The white stuff

When is a premium vodka not a premium vodka? When it’s an ultra-premium vodka, or a super-premium vodka or a prestige vodka, says Dave Broom

STRANGE to think that in the 1950s a spirit which now accounts for 18% of the world’s spirits consumption had to be marketed as "the white whisky" in order to be given some sort of credibility. Today, vodka is taking over the world.

According to IWSR figures between 1999 and 2003 consumption in the US alone increased by an extra 6.5m cases (an increase of 18.6%). 

During the same period, the UK increased consumption by 28.7%, an extra 1.34m cases and this year it seems likely that vodka will overtake blended Scotch as the UK’s favourite spirit.

Maybe whisky should start thinking about marketing itself as "brown vodka?" The IWSR report saw no slowing in the global trend, with growth estimated at 11.3% up to 2008.

Ironically, the one market where there is liable to be a fall is Russia, which still accounts for 50% of the world’s volume.  Vodka is no longer a speciality. It is global and, increasingly, vodka is premium.

That said, premium is a much-abused term which often means little more than a high price tag and a fancy bottle.  How then is premium vodka defined? Strength? Quality? Price? "We define premium vodka in terms of quality," explains Andreas Berggren, vice president for Europe, Africa and Asia-Pacific at Absolut.

"In Absolut’s case it is our ‘One Source.’ We have a single distillery, we only use winter wheat from the local region, our own pure well water and a specific continuous distillation process."

This, perhaps surprisingly production-oriented definition was echoed by Tarja Tuunanen, marketing manager for Finlandia at Brown-Forman, though she added a caveat.

"In the UK, premium vodka is usually defined by being a quality neutral spirit distilled from premium quality ingredients, bottled at 40% abv or above and retailing at a premium price ranging from £11.99 to £14.99.

Unfortunately the category is open to every possible vodka which basically falls into this price range and therefore not all the brands in this category are necessarily premium by quality tests per above."

So maybe, as Geoff Ross, CEO at New Zealand’s premium vodka brand, 42 Below says, ultimately the term premium is defined by the consumer, "who decides by paying more for a bottle than for a standard vodka."

"We do view ourselves in that bracket though because we put a lot more time and money  into the distillation process and we bottle at 42% abv.  We also get our glass from France and bake the ink on in a kiln.

All this gives better taste in a better bottle, but demands a higher price if we are to get a margin.  The more discerning consumers however accept this as their appreciation of vodka grows.

In fact, we’ve found that they want to outwardly demonstrate their new-found vodka knowledge by selecting better brands." 

Golden goose

This could well explain the development of a superpremium category. Initially the sole preserve of Grey Goose, it now includes Belvedere, Absolut’s Level, Stolichnaya Elit, Diageo’s Cîroc and Penka and many more.

Virtually every brand, it seems, is now developing a super-premium variant.  "Ultimately superpremium is about quality," says Marshall Dawson, global brand director for Grey Goose at Bacardi.

"If the quality is there from the start, then you can demand a certain price level, which to a certain extent helps to define the category – but it all starts inside the bottle.  The consumer uses the price as a guide."

Super-premium has given vodka its bling factor.  Developed in the US, it is now a global phenomenon, though its growth is currently concentrated in centres of urban cool such as London, Paris, Tokyo, Sydney, Taipei and Singapore, as well as what Dawson calls "luxury leisure destinations", like Monaco. He also saw superpremium as providing the lever which is needed to finally switch the Far East markets from brown spirits to white.

"The positive trend for vodka continues – especially premium and luxury vodka," adds Berggren.  For example Absolut currently sells 4.6m cases in the US and in its first year in the US, Level has already reached 100,000 cases.

"When Belvedere was launched in the US in 1996, there were no other vodkas that were priced at over $30.00 a bottle," claims Angelique Beziel, brand manager of the vodka.

"The consumer is only beginning to recognise vodka as a category of spirit that can be savoured and enjoyed in the same way a fine wine or Scotch.

In terms of packaging, generic vodka brands rarely look attractive enough to be considered as a gifting purchase.  However, beautiful packaging alone will not convince the consumer that a premium price point is justified."

Consumer desire

Dawson claims that the development of super-premium is part and parcel of a consumer desire for "affordable luxury", something picked up by Ross.  "While the growth of super-premium might not be as steep in future years, it’s still likely to move in a northward direction.

Grey Goose, Belvedere and Ketel One are all in growth and there’s room for more brands in that volume level for sure. Just look at luxury cars or fashion.  All those categories have more than three players."  That said, he was sceptical as to whether Level or Cîroc will make it.

"Their story feels too commercially driven to a consumer.  Consumers are hunting for the right boutique brands with the right credentials.  These will be the brands that grow in to the major players."

That said, not everyone is leaping on the super-premium bandwagon. Marc Charles, MD of Spirits Marque One UK, the distributor of Svedka says his firm has no plans to expand the brand’s portfolio.

"There’s a lot of misconception about the perceived quality of premium and super-premium," he says.  "It needs to be put in context.  Is there any consumer recognition and understanding between a premium and a super-premium vodka? I don’t think so.

There is however an understanding between a standard vodka and a premium vodka, which often comes down to strength.  Quite frankly, the difference between premium and super-premium seems to be down to packaging and retail price."  It was a point also made by Beziel at Belvedere.

