LUXURY VODKA: A glamorous comeback

We turned our backs on bling as the global recession bit and conspicuous consumption went out while cutbacks came in. But super- and ultra-premium vodkas are once again finding favour, writes Alan Lodge.

Some of the world’s greatest comebacks have become the stuff of legend. Wispa bars, Take That and Liverpool FC in the 2005 Champions League final can all arguably lay claim to the greatest comeback of all time, but amid the depression of recession in 2009 one trend started to make a slightly sheepish reemergence through the fog of economic frugality: bling.

While the world’s economies struggled to get themselves back on an even keel, overt displays of decadence and glamour were viewed as vulgar and slightly offensive to those struggling to make ends meet.

However, nearly two years after the credit crunch began, people are starting to look beyond budget buys and are starting to rediscover the qualities offered by high-end luxury products, such as super-premium vodkas.

As spirits categories go, this one is fairly young. Vodka producers are generally agreed that the super-premium end of the vodka market only came to life in the mid-1990s as the category looked for ways to reinvent itself for a new generation of aspirational young drinkers.

“In this world consumers want brands that serve as badges – something that allows them to be seen as more aspirational,” explains Marc Strachan, marketing director for Cîroc. “Just like people on a red carpet want others to know what they are wearing, people also now want people to know what they are drinking.”

Carefully targeted advertising campaigns, ever-evolving packaging design and a raft of celebrity endorsements have helped bring vodka back into bling. Companies have seen the value of creating products that elevate vodka above the norm, focusing on quality, heritage, provenance and taste.

Claire Smith, head of spirit creation and mixology at Belvedere Vodka, believes the whole vodka category has benefited from companies adjusting their approach to the top-end of the market. “The considerable work done over the last decade to raise the quality and awareness of super- and ultra-premium spirits has certainly had an influence on the consumer’s purchasing decisions and has had a ‘halo’ effect on the vodka category as a whole,” she says.

“Over the last decade, the consumer has become more conscious of the ‘quality indicators’ of products they purchase. Therefore, the consumer has become more readily prepared to invest intelligently in products that can demonstrate additional value, particularly in goods that demand a higher price tag, such as super-premium spirits.”

Lifestyle choice

Petter Moe, co-director of DQ Vodka, says that the combination of fashion, knowledge and a growing need for experimentation among consumers is fuelling the rise of luxury vodka.

“Over the last decade, vodka has changed from being an anonymous drink to become a luxury lifestyle product,” he says. “As with other trends of this day and age, consumers are becoming more and more brand aware and also use the drinks products they purchase to make a statement about themselves.

“With the introduction of the super-premium category during the middle of the ‘90s, consumers were introduced to higher quality vodkas that were easier to drink and that appealed to a younger generation. Since then, it has become a trend among consumers to compare vodkas based on how ‘smooth’ they are.

“The vodka drinker has learnt over time that there are actually great differences between vodkas, and that the drink they thought of as traditionally tasteless and odourless can actually be very enjoyable and interesting to drink.”

It has long been a priority for drinks manufacturers to try to educate consumers about their brand as much as possible. As with wine, it seemed that drinkers wanted to know where their drink came from, who made it, how it’s made and what makes it different.

With vodka, one can harp on until the cows come home about the number of filtrations the spirit goes through, what type of grain is used and so on. Yet, as with wine, once again there is the danger of intimidating, confusing or alienating your potential consumers with baffling levels of detail and description that can leave them yearning for the days when vodka was a much more simple thing.

Moe says: “The consumer has for a long time been misled to think that the numbers of distillations or filtrations decide the quality of the vodka, but this is not necessarily always the case.

“We believe that too detailed descriptions of production methods will only confuse the consumer further. For us it is important to tell the consumer what the vodka is made from and where it is made. Excellent raw materials are after all what create the basis of a high-quality vodka.

“Provenance is important for any brand. After all, there is only one part of the world where vodka should actually come from, and this area is called the vodka belt. The key countries in the vodka belt are Russia, Poland, Sweden and Finland. It’s that simple.”

The makers of Mediterranean vodka Akvinta, however, believe that letting the consumer know why the drink they are sipping is superior to their regular tipple is essential to grow awareness, understanding and loyalty among drinkers.

Catherine Thomas, international director for travel and luxury retail at Akvinta, says: “The average consumer tends to think of vodka as a neutral spirit with no taste or flavour, and potentially with a harsh after burn. It’s only when they are recommended premium vodkas by barmen, or given the opportunity to try a more superior product, that they can truly understand the difference.

“Education and consumer experience is the key. When we bring this to the consumer we frequently hear ‘I don’t normally like vodka, but I like this one’.

“With vodka, since there is no ageing process, the customer needs to be educated in the essential ingredients that have gone into producing the end product.

“In Akvinta’s case, we use water from a very ecologically pure source, we have a unique quintuple filtration through unusual filters that really yield a very smooth product, and the grain which is carefully selected to distil the alcohol is organic, and the best possible quality. From a trade perspective, we are also very considered in our modus operandi. We believe in the personal touch and as such tailor training, marketing and PR to suit our individual customer and end consumer’s needs.”

The vodka landscape has altered dramatically over the last two decades, in particular since communism ended in central and Eastern Europe in the late ‘80s.  As such, vast quantities of vodka have been launched to capitalise on the strength of the expanding super-premium category.

