Vodka

It’s
a little like being in your car, stopped at one of those
railroad crossings when the gates go down, and here comes a
freight train, moving fast, but seemingly without an end.The
engine is large and powerful and pulling a multitude of box
cars of different shapes and heights, painted in many
colors. Names fly by quickly, sometimes faster than you can
read. Some have instant recognition, like Absolut, Grey
Goose, Ketel One, Smirnoff, Stolichnaya, Skyy, Belvedere,
Finlandia, Svedka, Tanqueray Sterling, Chopin, Ciroc, Three
Olives, Van Gogh, Vox. Others are more obscure or totally
unknown and are almost unpronounceable like Armianskaya,
Kamchatka, Kutskova, Luksusova, Monopolowa, Moskovskaya,
Pomarancza, Wyborowa, Zubrowka, and Zynthia – sounding like
a listing of qualifiers in an Eastern European tennis
tournament or the roll-call of a Russian-Polish foreign
legion. After a while, you stop counting all the freight
cars and begin to wonder if the caboose will ever appear.
Eventually it does. But perhaps the most remarkable thing
about this metaphorical vodka-loaded freight train is that
it has never stopped buzzing with excitement nor even begun
to slow down for several years now.

TO
PIECE TOGETHER AN ACCURATE PICTURE
of how and where the train is presently headed, I sought out
a number of the key railroad engineers intimately familiar
with its route maps and timetables, including two
Massachusetts distributors who carry large and diversified
vodka portfolios, the brand director of the category’s most
illustrious cachet import, a number of on-and off-premise
store/bar/restaurant front-liners in Massachusetts and,
finally, two visionary and colorful product architects in
the emerging ultra-premium micro-distilled domestic
niche-brand vodka segment, which some experts feel has
started to produce some of the finest vodkas in the world
and presents a promising future benchmark for the
category.

The topic of
most immediate interest, of course, was checking out how
Grey Goose has been faring since the blockbuster $2.2
billion Bacardi acquisition deal with Sidney Frank last
August. It was the all-time record price ever paid for a
single spirits brand and positively startled the entire
industry. Has Bacardi been getting some bang for this
astonishing outlay of bucks? You better believe it. This
past year’s growth in Massachusetts (the sixth largest Grey
Goose US market) was 39.4%, with volume sales of more than
71,OOO 9-liter cases – and the brand’s national growth
average was not far behind.

“Here in
Massachusetts, we’ve been doing a little fine-tuning with
distributors, but nothing of major consequence,” says Jim
Whelan, Bacardi USA’s Massachusetts Regional Director. “But
on the consumer side, we really haven’t changed anything.
Quite honestly, we’re not messing with a formula that’s been
successful. How many major brands selling over 1.5 million
cases are growing at the 36% to 39% rate we’ve experienced
this past year? What they recently showed us at a Bacardi
meeting in Puerto Rico is that the brand, before last
August’s purchase, was growing in the 28% to 32% range,
which isn’t at all shabby, of course. But since the company
bought it, it’s been consistently averaging in the
middle-to-high 3O%. So if you look at it on a time line, and
put an arrow on last August, you have to say, ‘Holy Smoke!
Something pretty solid is happening there’.

As to whether
Bacardi might have overpaid for the brand, as some people
have suggested, Jim quickly dismisses the notion this way.
“Just consider that 9O% of the brand’s volume was US-based
when Bacardi bought it. The huge opportunity that hasn’t
even been touched yet is the great worldwide distribution
network that Bacardi has in place with brands like
Martini-Rossi. This gives us the ability to roll out Grey
Goose and grow it in all these world markets. And, if you do
the math, $2.2 billion suddenly doesn’t seem an extravagant
price to have paid for such extraordinary growth
potential.”

