Vodka

Steeped
in vodkas. “At this
point it’s next to impossible for me to put another vodka on
the back bar. We have 26 vodkas now,” comments Stephen
Clark, bartender at Cuffs, the bar at Jurys Hotel in
Boston’s Back Bay. “Our main restriction is space. All 26
sell well.” Ketel One and Grey Goose are among the brands
customers call for most often, he says, noting that
California’s small-scale Hangar One vodka is starting to
catch on, especially its lime and orange flavored products.
Coca Cola and Skyy Vanilla is getting hot, as are dirty
martinis, he continues. Space is a very real problem in
today’s competitive market. Shelves on bars are essentially
considered to be prime real estate and there’s not a lot of
room for rent anymore. “Bar space is limited. It’s also a
storage issue,” says Mary Palmer, General Manager for
Silvertone Bar & Grille in Downtown Boston. “So many
companies are coming out with their own flavors. Where does
it end?” she asks. “If people are coming in and asking for a
certain brand, I’m not going to deter it. But what am I
going to have to sacrifice?” One of Silvertone’s most
popular vodkas is its own homemade raspberry-infused
version, which Palmer says has developed a strong following
among customers there. She also finds that unflavored vodkas
are still very popular as well.

“I don’t care
anymore,” says Eryl Williams, Bar Manager at Laurel Grill
& Bar in the Back Bay, when asked how he reacts when
sales representatives approach him with a new vodka. “Come
back in six months and tell me it’s still in the market, and
I may consider buying it,” he tells them. “The marketing
people are realizing the end has come to buying premium
(unflavored) ultra-filtered vodka. There is no taste. I’m
sorry, it is supposed to have some flavor,” he says, adding
that if the quality of such “flavor” is high, customers
enjoy drinking these vodkas mixed only with soda water.
Among his top sellers, Williams says Absolut, Grey Goose,
Stolichnaya, Ketel One, Belvedere, and Chopin all sell
pretty evenly, with Skyy coming in at a tier below. Among
flavored vodkas, black cherry-flavored Effen is doing very
well, he says. So with all the different brands out there,
how does anyone choose one vodka over another? “It’s a name
recognition thing,” says Williams. “The Grey Goose advantage
has been so strong people automatically think it’s the best
and are willing to pay $9 for a mixed drink. In a taste test
they have no idea. I poured four
unchilled vodkas blind and Smirnoff came out on
top.”

Survival
of the fittest. “What’s
going to happen is there has to be a shakeout. I think it’s
happening in retail already. A retailer can’t afford to
carry that inventory, particularly in flavors,” observes
Monsell Darville, Vice President/Group Marketing Director
for Bacardi USA, which purchased Grey Goose two years ago
for a reported $2 billion. On premise, there’s only so much
back bar space, he says, prompting accounts to ask: “Do we
really need 12 citrus flavored vodkas?” Still, Darville
predicts total US vodka sales volume to increase from 44
million nine-liter cases now to 52 million nine-liter cases
in 2OO9. “I certainly don’t see vodka sales diminishing, not
in the short term.”

Despite Grey
Goose’s dramatic success, he insists he takes nothing for
granted in the market. “We operate here as though we’re at
bottom rung trying to find ourselves on the ladder. The
world is very transient. To assume that doing well three
years ago is still good would be a flaw in thinking. We
assume every restaurant has a new staff since last week.
It’s a constant world of education, of honing in on the
intrinsics. We can’t be naive to think there won’t be brands
that will have success regionally. It makes us better
marketers. We devise a marketing plan, it’s 5O marketing
plans. We’re very much a local marketing operation and
understand what’s going on in local markets.”

Reflecting on
the legacy of the brand and its creator, Darville continues:
“We inherited a wonderfully successful brand from Sidney
Frank and we want to improve upon it. Our tentacles probably
stretch a little further in our ability to affect every
market in the US. Grey Goose is coming into an already
substantial, powerful portfolio.” Bacardi’s legacy, he says,
“is our ability to build brands on premise. It’s where
brands are made. The Massachusetts market continues to be a
very strong market for us. We believe the dynamic in the
Boston area is a great incubator. It’s incredibly important
for us to be relevant,” he remarks, noting, “That people are
willing to spend $14 to $16 for a cocktail is remarkable.
We’re not greying nearly as much as the rest of the world.”
As far as the numerous, high quality smaller brands go,
“It’s fabulous that there is constant innovation. Will these
all succeed? Probably not, but they provide the germ to take
you somewhere else.”