"We’ve seen numerous new superpremium vodka entrants in this market and there currently seems to be a trend among some brand owners to believe that intricate or expensive packaging is more important than the quality, heritage or craftsmanship of the vodka they house.

In this rapidly evolving market, only exceptional quality liquids with intelligent marketing and distribution will survive."  Ross isn’t too worried. "Just like mature categories such as beer and wine, consumers will grow a choice set and choose a set of brands that have a story they resonate with which is based on image, aesthetics and taste.

As the vodka category matures so consumers will gain more knowledge which allows them to justify higher-priced purchase and the purchase of several brands just like happens in single malts or fine red wine."  That said, there are mixed messages coming from the UK market. 

Though the premium vodka category is up by 32% (ACNielsen MAT Sept/Oct 04) and Absolut (and Finlandia) have good onand off-trade presence, vodka’s overall growth is still being driven by standard brands like Smirnoff Red.

It would seem that for all but a small elite in the UK vodka is vodka is vodka.  "I disagree," says Johna Cameron, brand manager for Absolut at Maxxium UK.  "As a sector it is showing significant growth and we’re seeing the effect of the more discerning consumer who is asking for the brand they want coming through.

Super-premium is still a category in its infancy in the UK."  The UK is not a premium market… yet. Even Berggren admitted as much.  "You need to think long-term and stay your course. That said, the UK has probably proven more expensive and difficult than many new brands expected."

"It’s simply going to take time because of a number of cultural issues – the key one being the UK not believing in asking for brands at the bar," adds Dawson.

"How long it will take I don’t know, but I’m confident that it will eventually happen. Vodka is growing globally, there’s a shift to affordable luxury products and this type of brand is uniquely positioned.

Grey Goose took off in the US because it was the right brand at the right time.  It appeared when the economy was good and people were trading up.  We’re looking for that to be repeated."

New marketing rules

But can premium vodka ever be anything more than an image-driven category? Indeed, does it matter if it can’t? "Though it is still very much image-driven it can be more than that," says Tuunanen.

"The category has taken a turn into more ‘authentic, pure, heritage’ territory, which is fantastic for truly authentic brands like Finlandia."  But can the average vodka consumer even  differentiate between standard and premium brands? Do they even want to?

"There are new rules for marketing a premium vodka," says Lenny Musatov, marketing director at Sputnik.  "You must focus on your brand’s heritage, authenticity and its quality and emphasise the technology and vintage of the product.

These rules are new to vodka but familiar to other drinks.  Whisky and wine capitalise on them.  Premium vodka brands must educate buyers and consumers on the brand, its heritage, its story, its taste, its ingredients and manufacturing process, its versatility, its traditions.

This will create a corner in the market where the consumer is able to define what type of vodka they are choosing and drinking by providence in the same way wine is chosen by region and taste."

That’s a major shift in thinking, but one which is echoed by all other serious players.  "There has to be a solid quality product at the base," says Berggren.

"Consumers may not spend so much time actively thinking about these decisions, but it is important to many trade customers and bartenders.  In addition, the market is increasingly competitive and we strive to differentiate our product along a number of dimensions: primarily product quality and taste, but also packaging, name and, of course, advertising.

The whole offer must make sense and all the parts contribute to the product and brand experience."  The emphasis these days appears to be relying less on packaging and more on the quality of the liquid in the bottle.  This brings up an intriguing conundrum.

From the days of "white whisky", vodka has defined itself as a light, even neutral, spirit.  In these days of premium the buzz-word is ‘purity’.  The more times it is distilled the better, the more rigorous the filtration the higher the quality, but as any student of distillation knows the purer a spirit is the less flavour it has.

When you begin to define yourself as having less flavour than your rivals there is little for the consumer to hold on to other than the packaging and what the brand says about them. "Vodka? It’s like the Emperor’s New Clothes," said one New York bartender. 

"One day soon someone is going to be like the little child who punctured the illusion."  The vodka brands which do talk about having a distinctive, if subtly nuanced, flavour, need to completely re-educate their consumers – a long and expensive process.

That said, both Finlandia and 42 Below run regular in-depth training ‘universities’ for bartenders and consumers. 

Common dilemma

The brand owner’s final dilemma is how to manage their premium and superpremium brands when they penetrate a wider consciousness and sit on the brink of the mainstream. All brands want to sell ever greater volumes, but is high volume and widespread distribution compatible with a premium – or even super-premium image? Not according to Tuunanen.

"Unfortunately premium brands start losing their ‘premiumness’ when they become a mass-market brand .  You only have to look at some of the major players in the vodka category in the UK, who started as at a premium level but have lost this status when becoming 100,000 or more, 9L case brands."

What then with superpremium brands such as Grey Goose? Bacardi didn’t pay $2bn for a niche brand.  With 1.4m cases a year sold in the US it occupies a pretty big niche, but can it maintain its image and status as its new owner pushes for greater volume?

"The reality of any business is that the more successful you are the more readily available the brand becomes," says Dawson. "I do however believe that a superpremium brand can still be a widely distributed as long as it doesn’t compromise on quality and maintains its price premium. Not doing that is a commercial kiss of death.

It’s not simple. It’s a challenge."  Words which the rest of the category would do well to heed.