Bacardi’s
Miami-based Grey Goose Senior Marketing Manager, Aleco
Azqueta, takes this point even further. “Nationally, it’s
just been a monster first year all around for Grey Goose.
The primary focus for us is to really manage growth while
always promoting the brand’s super-premium image.” And
despite Grey Goose’s size and success in the US the brand is
in different stages of development in different parts of the
country, necessitating a number of different regional
marketing approaches, he points out. In most East Coast
markets, the Original Grey Goose brand already has huge
equity and is well established. In these markets, the
marketing concentration has now shifted to developing the
brand’s three flavors, especially Grey Goose l’Orange.
Nationally, and particularly on the West Coast, the brand is
very underexposed and underdeveloped, so a mammoth territory
like California presents enormous growth opportunities for
the Original Grey Goose, while the flavors remain a
secondary priority. “Of course, the brand had almost no legs
at all internationally” Aleco emphasizes, “so, in Europe,
the Caribbean, Canada, and a lot of other global
destinations where Americans go, the opportunities are
simply tremendous.”

Aleco points to
a few of the innovative marketing initiatives that Bacardi
is now focusing behind the brand with considerable success.
“We like to be at the forefront of what we call branded
entertainment,” he explains. “For example, on the Golf
Channel, we have a show that’s actually called the Grey
Goose 19th Hole. And we’ve just finalized a two-year
worldwide sponsorship deal with Retief Goosen, who’s agreed
to use the Grey Goose logo on his apparel, make appearances
on the 19th Hole show, and do several meet-and-greet
sessions at PGA Tour events. He’s currently the #4-ranked
golfer in the world, and the defending US Open champion,
who’s known, appropriately, as The Goose.”

Aleco points out
that Bacardi is convinced the world of golf is a perfect
demographic fit for Grey Goose, since it’s a natural filter
for targeting upscale consumer audiences. It’s also a very
social high-end sport. “Whenever you see these multimillion
dollar football, basketball, and baseball athletes taking
time off from their own sport, they’re playing golf,” Aleco
observes. “And a golf course is also the venue where a fair
amount of high level business deals and relationships are
made. So, Grey Goose is currently sponsoring several PGA
tournaments this year including, the Bank of America
Colonial in Ft. Worth, Texas, the Booz Allen Classic in
Maryland, and the International in Colorado.

The brand has
also developed sponsorship relations with the National
Thoroughbred Racing Association, which is another connection
to the world of luxury sports. “Thoroughbred racing is known
as ‘The Sport of Kings’,” says Aleco, “and we’re targeting
horse people like owners and suite holders. We just
sponsored the Kentucky Derby, and Grey Goose was the vodka
served at the official Derby party.” Bacardi has
significantly increased the ad spend on Grey Goose. Last
year, the brand spent a very hefty $14 million on media.
This year the ad-spend is up over $16 million, with more of
an emphasis on broadcast TV. “We were the first spirit
sponsor to be on CNN this spring,” Aleco underscores, “and
we’re partnered with the Sundance Channel in the fall, doing
a six-part show series titled ‘The Iconoclasts’.”

At the retail
level Grey Goose will feature a new high-profile brand
ambassador, Nick Mautone, the author of the bestselling
cocktail and entertainment book “Raising The Bar”.
“On-premise, bartenders want to know what are the newest
drinks and are always looking for cocktail ideas and best
ways of mixing them,” Aleco points out. “We want to help
educate them about the latest trends in cocktails. It’s the
same with off-premise customers coming into a retail store.
So, with Mautone, we’re putting together in-store displays
and demonstrations and offering free recipe books with
different holiday cocktail and food match-up suggestions,
which can serve as home entertainment reference guides.
Let’s face it, everybody loves being a bartender,” he
emphasizes, “and the more creative, the better.”

Mark Fisher is
the President & Chief Operating Officer of United
Liquors Ltd., and Vice President of The United Group. A
vodka drinker himself, Mark is bullish about the category
and has nearly 3O vodka brand names under his command. We
discussed how and why United selects their brands, and what
he finds particularly interesting in his portfolio. “A vast
majority of the brands we carry are selected because of
relationships with our suppliers, but there are always
exceptions,” he explains. “One recent example is Jean-Marc
XO. It’s a small-batch, hand-crafted French product that’s
at the real high high-end of the price spectrum, and the
only vodka I’ve seen that’s received as high a rating as
Grey Goose. One of the things that attracted us to the
Jean-Marc product was another of their brands, X-rated
Fusion, which looks like it might be able to compete in that
Hpnotiq-type vodka-liqueur crossover category with a special
appeal to women. Fusion has a sexy hot pink color, an
extremely attractive package, and has a very high quality
vodka spirit with blood orange mingled with mango and
passion fruits. It’s actually been doing fairly well so far.
Anyway, these are examples of some of the products we select
that are not from a traditional supplier, but which we feel
have some solid growth potential.”