As saturated as
it is, the vodka industry could potentially face a “survival
of the fittest” test in the future. “There are a lot of
brands in the ‘All Other’ category that don’t sell well,”
remarks Susan Kilgore, Marketing Director with Pernod-Ricard
and Brand Manager for Stolichnaya. “You will see marginal
brands and marks eliminated.” With its wide array of
flavors, including blueberry (spelled “Blueberi” in Stoli’s
lexicon), which was scheduled to launch this month,
Stolichnaya is well placed, she says, because it’s been
around for a long time, is known as an enduring brand and is
recognized as such by consumers and the trade. “From a
consumer and bartender’s view, the large choice of vodka
brands excites them. Growth is being driven by flavors, and
Stoli is in an excellent position. There are a lot of vodkas
that are inventions of marketing. Stoli is not one of them.
For us, in terms of assuring we’re on the shelf in five
years, it’s important to present our brand as an authentic
choice.” When Pernod-Ricard studied Allied Domecq before its
purchase, Stoli was a priority, and was one of the reasons
Allied was attractive, she says. Stoli actually diversified
its portfolio last year with the launch of a luxury vodka
offshoot, Elit. However, at nearly $5O a bottle wholesale,
cost is a factor. A vodka in this price range wouldn’t
automatically fly off the shelves, presenting retailers and
bartenders with the challenge of how to promote and sell
it.

From a
bartender’s perspective, both Williams at Laurel and Clark
at Jurys opine that selling a cocktail for nearly $2O can be
a challenge. Moreover, sales representatives advise that
Elit be kept refrigerated, limiting visability at the bar,
Williams says. Pernod-Ricard’s Kilgore notes that they will
furnish accounts with Elit back bar display pieces to
attract customer attention, and recommends purchasing two
bottles – one would be for the back bar, the other would be
kept refrigerated.

“Elit will
appeal to a small percentage of consumers. We knew at the
launch this would not be a mainstream, general market
product. It is not designed to be placed in every on- and
off-premise account, in the way that very high-end brown
goods do not belong in every account,” says Kilgore. “Elit’s
vision is to deliver, for those consumers who can and will
pay $6O for a bottle and $19 for a cocktail, the ultimate
vodka experience.”

Bar and
restaurant staff generally agree that expensive marketing
programs don’t necessarily get a brand into an account. “The
real way to do it is drop off a couple of bottles at the
bar. The bartenders drink them and talk it over, and also
make drinks for their customers,” says Scott Hurley, Dining
Room Manager and a bartender at Tempo in Waltham,
Massachusetts.

Chasing
the Goose. “The vodka
market is alive and well. Sometimes I wonder, as I turn down
two to three ultra- premium vodkas per week, if the category
is getting over-populated. But it seems that this spirits
category is growing every day, so I try to pick the next
Goose and add a new brand every few weeks,” observes Michael
Brody, Vice President of General Sales for M.S. Walker. “The
Massachusetts and US markets have not lost their taste for
flavored vodkas. Yes, everyone has a citrus, but that’s
because it is by far the most popular flavor today, used in
most Cosmopolitans. Add orange, vanilla and raspberry and
you have the majority of all the flavors sold today. But,
there is a large group of consumers that want choice and
will experiment with new flavors, if they pique their
interest. We are all looking for the next big new
flavor.”

Although the
market is crowded, Brody believes there are still plenty of
opportunities for small, up-and-coming brands. “There will
always be room in the vodka market for lesser known brands,”
he says. “When Goose was introduced it took many years of
tasting to develop a following. Look at it now. Every
supplier wants to find or develop the next big winner.
Therefore, you introduce new brands in the hope you can
discover the next one. Some of our lesser-known brands like
Armadale, Citadelle, Danzka, Kutskova, Luksusowa, Ston,
Vertical, and Bison have a strong and loyal following. It is
simply because of their taste profile.” Among up and coming
category leaders, Brody points to Sweden’s Svedka, which he
says is developing into the next million case vodka brand in
the US. Their strategy, he says, is to be the best value in
the imported vodka category. Three Olives has also become
successful in this arena and grows every month, he adds. Of
course, standards such as Absolut cannot be
dismissed.

