VODKA: Flying high in travel retail

Vodka continues its upward growth trajectory throughout the world, and nowhere more so than in the duty-free and travel-retail sectors, where it is fast catching up with the likes of whisky and brandy. Alan Lodge reports

All over the world, vodka is riding the crest of a wave. It is gaining market share in the travel sector at a relentless pace and with new brands and range extensions enhancing the category there is a buzz around vodka the likes of which we have not seen before.

The versatility of the spirit, coupled with increased consumer interest in provenance and brand heritage, has lead many to enter the category or trade up to more distinguished brands, or even ditch other categories in favour of a dip into the world of vodka.

Europe remains the most important market for the category, but all regions are currently in growth, particularly in Asia/Pacific and the Middle East.
While whisky and Cognac may lead the way in duty-free volumes, vodka is catching up quickly.

Andrey Skurikhin, minority shareholder of SPI Group, which owns Stolichnaya, says: “The duty-free market for vodka has been outperforming the domestic growth rates in this category over the last few years and we expect this trend to continue.

“Today vodka is still underrepresented in terms of shelf space. In contrast with other categories, vodka has, at the same time, not seen over-premiumisation in the last couple of years and therefore represents an interesting and attractive consumer offer in today’s economic climate. We believe there is even space for yet more vodka brands in the duty-free market.”

It wasn’t always this way. The 1990s and early part of this century saw a raft of companies try to diversify their range with fruit-flavour varietals and the rapid ascension of RTDs, most of which helped give vodka something of a grubby name. Now it’s viewed as one of the world’s most popular and flexible drinks.

Petter Moe, co-director of DQ Vodka, explains: “The main reason for vodka being so popular is that it is one of the most versatile spirits used in cocktails. It is traditionally an odourless and tasteless spirit that makes an excellent base with
any mixer.

“This cocktail hysteria has led to people drowning in infused and flavoured vodkas over the last decade, giving them a headache when trying to order something at the bar. The market has simply forgotten what vodka is all about.

“We now believe in a renewed interest in regular vodka, based on the fact that consumers are more conscious about what to order. Many of today’s vodkas are smoother and better to drink neat, and the consumer is becoming more of a vodka connoisseur.

“Vodka has become a specialist product, and consumers are now trading the odd 18-year-old fine Scotch for this trendy white spirit.”

Phil Humphreys, managing director at Diageo GTME, believes that vodka’s adaptability makes it almost recession-proof. He says: “Vodka’s major
strengths can be summed-up in a single word – versatility.

“There is simply no other spirit that has such adaptability – from straight with ice to sophisticated cocktails – combined with exceptional appeal to consumers across the world.

“As such, vodka remains a vital market and, despite the current downturn, remains one of the industry’s most vibrant growth opportunities.”

Andy Causer, national sales director at UB Drinks – the owner of Dannoff – adds: “Certain spirits tend to have certain markets, but vodka has a very broad appeal across many age groups, both male and female.

“Vodka is becoming more about taste. People are putting it in the freezer and drinking it in the traditional way or experimenting with their cocktail shaker.

“Provenance is also playing a bigger part in the vodka market with more originating from outside the major markets – Russia and Scandinavia. Consumers are becoming savvy to this and are actively searching out specific vodkas, of different origins, with a solid heritage behind them.”

Vodka value

With that said, consumers will never lose their eye for a bargain. Premium products at a comparatively low price are bound to attract the more cost-savvy consumer and this is where cleverly positioned vodkas can reap the rewards.

Vodka O is set for launch into the travel retail market in March 2010 and, ahead of the launch, the brand has been assessing the impact pricing has on the success of its rivals.

Julian Moss, CEO at brand owner ASM Liquor, says: “Vodka O has been a very successful brand in Australia due to its image as an affordable luxury. The consumer is looking for high-quality products at very affordable prices. They are looking for a bargain but don’t want to compromise on quality.”

Causer adds: “Consumers are becoming more cost-conscious not only in travel retail, but across all sectors. Dannoff will do well in the travel retail channel as it provides a premium product at an affordable price point.

“While consumers are on the lookout for superior quality products, good value is an important factor in the buying decision, and this provides a fantastic opportunity for quality brands that don’t carry a premium price tag, like Dannoff, a Latvian vodka, which, at £10.99 (70cl), provides consumers with the value for money they’re looking for and retailers with an exciting profit opportunity.”

With the global economy starting to stabilise, brand owners are looking at how they can push on through the next 12 months. For some, it’s a case of consolidation, while others are looking to grow.

Skurikhin says Stolichnaya is hoping to “solidify and rebuild our distribution in the travel retail channels” during 2009/10 and is currently introducing
the “Stoli Global” campaign in the duty-free channel.

Skurikhin says: “The campaign was launched in the US in 2008 and subsequently rolled out worldwide during 2009. We are preparing at the moment an exciting consumer concept that we hope to unveil at the Cannes show.”

Bacardi, the owner of Grey Goose, which commands 48% volume market share in the global vodka category, is also refusing to rest on its laurels. Global marketing director of Bacardi Global Travel Retail, Gary Chau, says: “Despite the global downturn in the travel industry, we continue to promote brand-building activation in stores via innovative sampling experiences, which are more than just creating cocktails. Gift packs and gift with purchase are also implemented.”

Nemiroff Company, the largest alcohol exporter in Ukraine and one of the leaders in its domestic market, views travel retail as vital to its plans to grow exports. A Nemiroff spokesperson said: “The presence of Nemiroff in the duty-free and travel-retail markets is an integral part of the company’s global strategy.

“We have already increased sales volume by 35% in the duty-free network in 2008 and this year we are planning to change our distribution geography and start working on the duty-free markets in the Asia/Pacific region.”

Nemiroff will soon be launching Lex Ultra – a new product targeted at the ultra-premium end of the market. Lex Ultra will be available shortly in the duty-free stores in Russia and Ukraine, with a roll-out to the rest of the world in 2010. As with any new product launch, brand managers have been careful to ensure they identify the correct type of consumer to target with their promotional campaign. Nemiroff’s  spokesperson says: “The main instrument that affects the sales volume and brand image is advertising activities.

“On formulating our offer for a customer, we lay on the preferences, behavioural reasons and culture of spirit consumption of potential consumers. In the duty-free and travel-retail channels we have selected two types of effective sales promotion. In regions with the developed culture of liquor consumption, such as countries from the former CIS and Eastern Europe, we use mechanics of extensional purchase – three bottles for the price of two. Tasting and consultation are provided for the potential customers in order to inform them about a producer and products and to contribute to their interest in the first purchase.”

Window on the world

The opportunities presented by travel retail as a way of showcasing products to a global audience cannot and are not being ignored. Akvinta Vodka is hoping to back up the launch of its new Sensory Kit on board Virgin Atlantic flights – which consists of scented candles, soaps and room sprays with which to create the perfect Akvinta-drinking atmosphere – with effective store displays to help boost the brand.

Catherine Thomas, international director for travel and luxury retail at Akvinta, says: With our entry into the US and developments in the Middle East, we like other brands see travel retail as an important shop window that allows us to display the brand and build customer affinity and recognition.”

The resilience of the vodka category is impressive, as is the drive by companies to ensure that they make the most of the opportunities duty-free retailing offers. As Skurikhi says: “The travel-retail and duty-free market continues to be the ‘window on the world’.”

Alan Lodge, October 2009