One of the vodka
giants that United carries is the category-leading import
Absolut, and its new ultra-premium brand, Level. “Absolut is
arguably one of the single greatest success story in the
spirits business ever. They reinvented the vodka category
and brought an aura of style and sexiness to what was a
fairly mundane product. They introduced the first
flavored-vodkas that had universal taste appeal and that
grew into powerful brands in their own right and they look
like they’re on the right track again with Apeach.” Despite
the unequaled success of the brand, “Many people feel that
Absolut made a mistake years ago, when they let other brands
come in over them, because they owned the high-end of the
category and were the real deal. Their once unassailable
brand image has been pushed down as other, higher-end brands
climb in above them” says Mark. The introduction of Level
gives Absolut a chance to fight back and to try and regain
some of the image high-ground. “It’s Absolut’s second foray
into the ultra-premium category, and I’m watching closely to
see how it does,” he says. Absolut tried introducing a high
premium called Sundsvall six or seven years ago, but dropped
it. Level is relatively new and they’re certainly investing
a lot of money behind it, so I think it’s just a question of
time and getting distribution out there.”

Ketel One is a
super-premium that Mark is particularly impressed with.
“It’s just been a killer for us!” he exclaims. “The Nolet
family have been producing it in Holland for over 11
generations, and have traditionally been extremely low-key,
genteel and fairly conservative about their marketing. But
in the last few years, they’ve broken out with some
significant ad-spends. It had always been built as a
word-of-mouth brand. But the advertising now is both clever
and dignified and targeted mostly to brand
loyalists.”

He feels that
what’s especially unusual about the Nolet family’s brand
philosophy is that they’ve stayed true to their original
product, only coming out with one flavored line extension,
Ketel One Citroen, and haven’t tried competing with the
flotilla of flavors that are out there today. “They’ve just
continued to stay focused on their base brand as their
bread-and-butter, which I think is a very sound business
strategy. Here in Massachusetts, the brand has experienced
just phenomenal growth, and been running at about a 2O% clip
since we’ve taken it on exclusively the last two or three
years.”

Mark feels the
key to Ketel’s success is their unusually effective
on-premise trade initiatives, including exceptional wait
staff and bartender training they’ve done to put all these
on-premise professionals solidly behind the brand. “You
can’t say enough about the importance of this,” he
emphasizes, “because once you’ve imparted this education and
knowledge about the quality of your brand to these in-house
people, they’ll sell the product for you. And, of course,
once consumers drink it on-premise, that’s what drives the
off-premise sales. As Mr. Ray Tye is always reminding us
here at United, brands are made by the drink. Ketel One is a
perfect example.”

Belvedere is
another of United’s high-end super-premiums Mark sees doing
a very good job, and believes that the quality and visual
packaging plays a huge role. “It’s an example of putting a
great vodka and a great-looking bottle together, and you’ve
got a success story right there,” he points out. “But they
did make one mistake they’ve admitted to when they came out
with the two flavors that are somewhat odd to read and very
difficult to pronounce. One is their orange flavor
Pomarancza; the other is Cytrus, a citrus flavor spelled
with a ‘y’. These are splendid products, but not too many
people go into a bar and order something they can’t read or
even pronounce. So, they’re actually in the process of doing
some packaging changes with more traditional names that will
undoubtedly help. Later this year they’re breaking with a
major advertising campaign that will give them a big boost.
Remember that before Grey Goose began dominating the high
end a few years ago,” Mark adds, “Belvedere was the image
vodka in that category segment. But it’s still a very, very
solid brand that’s showing decent growth and profits for all
segments of the business, and it grew double digits for us
this past year.”