The
Absolut appeal. “We
have found Absolut is as strong as ever. In the past few
years, they have chosen to become the market leader in new
flavors instead of adding another me-too flavor,” he says.
“Their Apeach is doing well and this summer they are
introducing Ruby Red, a grapefruit flavor. They are also
changing their ad mix to television. They are number one and
will not give up this position.” Brody calls Absolut’s
introduction of Level, its ultra premium vodka, “One of the
most successful new product introductions in the business.
They are still working to get this product tasted by the
vodka consuming public because after one taste, they feel
the quality and taste of the product will make the brand.”
Skyy, a long-established brand that Walker first introduced
in Massachusetts, remains very strong in this market and
still sells two million cases in the US each year. In March,
Beam Global Spirits & Wine and Absolut’s owner, Vin
& Sprit, announced a marketing partnership in which Beam
Global will distribute Absolut and Level in the US, while
Vin & Sprit will sell Beam Global’s portfolio around the
world. The Swedish company also bought 49 percent stake in
Beam Global’s parent, Future Brands, and 1O percent equity
of Jim Beam Brands for a total of $645 million.

Not to be
dismissed, domestic vodka, which accounts for about 7O
percent of total US sales, is also doing very well, Brody
says. “Premiums like Burnett’s are growing because it is a
value to the imports and has the largest and best-tasting
flavor lineup in the business today.” Even Walker’s own
modestly priced vodkas, such as Caldwells, Cossack, Kimnoff,
Rubinoff, Ruble, and S.S. Pierce, are still strong and have
a local following. “We even added flavors to Rubinoff
because our customer base demanded it,” he says.

The
next citrus? Trying to
capitalize on the craze for a unique new flavor, Pearl Vodka
recently launched Persephone, which at the time was the
first pomegranate-flavored vodka available. “It is a very
crowded category. We needed to break through the clutter and
do something different,” says Todd Nickodym, Executive
Marketing Manager for Luxco, which was formerly the David
Sherman Corp. “We were the first to tap into consumer trends
for non-alcoholic pomegranate beverages. In something like
this, being first is a tremendous advantage. Big brands are
aware of Pearl, and I’ll bet you’ll see a few more
pomegranate vodkas,” he says, adding “Had we done a citrus,
it would have been a lot more challenging. Imports and
flavors seem to be driving the vodka category. With our
limited resources, we focus on six to eight different
markets where our staff is there to do promotions and
tastings.” The challenge now? “Is there another flavor also
on the cutting edge that consumers are looking for, even
though they may not know they’re looking for?”

Dennis Prado,
Senior Brand Manager for Vox at Beam Global, points to the
brand’s green apple-flavored vodka as Vox’s entry into
uncommon flavors. For this, as well as the unflavored Vox,
the taste and quality stand on their own, he says. Vox’s new
point of sale materials will highlight its rating by the
Beverage Testing Institute as the highest rated super
premium vodka. Local sponsorships, product sampling and
education, and distributor incentives will be where Vox
concentrates its marketing, he says.

The
craft niche. Despite
widely recognized and successful brands like Grey Goose and
others, one of the more fascinating and curious developments
in the market has been the proliferation and consumer
acceptance of small scale, very high quality vodkas such as
Charbay and Hangar One. Tito’s Handmade Vodka, for example,
is made in Austin, Texas, primarily from corn, distributed
in 46 states and sold 1O6,OOO cases last year. Joseph
Herpin, the company’s sales director, projects 15O,OOO cases
will be sold in 2OO6. The story behind Tito’s appeals to
consumers, he says, because it’s a small company (only seven
employees) and was started by a real person, Tito Beveridge,
who maxed out his credit cards in order to start his brand.
He would go to stores tasting consumers and hope they liked
it enough to buy a bottle. Certainly a genuine, even quaint
tale. But Tito’s has something going for it that most
multinational mega brands don’t. In 2OO1 it won the double
gold medal at the World Spirits Competition in San
Francisco, beating out many better known names and giving
many overpaid marketing suits a reason to stop laughing at a
vodka from Texas. Only last year did Tito’s start
advertising in the new york times and the wall street
journal. Word-of-mouth remains the most effective sales
tool, says Herpin, who sees brands like his in a David and
Goliath marketplace scenario.

