Vodka in the US

Lucy Britner finds vodka is still sweet on flavour in the US market. Here she uncovers some of the more unusual varieties

Although many bartenders love to hate the neutral charm of vodka, it remains the consumer’s tipple of choice in the US. 

According to the Beverage Information Group’s Liquor Handbook 2012, the category’s market share reached 33.5% in 2011. This is 7%, or 4.4 million cases, up on the previous year. Total vodka consumption for 2011 was a massive 66.5 million nine-litre cases. To give you a bit of context, that’s around 240 Olympic-sized swimming pools full of vodka. 

But, as we all know, there’s vodka and there’s vodka. And, according to the Liquor Handbook, “some consumers traded down to lower-priced labels”, while others “indulged in the ‘affordable luxury’ of the category’s super-premium offerings”. The important point is that consumers did not leave the category. 

Adam Rogers, senior analyst at the Beverage Information Group says: “The areas that are driving vodka sales are currently in the super-premium and premium segments with estimated increases of 13% and 11% respectively, while the entire vodka category increased 7%.”

Rogers says premium brands include Svedka, Smirnoff, Pinnacle and Sobieski and describes as super-premium Belvedere, Cîroc, Ultimat and Grey Goose. Cîroc owner Diageo describes the brand as ultra-premium but either way, it’s had a great year. 

Rogers says vodka price segments that posted modest gains were in the value brands, including Popov, Kamchatka and Tvarscki, and high-end premiums such as Absolut, Pearl and Finlandia. 

He adds: “There is still growth at the lower-priced tiers of value and premium, but out of the two price segments premium has more of an upside. During the recession people traded down from high-end premium to premium and found there were many brands that offered a high quality product at a good price point. These consumers remained with these brands due to their high quality-to-price ratio.  

“Many of these brands were also participants in the flavour offerings, so that was another contributing factor for consumers to remain intrigued with their brand of choice.”

Vodka’s 7% increase in 2011 marks the 16th consecutive year the category has enjoyed growth. Domestic vodkas were up 4.2% and imports by a massive 12%, according to the Liquor Handbook. Despite its mature status – in both brand and market terms – Smirnoff managed to gain 0.9% and Campari America’s Skyy vodka was up 1.5% to make its 2011 total 2.74 million cases. 

Both of these brands have worked a significant amount on their flavour offers and this has become an important strand to the category. But more of that later – much more. 

Celebrity style

On the imported brands side, the Liquor Handbook says consumption reached 25.4 million cases in 2011 – this has grown more than 200% over the past 10 years. Absolut leads the pack, though it saw a 1.2% dip in 2011. Next up is Svedka, which overtook Grey Goose after an impressive 11.8% volume increase. 

Celebrity status for brands such as Cîroc and Sobieski (Sean Combs and Bruce Willis respectively) helped them to grow 66% and 23.9%, while Beam’s Effen enjoyed a 27.8% boost. 

It’s no coincidence most of these successful brands have innovated with flavours in the past couple of years and the top prize has to go to Pinnacle, the first brand to launch a ‘whipped’ range. The brand gained more than one million cases in a year to post a massive 92.9% growth. It was bought by Beam for $605 million earlier this year.

Rogers adds: “People believed that flavours had their day in the past. Then Pinnacle released its Whipped line of flavoured vodkas last year which became the most successful extension in distilled spirits history.”  

Pinnacle’s Whipped also went on to inspire a barrage of flavour launches – many of them dessert-centric.

The US flavour treadmill has been working harder than a 2012 Olympian and those in the know say there’s plenty more where that came from. 

Kim Washington, senior director of vodkas at Beam, says: “We certainly don’t see the trend of indulgent offerings and dessert flavours going away any time soon. In fact, this sub-segment of flavoured vodka continues to grow. 

“We were the first brand to launch a whipped vodka with Pinnacle Whipped Vodka, which has seen explosive growth, and we have a number of other popular, indulgent vodka flavours in our portfolio. 

“Our consumers expect new and surprising flavours from us and we expect this flavour trend to continue as vodka drinkers look to experiment with diverse offerings.”

Flavour is flying

Speaking of diverse offerings, most waffle-eating people enjoy the foodstuff for breakfast, covered in maple syrup. It may not be the healthiest start to the day but things could be worse – you could bypass the food side of things altogether and just drink Waffle vodka. 

Yep, that’s right. One of the latest in a very long line of sweet food-inspired launches is Georgi’s waffle-flavoured vodka. To mark the launch and celebrate National Waffle Day, a branch of Holiday Inn Express in Stony Brook, New York, served alcoholic waffles to its guests. No doubt that was an interesting start to the day. 

But it’s not just vodka that is reaping the benefits of the flavour boom. Rogers believes the phenomenon will continue to spread, saying: “Flavours will continue to be a driving force for not only vodka but the overall spirits industry as more flavoured whiskeys enter the market.  Innovation is what is driving the industry today and flavours are the most contributing factor to that trend.”

Brad Essig, vice-president marketing, vodka category, Diageo North America, agrees with Rogers and Diageo has definitely got a taste for flavour. 

Essig says: “Currently much of the excitement in the US vodka market is being driven by flavour innovations. Vodka consumers value brands’ heritage, but also look to vodka’s vibrancy and modernity to keep the category fresh and interesting. Flavour innovation is one way the category responds to consumers’ changing tastes and drives excitement.