Mark views Ciroc
as another interesting brand because of its uniqueness. It’s
produced from snap-frost grapes and, therefore, may have a
particular appeal to the wine aficionado who’s looking for a
distilled spirit to drink. “First, it’s a grape base,” Mark
observes, “secondly, it’s something that’s definitely
different, and not a traditional vodka. The packaging is
spectacular, and obviously Diageo knows what they’re doing
when it comes to marketing brands. We have been very pleased
with its performance. I think there’s a bright future for
Ciroc, because you’re seeing a lot of people starting to get
into the grape vodka kick and we know there are going to be
some new grape product entries in the very near
future.

“The truly
amazing thing about this category,” Mark marvels, “is that
every time you start thinking it may be getting saturated or
is starting to lose momentum, along come amazing new
products, new growth brands, new opportunities, new
excitement. There just seems to be no end to it. And let’s
face it. Everyone likes to have a martini glass in front of
them. And what they like in it, for the most part, is vodka,
maybe mixed with something or maybe flavored, but they want
that image of sitting there with a martini shape in front of
them. And if anyone had ever told me this was going to
happen 15 years ago, I’d have told them they were out of
their minds. But it has happened, and the phenomenal thing
is that it keeps on happening even more and more, just as
more and more niche brands keep on proliferating.

What turns out
to be one of the vodkas that Mark respects the most is none
other than the category’s dominant leader, Smirnoff. “We’re
talking about a domestic vodka,” he says, “which often is
perceived as having a lower level of quality than the
imports. But let me tell you something about Smirnoff that
may surprise you. First off, it’s as high a quality vodka as
is produced worldwide, and I’m really not kidding. Did you
know earlier this year the New York Times did their own
blind taste test of vodkas? And guess what the results were?
Smirnoff was picked #1 over every single vodka in the
tasting, including imports. And you got to know this wasn’t
paid for, certainly not with the Times.

“I’m a huge
believer in this brand,” Mark re-emphasizes. “And they’ve
done a particularly spectacular job on the flavor end of the
business, especially with their raspberry twist, green apple
twist, and watermelon twist and they’ve just broken in with
a new black cherry. It seems they’re always doing something
interesting and newsworthy. Smirnoff is all about extremely
good marketing, because their business is more skewed
towards the off-premise consumer. It’s true that at the
lower price points, they’re not perceived to be as good a
quality or have the high class image of many pricier
competitors. But the truth of the matter is the product in
the bottle is as good. Sure, people will order a Ketel One
or a Stoli in a bar. But guess what many of them are pouring
for themselves at home where image really isn’t an issue?
It’s likely to be Smirnoff. There are just a huge number of
Smirnoff customers out there who are day-to-day vodka
drinkers and only really interested in spending less of a
buck for excellent quality.”

Seagram’s is
another United brand Mark feels is a sleeper on the domestic
premium end. Like Smirnoff, the name has tremendous brand
equity with day-to-day consumers, he points out. They’re
also doing the flavor thing big time, and recently
introduced their own black cherry. “This is a brand that
we’ll undoubtedly be seeing more and more out of,” Mark
declares, “as new owner Pernod Ricard becomes a bigger and
bigger player after their acquisition of Allied Domecq. So,
from now on, keep your eyes on Seagram’s and a lot of
interesting head-on-head competition with Smirnoff at the
premium level of the flavored category. Right now, Smirnoff
is predominately a 1.75 brand in the $19.99 to $23.99 retail
range. Seagram’s is a couple of bucks below, maybe $14.99 to
$18.99, slightly about the Gordon’s/Gilbey’s price point
level. Not that Seagram’s will ever have the draw of a
Smirnoff, but I see some very decent growth opportunities
for this brand.”