Another popular
upstart is Shaker’s, a vodka made from ground to bottle in
Minnesota using wheat and rye grown by a farmers cooperative
there. The farmers also own the distillery. Tim Clarke, CEO
of Infinite Spirits, which owns Shaker’s, helped build
Pete’s Wicked Ale into a famous brand and believes he can do
the same with Shaker’s. “With Pete’s, the brand was built
largely by word-of-mouth, and we’re employing a lot of the
same tactics. For Shaker’s, it started with the product
first, because you want people to come back to the brand.
“One of its key components is American, and we wanted to
give consumers an American brand. But they won’t buy
American unless the brand is as good or better than
imports,” says Clarke. “We’re able to sell the product on
its merits because there is something real to it. It’s not
just a marketing gimmick like others have. A number of
brands we saw when we started aren’t here anymore. You can’t
have 3OO-plus brands. There’s only so much room on back
bars. You’ve got to come in with two or three compelling
things, not just a snazzy package and money.”

This is all the
more vital when, in Clarke’s view, the number of new entries
in the crowded vodka market is slowing. “People are trading
up in this category much the same way as in beer or wine. We
don’t go into a given market and try to saturate it or just
throw money around. To some extent, you can’t play on a
level playing field.” Instead of a hard sell, Shaker’s
focuses heavily on product education, he says. “Walk them
through Vodka 1O1, you’re passing on knowledge to them and
also providing ammunition to help them sell. This generates
brand loyalty.” Future plans call for Infinite Spirits to
market whiskey, rum and cordials.

A
taste of Nantucket.
Massachusetts’s own Triple Eight vodka also seems to be
creating strong customer loyalty. The unfinished alcohol is
sourced in The Netherlands and Italy, and finished in
Nantucket at Cisco Brewers. The distillery there was used to
make barrels of single malt scotch that were sold to
investors to gain startup money for the company’s vodka, rum
and gin brands, says Jay Harman, Cisco’s president. The
vodka sold over $6OO,OOO last year, and Harman expects case
volume in 2OO6 to reach 1O,OOO, representing over $1
million. “When we first started (in 2OO2), Grey Goose wasn’t
as much on the map as they are today. Absolut was really the
call brand,” he recalls. “Since Grey Goose was sold to
Bacardi, it’s become a call brand. People who first drank
Grey Goose drank it to have something different. It isn’t
different anymore.”

Harman’s big
focus is creating sales incentives for bartenders, and he
started the Triple Eight Black Card program, for supportive
bar staff who sell the most product. Incentives include a
lot of themed merchandise, as well as all-expense paid trips
to Nantucket and Costa Rica. Sold in 14 states, Triple Eight
relies heavily on word-of-mouth publicity spread by visitors
to its facility. Aspen, Vail and New York City are among the
next markets Harman says he is considering. “We’re not even
a speck on the sales map for huge brands. It’s just a matter
of time and all about the quality of the product. In
Massachusetts there’s a ‘Drink locally’ sort of mentality,”
he says.

Triple Eight’s
newest entry, a cranberry vodka, seems to have been
well-received in the local market, adds Matt Lambo, the
brand’s marketing manager. “We didn’t have any extra
incentive to get on drink lists, but we’re on about 1O
different menus since being launched. Bartenders like it,
it’s new and they want to do new things with it,” he says.
Made from Nantucket cranberries, Lambo explains that the
distiller leaves the natural color and flavor in vodka.
“That really sets it apart on the shelf and in peoples’
minds when they try it. Even before it hit their lips they
know it’s completely different.” At Tempo, Hurley says
Triple Eight’s cranberry, as well as their unflavored vodka,
are both received very well with customers. He adds that
being made from corn is another niche that differentiates
the brand.

A
finessed new Finn.
Making a return after years of a low-key market presence
some might describe as invisible, is Finlandia, which is
owned by Brown Forman. “We had many types of campaigns,
inconsistent investment levels and positioning in the US.
Since 1996, Brown Forman did not make the best moves with
Finlandia,” says Mark Overdyk, Brown Forman’s Global General
Manager for the brand. “We basically got eclipsed by
others.” Until last year, when Brown Forman bought the
remaining 2O percent on Finlandia, “We weren’t calling the
shots,” he says. Like leading competitors who have a genuine
story to tell, Finlandia’s new campaign touts its purity and
authenticity, as well as the grain and water from which it
is made. “We’re not asking people to drink it because it’s
from Finland, but because of the purity of the product,” he
notes. “We’re trying to be real, not driven by image. Most
people are not that knowledgeable about what they drink.
When people say something is quintuple distilled, what does
that mean? If you tell customers it’s made from pure glacial
spring water, they understand that. The more people ask
about that type of stuff, the better off we’re going to be,”
says Overdyk.