“In the US,” adds Essig, “innovations are moving beyond fruit-based flavours and into new spaces, as we see in the trend toward confectionery-style flavours.”

Flavours are not just creating a buzz around the category, they are also creating revenue. According to Essig, Smirnoff was up 3% volume and net sales were up 4% in the company’s preliminary results for the year ending June 30, 2012. 

He adds: “Smirnoff grew volume share with the highly successful innovation launches of Smirnoff Whipped Cream and Fluffed Marshmallow and also as a result of the Smirnoff I Choose campaign.”

Variations on a theme

Cue the introduction of more variants. Diageo has recently launched Iced Cake and Kissed Caramel under the Smirnoff brand, the 30% abv drinks retailing at around the $13 mark. 

The Sazerac Company is also reaping the rewards of recent flavour trends and has some predictions for the future. 

The company launched Wave vodka in 2011 – a line of coloured and flavoured vodkas – and Naked Jay vodka in “a few select markets”.  

Wave is set to hit the market with Chocolate Covered Pretzel-flavoured vodka this month (October). Naked Jay, which is known for its Big Dill – dill pickle flavoured vodka – is also set to hit the sweet spot in 2013 and, although the precise flavour is strictly under wraps, Sazerac Company tells Drinks International that “it will be sweet and not savoury”.

But Absolut vice president marketing director Maxime Kouchnir warns that the dessert bubble could burst. 

Kouchnir says: “I doubt though that the demand from consumers will sustain all the recent dessert flavours launched.”

Tracey Clapp, marketing director for vodka at Sazerac Company, predicts future flavour trends will take inspiration from other food segments. 

Clapp adds: “If you pay attention to other food segments and consumption patterns the clues are there. Peach, which is not a new flavour, is making a comeback. So it’s been fun to see how something old is new again and also to see the new and unusual breakthrough almost concurrently.”

Peach has certainly been a feature in Diageo’s mind and Essig says fruit flavours have not gone sour. 

He adds: “Fruit flavours have clearly not lost their attraction either as Cîroc flavour variants Peach and Red Berry have been well received by consumers in the US and abroad.”

Essig goes on to describe Cîroc Peach as “Diageo’s most successful North American product launch to date”. 

Cîroc’s numbers to June 2012 show an increase of 58% in terms of volume and 61% in net sales in the US.

Essig says this was boosted by the double-digit growth of both Cîroc Red Berry and Cîroc Coconut. This success makes Cîroc the fastest-growing ultra-premium vodka in the US, according to Essig. 

Getting fruity

Diageo isn’t the only company getting fruity with its flavour options and Beam brand Pucker has just launched Raspberry Rave and Lemonade Lust. Across its portfolio, Beam reports vodka success with 31% increase in dollar sales and volume up 18% on last year. 

Looking beyond flavours, where will innovation come from next? Diageo’s Essig says the artisan, craft selling-point will continue to be important. “As in other sectors of the US spirits market, local artisanal products are becoming more commonplace. While these vodkas are still a small part of the overall market, the success of the craft beer category in the US gives some precedent to suggest that these brands will grow in importance over the next few years,” he says.

Vodka has long been king of the bling when it comes to packaging, and Diageo’s Essig believes stylish packaging will play a part at the premium end – he also cites mixed drinks as a space for innovation. 

He says: “We can also see the market developing towards vodka-based drinks, such as Smirnoff & Cranberry ready to drink or Nuvo, a carbonated blend of vodka, sparkling wine and natural fruit nectar.

“Nuvo has become a hot brand with multicultural consumers. The brand is showing tremendous growth,” adds Essig. 

In other good news for the US vodka market, Absolut’s Kouchnir reports that the on-premise is back.

Kouchnir says: “I think recent trends include two pieces of very good news: we are seeing the on-premise go back to growth and the premium and super-premium parts of the market accelerating. Consumers are willing to pay a premium again, whether that’s for more premium items or for going out.”

Diageo is also enjoying the resurgence of the on-premise, particularly for Ketel One. 

Essig says: “Ketel One is a fantastic on-premise brand and it is also experiencing good growth. Even during the depths of the recession when everyone else was running promotions, we held on price for Ketel One and it has served us well in the long run.

“Trends over the past six months show the on-premise side is healthy and running strongly in the US. In fact, most recently, our own on-premise business is growing faster than our off-premise business, indicating that consumer confidence is returning and shows a strong basis for the sustainability of the US spirits market.”

Brand heritage

Success in the on-premise relies on bartenders knowing about a brand. And brand heritage triumphs, whatever the flavour of the month happens to be. 

Flavour veteran Absolut’s Kouchnir says: “We also had very strong feedback from our programmes with bartenders. In these programmes we are actually bringing Sweden to the US – quite literally as we are building a travelling Swedish village made of stugas (small Swedish cottages).”

Bartenders learn about the ingredients and their source in Sweden as well as the brand’s history. 

So whether dessert drinks prove to be the icing on the cake for another couple of years or whether the category is ripe for new fruit flavours, core brand values have to remain intact to keep the big names on top. 

But one thing’s for sure – vodka shows no signs of slowing down in the US and, when it comes to innovation, something tells me we ain’t seen nothing yet.