Before closing,
I was perhaps indiscreet enough to ask Mark how much United
might be missing the two major vodka brands that got away in
the recent brand trade reshuffling among Massachusetts
distributorships. “I guess you must be referring to Grey
Goose and Stolichnaya,” Mark responds with a thin laugh. “Do
we miss them? Wouldn’t you? Not only are they very good
brands, but also consider that we were exclusive on both of
them for many years and had a great deal to do with really
putting them on the map and developing them in this market.
But here’s how I react to this kind of thing. You don’t know
how much you’re going to miss something til it leaves you.
And, actually, Stoli was a tougher loss than Grey Goose in
some ways, cause Goose doesn’t do a lot of volume in
flavors. Most of the Goose business is base brand. But Stoli
does a huge amount of flavored business, and also is huge
on-premise where they’ve got a better image than Smirnoff,
as does Absolut. On the other hand, off-premise, Smirnoff
has enormous volume, plus it’s an easier sell. So, all
things are relative when you evaluate these things. And when
it comes to any sense of loss, you learn to realize that a
new love is equally important to you. It’s sort of like
missing old girlfriends. You get married and have to forget
about them. Same thing in the wholesale liquor business. You
have to let go and move on.”

The other
distributor I huddled with is M.S. Walker’s Sales &
Marketing Director and Vice President, the always gregarious
Mike Brody, who’s built a reputation for discovering and
developing hot and unusual brands in many spirits categories
– vodkas very much included. “As I like to say in this
business, ‘If it’s white it’s up, if it’s brown it’s down’,”
Mike explains with a characteristic hearty laugh. Absolut is
the biggie in his portfolio, but our discussions centered on
the excitement he feels about some of his lesser-known
recent vodka brand adventures, the most prominent being the
phenomenally successful premium-priced Swedish import
Svedka.

“Talk about
something that’s caught fire,” Mike exudes, “I hardly have
words to describe what this brand has been doing for us.
Last year, it grew nationally over 6O%, and Massachusetts
was higher than that. This year, our Svedka business has
been doubling even over last year, and is presently
somewhere between 25,OOO to 3O,OOO cases in this market.
Consider that in its first launch year, 2OOO, when it was
with Whitehall, the brand did 6OO cases. Then, we took it on
and did 75OO the first year we had it, and the last two
years it’s just exploded.” The Spirits Marque One suppliers
have done a particularly clever thing with
price-positioning, Mike emphasizes, since this a high
premium quality import, but is being sold at a domestic
premium price-point around the Smirnoff level. A Svedka
75Oml usually retails around $11.99 to $12.99, the 1.75s go
for about $19.99 to $22.99, and the liter size that bars and
restaurants especially like to use, sells in the approximate
$14.99 to $15.99 range.

From a
distributor’s viewpoint, this is also truly a dream brand,
Mike points out, because it’s such an easy sell and requires
very little special attention. “We don’t have to do anything
unusual with it,” Mike says. “On a monthly basis, we just
keep taking care of the refills, and basically buy it and
sell it. The brand has beautiful packaging and is heavily
supported by shelf promotion materials from the supplier,
and it’s a great profit-maker for retailers. It’s also very
competitive on the flavor battlefront, having just added a
Svedka Citron to the brand lineup, the most popular vodka
flavor of all of them. This gives them an entry in all the
major flavors like vanilla, mandarin, raspberry, and now
citron. So, they have the four fastest flavor movers.” Among
his unusual high-end brand discoveries, Mike talks about
success with a Scottish vodka that Wm. Grant & Sons
produces called Armadale, pointing out it’s their vodka
equivalent to their enormously successful new gin product,
Hendrick’s, and retails in a similar $3O to $35 range for a
75O. Another small-batch super-premium import from France he
likes is Citadelle, produced by the makers of Pierre Ferrand
cognac. “It’s made in a pot still in cognac, and I have to
tell you, their raspberry and apple vodkas are by far the
most spectacular flavored vodka profiles I’ve ever
encountered. When you smell these bouquets they’re almost
unbelievable, like finest quality eau de vies. Restaurants
Grill 23 and Excelsior uses Citadelle Apple for their
signature apple-tinis. We supply four or five cases every
couple of weeks to just these two on-premise
accounts.”