The
Russians are coming.
One of the more intriguing new entries in the high-level
vodka segment may be Zyr (pronounced zeer), a Russian vodka
introduced into Massachusetts in March. David Katz, a New
Jersey-born Russian history scholar and president of Zyr’s
importer, Symphony Imports, moved to Boston during March and
April to personally visit accounts, conduct seminars and
hand sell the product. “How can you develop a winning
strategy for Boston and Massachusetts without living there?”
he asks. At first, Katz says he imagined calling his vodka
Another. This way, when he entered a new account trying to
sell it and the owner exclaimed “Another vodka?” Katz would
reply: “Oh, you’ve heard of it?” But after some thought, Zyr
won out. “Consumers don’t want gimmicks. They want quality,
not just the best seller,” he says. “If it tastes better or
makes a better cocktail, there’s always room for innovation.
With Zyr, it’s a simple premise: You’re a bartender,
retailer or consumer – what vodka do you enjoy today? Let’s
taste them side by side. No gimmicks, not marketing spiel.
Just taste tests. We do a lot of store tastings and a lot of
events.”

Vox, Level and
other major brands typically launch multimillion dollar
magazine advertisements, partner with large wholesalers in
major markets and pay their sales staff $2O for every three
bottles of product they sell, claims Katz. “People may read
about it in magazines, but bartenders don’t know it. If they
haven’t tried it, you’re dead because they won’t introduce
it to their customers.” Katz believes that direct, personal
tasting with bar and restaurant staff gets through in a
crowded market, a tactic he says worked in Florida,
Connecticut and New York City. In addition to Zyr, Imperia
is another new, self-described luxury vodka from Russia that
Shaw-Ross launched in the US last September. The $35 vodka
is the brainchild of Russian financier Roustam
Tariko.

When
vodka met sake. And
then there are the hybrids, such as Hpnotiq, and two
vodka-sake blends, Wokka Sake and Wasabe. Keith Harvell,
Northeast Regional Manager for Pasternak
Wines, which distributes Wokka Sake, calls it a heavily
on-premise product because bartenders love using it to
create imaginative cocktails. Not a sweet beverage, he says
Wokka Sake has a subtle Asian fruit taste. “It’s our
intention to create a bar brand with Wokka Sake. We’ve got a
big campaign coming up on the East Coast, very guerilla
style, to really engage the consumer. Unless consumers ask
for it, you’re not going to have a business very long,” says
Tim Day, the product’s creator and marketing director with
Extreme Spirits in England. “The market is super saturated.
If you took five top selling vodkas and made a mixed drink,
I don’t think you
would be able to tell them apart. We are vodka sake, a new
category.” The product launched here last September, though
Harvell says it will be re-launched this spring with United
Liquors.

Asked how he
chooses a new vodka to sell at Bauer Wine & Spirits in
Boston, Manager John Stepanski cautions that it can’t be too
obscure, and the staff must like it. “There’s a whole mess
of people out there who want what’s new and different,
something everyone hasn’t heard of. This time Hangar One,
next time Jean Marc XO. But people also want a recognized
name to show they serve quality.”

“I sell a lot of
Rubinoff and Popov. Older customers in their 5Os and 6Os are
going to go for the cheapest vodka they can,” says Melissa
Winters, owner of The Wine Rack in Greenfield,
Massachusetts. “Once you get above that level the Smirnoff
probably sells the best. When you get to the top shelf, I
sell a lot of Grey Goose and I carry the Jean Marc XO for
$5O. It’s the most expensive in the store and I think it’s
the best. The way I decide on bringing in a new product is
by what my customers ask for. I just brought in Three Olives
because several people asked for it.”

Is
the market hip-deep in vodkas?
No doubt. Can new brands penetrate the crowd and achieve
success even if they’re not Grey Goose? Yes, but only
through lots of smart, innovative outreach. And as smaller
brands have shown, even with a modest budget, a loyal
customer base is won by authentic, excellent-tasting
products and an ability to engage the target clientele. And
don’t neglect bar and restaurant staff or they’ll never
recommend your product.