In some ways this has benefited the category, ensuring that the consumer is constantly given the opportunity to try something new and always finding a reason to visit the super-premium vodka  (SPV) category. On the other hand, the category is becoming dangerously over-saturated and could certainly benefit from some consolidation, according to Belvedere’s Smith.

“Ultimately what is needed is a tighter definition of vodka than the one we currently have within the EU which would help protect the traditional and authentic style of vodka produced in those areas with a longstanding vodka provenance,” she says.

“The influx of vodkas from outside of the ‘vodka belt’ have diversified the options available to the consumer, and it can certainly be said that there are discernable differences between styles, yet many would argue this is at the expense of the consumer’s understanding and appreciation of ‘real vodka’ and the centuries of tradition and craftsmanship that have contributed to some of the finest vodkas  available today.”

Differentiation and diversification

Nonetheless, the growing popularity of luxury vodkas is fuelling industry optimism that consumers are now getting more aware of the fact that vodkas do not all taste the same.

Muriel Raguenaud, global marketing manager at Grey Goose vodka, says: “As Grey Goose awareness levels continue to increase internationally and more consumers have an opportunity to taste Grey Goose for the first time, there is no turning back to the once commonly held belief that all vodkas taste the same.

“Once consumers experience the superior taste of Grey Goose, something which is particularly well showcased in the Grey Goose Classic Martini – a bar call heard across the US – the difference in quality is clear whether or not you’re a spirit connoisseur.”

The producers must be doing something right if recent performance figures are anything to go by. Markets across the world are opening up to luxury vodka, while travel retail is providing a reliable sounding board for the demand among discerning drinkers for a little extra quality.

Mathieu Duchemin, global business development director for Belvedere Vodka, explains: “The US still remains our number one market, where our sales in 2009 have remained stable, which is quite an achievement in sight of the current economic context. The other markets in the world are actually performing very well for Belvedere, and not only for the past 12 months.

“The brand has enjoyed a very promising growth in Europe across all the countries, exceeding +30% annually, with particular growth in the UK, France, Germany and Italy where Belvedere is either already the leader in the super-premium vodka league, or about to become the most highly recognised brand.”

Others, such as Akvinta, are using the success of 2009 as a springboard for further development in 2010 and are looking forward with much greater optimism than at any time in the brand’s relatively short history. Thomas says: “We have achieved significant growth compared to last year. For a brand that is only three years old, we have achieved good penetration in London within the on-trade, travel retail and in luxury retail.

“Within the UK, we still have a large amount of potential to achieve, since we still have the rest of the UK to spread our wings to. In terms of other markets, the newly launched initiative in the US will obviously be another key market going forward, if only because of its size, but there is also Europe, Asia and the Middle East to expand and develop the brand into. We have already started laying the groundwork, so 2010 should certainly be an interesting year for growth.”

Diageo reacted to the boom in the popularity of high-end vodka by entering into partnership with Dutch distiller Nolet’s Ketel One last year, beefing up a luxury offering which already included Cîroc as pricier, and some might say classier, alternatives to Smirnoff.

As a marker for the direction and potential Diageo sees in the category, Ketel One plans to enter 15 new markets including Brazil and Australia by the end of June, according to Bob Nolet, vice president of the Nolet Distillery, where it’s made. Diageo also plans to release a new Ketel One flavour to add to its citrus variety in 2010, Nolet said.

The US currently accounts for more than 90% of Ketel One’s vodka sales, which will reach two million nine-litre cases this year, said Nolet, an 11th-generation descendent of the distillery’s founding family.

“The partnership with Diageo is about global scale and our inspiration to make Ketel One a true global brand,” said Nolet. “We’re in this forever.”
The world’s biggest drinks company is placing a lot of emphasis on the luxury sector, buoyed by figures which show Cîroc volume sales climbed to 400,000 cases in the year ended 30 June from 60,000 cases in first half of 2007, the year that Diageo teamed up with Sean Combs, better known as P Diddy.

The music star’s arrangement with Cîroc is unique in that he is regarded as a “true partner” and receives half the brand’s profits while acting as the public face of the brand across the world.

The success of the partnership with Combs has led Diageo to the point where they are set to release two new Cîroc flavours – Red Berry and Coconut – into the US market early in 2010 in a bid to add to the whopping $2 billion profits the brand enjoyed in 2008.

Staying ahead of the game

It is the ability to innovate which stands luxury brands in the greatest stead. It’s all very well establishing yourself as a top-end product, but staying there requires a flexible marketing approach as well as the vision to spot gaps in the market to expand into.

Belvedere’s Smith says: “It is certainly more important than ever to ensure that your brand is at the forefront of the consumer’s mind, and in times of economic pressure many brands have chosen to reduce their level of communication.

“Belvedere on the other hand has chosen to innovate, and 2009 has seen the launch of several new varieties to augment our offering. Belvedere Black Raspberry, Belvedere IX, Belvedere Intense and Belvedere Silver all demonstrate our commitment to innovation, quality and investment within our brand.”

DQ sets itself apart from the competition with its striking bottle design, which looks markedly different from anything else on the market today.
Co-director Moe says: “The vodka segment is a highly saturated category, and it is easy for brands to become invisible and disappear amongst the crowd.

“It is difficult to differentiate a product in such a fierce marketplace, but if you have a product that looks different, that is of a high quality, and you have a brand statement that the consumer can identify with, then it is definitely possible to make its presence noticeable.”

It looks for all the world as though bling, image and provenance are going to be the keys to success in 2010.

Alan Lodge, December 2009