Another very
stable product in his super-premium import portfolio is
Luksusova, the original Polish potato vodka, which he says
draws interest among real vodka connoisseurs, and does very
decently at a $28 to $3O price level for a 1.75. And still
another French specialty vodka he carries is Vertical that
sells in the $25 to $3O/1.75 range, and is made by the
Chartreuse monks who produce the classic liqueur. “It
doesn’t have any of the familiar Chartreuse spiciness in
it,” Mike points out, “but it’s four-times distilled and a
very clean, pure super-premium. We’re in the process of
developing it. So many of these smaller brands are all about
guerilla marketing. You get them into a few stores and some
on-premise accounts, get some people try them and find them
unique, then make them their own, and, then, you hope, word
of mouth will spread. We have still another specialty brand
I have hopes for called Ston from Estonia that we’re
starting do some things with. Part of the product’s appeal
is it’s from the Old Russia.”

On the domestic
side, he is especially intrigued by a new small-batch
discovery out of Texas called Tito’s. “What an amazing
success story!” Mike enthuses. “The product was first made
with a little pot still in this guy’s garage in Ft. Worth.
He’s now expanded into a larger facility, has his own
bottling line, is up to something like 5O,OOO cases a year
in the Texas market, and is now picking up distribution all
over the US. When I was at this year’s WSWA in Orlando a few
months ago, a couple of people kept telling me, “You’ve got
to check out this product.” I found it spectacular. It has
an exceptionally clean micro-distilled-type taste because of
it’s very small batch pot still production where you’re able
to remove all those impurities. So, we’ve taken it on for
Massachusetts and will have it on the market this summer. It
would be fun to get it on WEEI-Sports Radio when they
interview Tito Francona before Red Sox games and say, ‘Gee,
Tito, we see you’ve got your own vodka’. This is the kind of
thing I just love to get involved with. It’s similar to when
we first started to handle Skyy, when we were one of the
first distributors in the US to get behind that
brand.”

And Skyy, of
course, is another high premium domestic that’s continuing
to go well for Mike. Nationally, they’ve been a double-digit
growth brand since the late ‘9Os. “Here in Massachusetts,
we’re more of a price-sensitive market than a lot of
places,” he explains, “and when we finally broke above that
$2O price-point for Skyy last year, it’s taken about a year
to level. But this year the brand has been showing
significant increases, and is attracting customers who don’t
want to spend quite what an Absolut or a Stoli is going to
cost them. So, in the low $24 to $25 category for a 1.75,
with Skyy, they’re getting a nationally recognized brand of
excellent quality with a nice image and a great-looking
bottle. And they, too, have done some interesting flavor
things with citrus, orange, melon, vanilla, and berry, which
they’ve now changed to raspberry. I’m just amazed at how
strong that Skyy Blue label continues to be, and the brand
is really back on the growth track this year.”

Mike feels that
one of the most exciting current vodka opportunities is none
other than the low-priced domestic premium Heaven Hill
Burnett’s brand lineup, which is moving well, not only in
Massachusetts, but all over the country. “It’s strength lies
in its ability to have established itself as the
price-sensitive value brand well below Smirnoff with every
single flavor you can imagine, including raspberry, orange,
citrus, vanilla, coconut, sour apple, lime, cranberry,
cherry, watermelon, and mango. Without a doubt, they have
the most complete flavor line in the industry, and these are
products of very decent quality. And this is the thing about
vodka and all the different quality claims. If you are going
to mix it, with tonic or juices or anything else, the price
value factor is an important selling point. So, no one
should thumb their nose or get uppity about the low-end
vodka business. It may not be particularly glamorous or
exciting, but it’s a very strong and, more importantly,
extremely stable part of the vodka industry.

Among all the
flavors in his portfolio, Mike is exceptionally impressed by
Absolut’s new Apeach flavor launch which, he says, has been
an instant hit here Massachusetts. “It’s just doing
phenomenal business. And one very smart thing they’ve done
with this is use it to reinforce their brand position. It’s
as if they’re saying, ‘We may have lost some ground in the
vodka image department, but we have always been the import
category’s volume leader by a very wide margin, and were the
first to introduce flavored vodkas with Citron many years
ago. So, we’ve always been in the forefront of developing
this category, and here’s a new flavor product that could be
the best of them all.’ Clearly, what they’ve decided to do
this year, and in the future, is to concentrate effort on
regaining recognition and reinforcing a leadership position.
And here they come with peach, which is a very palatable
flavor, tremendously mixable, and makes a fabulous
peach-tini. It’s been doing an amazing business since we
rolled it out the first of May. Within the first month, we
were getting all kinds of repeat business for it, both on-
and off-premise.”

