despite its colourless, odourless and often rather tasteless characteristics.

Displays are now cluttered with an array of expensive vodkas, commonly appearing in tall, frosted glass bottles.  And according to Canadean, of the drink’s 6m case sales last year, about a third were sold in the on-trade, making the market around 1.8m cases. In fact, vodka made up 28% of the spirits market in the on-trade in 2002, up from 24% in 2001.

Most of the growth in the premium segment – about 5% of the market – is driven by Absolut, which sells around 120,000 cases (on- and off-trade) every year. However, this is small change compared to brand-leading Smirnoff with its 2.3m case total.

Above Absolut are the so-called luxury vodkas which contribute only about 10,000 to 12,000 cases, but are effective value drivers for the category, as well as raising the profile of the drink.

A surprisingly late entrant in this top-end class is Diageo, with Cîroc, a French vodka (like Grey Goose) made from snap-frost grapes.  This innovation is in keeping with a category crammed with topend brands constantly looking for some point of difference, be it heritage, base constituent, water source, or type of distillation.

Of course, packaging is another way of differentiating. Cariel and Seriously… have gone the clear-glass and simple-label route while Grey Goose and Belvedere have opted for the rather more decadent frosted-effect with windows.

Skyy, on the other hand, stands out because of its blue bottle and just launched new silver lettering.  The latest craze boosting the sector is flavoured vodka, which has increased 12% in the on-trade year on year.

But the real question is how are other white spirits attempting to challenge the dominance of vodka, which is currently increasing in sales by 7% in both the on- and off-trade, outperforming the growth of spirits as a whole, which are growing by 3.1% (ACNielson MAT 2003 on 2002 vol).

Well, "the one to watch" according to Elwyn Gladstone, new brand development manager, William Grant & Sons, is gin.  Slowly shaking off its image as an old housewives’ favourite, the juniper-based spirit is having a resurgence.

However, it is some way behind vodka’s 6m cases, with sales amounting to around 2.7m cases a year.  Furthermore, much of gin’s growth is confined to the premium end and, unlike the leading white spirit, the overall market for gin is pretty static.

By far the brand leader in the category is Gordon’s – gin’s Smirnoff you could say – with over 10 times more sales than the number two brand, Bombay Sapphire. But it is the latter that’s driven the premium gin sector, just as Absolut has for vodka.

Much of this blue-bottled gin’s success is actually because it tastes more like a vodka than gin, or rather the juniper flavour is less prominent in Bombay.  And gin distillers, although some way behind vodka distillers, are starting to innovate.

In an attempt to claw back market share new versions are being introduced with different mixes of botanicals, secret ingredients, higher alcohol strengths and trendier packaging. Mimicking vodka, a new luxury category has emerged.

This includes Grants’ Hendricks, Miller’s Gin (which has just launched a Westbourne strength version at 45.2% abv), Allied’s Crown Jewel, Greenall’s Quintessential, Diageo’s Tanqueray Ten and Beafeater’s Wet.

A trendy addition, if perhaps not quite in the luxury price category, is Facile and Co’s (owners of Seriously… vodka) Imagin.  And, like the trend for flavoured vodkas, people are looking for something more interesting than a neutral spirit, hence gin brand owners’ attempts to sell the taste of gin.

As Andreas Versteegh, director of the Reformed Spirits Company, owner of Miller’s, says: "People are a bit bored of repackaged vodka, they are looking for something more interesting.  I think you can use Miller’s for any cocktail instead of vodka.

We want to change vodka for gin.  The category should not be limited by just dry Martini and gin and tonic."  In fact, the juniper-based spirit has even lost out to vodka as the traditional constituent of a Martini, because "gin has not responded to what consumers wanted" – something Versteegh is hoping to redress.

Next comes rum, which as a whole only just tails gin, although when one considers white rum, the market is significantly smaller at 1.5m cases, with about 45% of that sold through the on-trade.

But while rum as a category is creeping up at around 2.5% every year, white versions of the spirit are rising by 3% to 4%.  And, like gin and vodka, rum has its own market leader by some distance in Bacardi.

The brand’s Carta Blanca accounts for 6.8% of the white spirits market and 41.2% of the total rum sector.  However, Bacardi is not necessarily considered by the consumer as a rum.

It is very much a brand, and one that’s deemed cool, compared to the category’s rather less hip image.  For this very reason, however, Bacardi isn’t challenging other rum brands, but vodka.

As Mark Scott, senior trade marketing manager says, Bacardi "wants to challenge vodka as the default white spirit option", and the company has found from research that two thirds of vodka drinkers prefer the taste of rum.  "The wider spirits market is the challenge, not other rums," notes Scott.

However, while Bacardi challenges vodka with its Latin Quarter advertising, "pourfection" (an educational campaign for bartenders), and closer alliance with Coca Cola, other players in the market are working to build a premium white rum sector, similar to vodka and gin’s prestige positioning.

Among these is Matusalem’s Platino, launched a year ago, and boasting the characteristics of an aged rum while remaining a white spirit, making it highly mixable. Justin Shore, brand manager, hopes the drink will challenge the brand leader, Bacardi, in the same way Absolut affected Smirnoff.

And although he notes there is a general trend of new rums entering the market – other premium white rums include Myers Platinum and Appleton White Jamaica Rum – which are good for the category, he maintains: "It is not the cut-throat competition which characterises the vodka market."

Lastly, the specialist white spirit tequila is worthy of mention.  Representing some 100,000 cases, two thirds of which sell through the on-trade, and dominated by Diageo’s José Cuervo, the sector has struggled in recent times.

This has mainly been due to a past Agave shortage and volumes are moving up again. But as Cathryn Sleight, ADUK’s marketing director, explains: "Tequila is down in the on-trade (value) around 12% MAT because others are shouting harder for that consumer spend.

Brand owners need to unlock the potential to drink tequila not just in shots and slammers, especially as there is a heavy social responsibility message in our own business. They need to find different occasions."

But, overall, while premium gin and white rum may make some inroads on vodka’s supremacy due to their different taste, they are unlikely to challenge the latest craze, that of flavoured vodkas, which are boosting an already booming category.

These have the important attribute of adding much-needed zest, but without diluting the spirit. Nevertheless, although there is much activity at the top end, the real volume is still driven by the top three – Smirnoff, Gordon’s and Bacardi.