Absolut has also
added a lower-end Danzka import from Denmark that Mike
believes is the only grapefruit vodka flavor in the market.
It’s packaged in a unique new metal container that holds the
cold for at least an hour longer than a normal glass bottle.
“This category is all about packaging,” Mike points out,
“and this package is totally unlike anything you see out
there on the vodka shelves. Danzka also has a citrus and
cranberryraz flavor at 75-proof.” Right now, the brand is
only available in liters and 75Oml, and sells in the $15 to
$2O range. But next year they may be coming out in 1.75s,
and seem to be going after competitors like Skyy from a
price standpoint. The larger size will make a big difference
for this brand, Mike predicts, and so far it’s already had
some notable sales success in the Boston market.

When talking
about the category’s escalating flavor craze with on- and
off-premise retailers, you’ll discover surprising
differences of opinion that you’re not hearing at the
distributor and supplier levels. While bartenders are
predictably welcoming as many different flavors as possible
for an increasingly exotic variety of drinks, many
off-premise liquor store operators are not all that
impressed. Says Atlas Liquors’ president, Peter Fine, “In my
vodka business, the higher marques and super-premiums are
doing well, but I don’t see the flavors really flying out of
any of my three stores. For instance, Absolut regular is one
of my popular high premium brands, but the flavors aren’t
really doing much of anything. Stoli regular also does a
good business, but you’re seeing sales on Stoli flavors
slowing down, because Smirnoff has really been making some
inroads in the vodka flavors market at a lower price point.
And I have a feeling that the people who drink something
like, say, Grey Goose on the rocks, they’re not looking for
a flavored Grey Goose. So, yes, we’re seeing all kinds of
flavors, and people definitely buy them, but it’s not
anything compared to the straight vodka business. I myself
am a longtime vodka drinker, but personally have almost no
interest in flavors at all.

“Ketel One is a
brand that seems to have gotten all this figured out
correctly. It’s an excellent vodka that’s also priced right.
And you’ll note they only have the single Ketel One Citroen
citrus flavor, which has become pretty much the standard
base flavor in the whole category, if you wanted to add just
one flavor to your line. And this is a wise move, if you
look at other brand performances. I mean, you get your
regular and your citrus, and then it really falls off fast
as far as sales go.”

Peter feels
strongly that what this flavor business is really all about
is getting a larger presence on the retail shelf. “This is
the name of that game,” he firmly declares. “Brands are
looking for the biggest spread possible to attract
attention. A consumer walks down the vodka aisle, and if you
have a big spread of a particular brand out there on the
shelf, the chances of a purchase are significantly
increased. It’s not that suppliers don’t care if a
particular flavor or product sells,” he adds, “but the
primary objective is all about increasing the real estate.
Basically I see the flavor thing as a monkey-see, monkey-do
business, where one flavor comes in and the competition is
quick to respond with other versions. You might launch the
only kiwi vodka in the market, but I’d almost guarantee that
a month or two later there will be three other ones. But
these things tend to come and go, and to me the flavors
craze is just a temporary thing if you keep focused on the
long-term view of the marketplace. Ten years from now I have
little doubt that a brand like Grey Goose will still be a
powerful and popular brand, but it won’t be because of its
flavors. The same goes for other quality vodkas. If you want
it to be orange flavored, you can always add something
orange to it. There’s a world of good mixers out
there.”

About his vodka
sales in general, Peter says, “The higher end stuff is
great, but it’s mainly all about image, especially with a
powerful brand like Grey Goose. In my business, these are
the specialty products that you see really taking off during
the holidays. But there’s always a market for a good vodka
that’s moderately priced and has obvious good quality.
Smirnoff is an excellent case in point. Something around $2O
that you can drink yourself and pour for company, and you
don’t have to worry about it.”

Don
DellaGiustina, the Beer & Liquor Manager for massive
retailer Big Y’s Table & Vine outlet in western
Massachusetts, also questions the value of all these
flavored vodka products at the upper super-premium and
luxury levels. “You’re seeing all these high-end brands
jumping into flavored lines,” he observes, “but, honestly,
they aren’t moving all that well. If you want to talk flavor
business, it’s the lower super-premium and high premium
levels where the action is, like the Absoluts, the
Stolichnayas – also the Smirnoffs and the Skyys – among
several others. I think people buy the straight high-end
vodkas for their nice martinis or straight-up drinking. This
is where you really appreciate clean smoothness that
top-level vodkas deliver for a higher price. But this
quality superiority isn’t so significant when you get into
flavors, so maybe the higher price on the flavored product
isn’t worth it.”

However, there
are a few exceptions to this, he emphasizes, such as the
ultra-small-batch, handmade flavor products of the
micro-distillery Hangar One brand, produced out in
California. Last summer, in fact, the Big Y featured Hangar
One in all their store newsletters. “This brand is still one
of the world’s best kept secrets,” Don declares. “It’s just
a clean, luxurious, truly ultra-smooth super-premium, and
the distinctive purity of it’s three flavors just blows
everything else away. So far, the brand hasn’t gotten the
sales recognition it clearly deserves, but at our
approximate $3O selling price for a 75O, dollar-for-dollar,
it’s probably far and away the best super-premium value we
have to offer, and it’s worth every penny.”

Hangar One turns
out to be a collaborative niche product venture by a small
California company called Craft Distillers. The two
principal brand architects are master distiller Jorg Rupf,
celebrated for making extraordinary high quality eaux de
vies, Aqua Perfecta liqueurs and St. George Single Malt
Whisky, and Ansley Coale, the man behind ultra-premium
Germain-Robin domestic alembic pot still brandies,
recognized as some of the finest small-batch brandies in the
world that critics compared to the finest cognacs of
France.

In a previous
article I referred to Ansley Coale as a “mad scientist”, “an
industry maverick”, “an impossible dreamer”, which were just
some of the wild man titles bestowed upon him by many
friends and industry colleagues. He laughs when reminded of
this. “Well, I don’t know if I’m really crazy, but I will
tell you that my desire to produce one of the best vodkas in
the world out here in California is not an impossible dream.
To tell the truth, I think we’ve already done it.” The story
behind the Hangar One brand is indeed a wild one.

It all got
started back in 2OO1, when Ansley and his friend Jorg
noticed there was a new and serious market out there for
high-level super-premium vodka. “Here, we were suddenly
seeing Grey Goose and Belvedere selling over 1.5 million
cases at a $3O/75Oml price point,” Ansley explains. “I said,
‘Well, Jesus, Jorg, why couldn’t we produce a truly great
domestic vodka, using your handmade, fruit-distilling eau de
vie production expertise and your little Holstein pot still?
I’ve had a fair amount of marketing experience with my
hand-crafted pot still brandy products. We might even make
some money.’ Jorg agreed. We both felt it was an enormous
and irresistible opportunity, and it’s exactly how the brand
got started. And if you think I’m a ‘mad scientist’ in the
spirits business, you should have taken a look at Jorg’s lab
and distillery that was operating out of a little low-rent
building on the Alameda Naval Air Station. This is how we
came up with the Hangar One brand name.

“We decided on a
really simple package,” he goes on, “cause you sure don’t
want to dress something all up with a lot of hype, when what
you’re really trying to do is focus a consumer’s attention
on unusual contents inside the bottle and talk about how it
tastes. And what was really important to us was using
ingredients worth talking about. “For our vodka,” Ansley
continues, “we wanted a wheat base, because it’s softer and
has nice mouth-feel. But it was our choices of fruit and the
production of our flavors that makes these products
particularly unique. What we ended up doing is making our
flavored vodkas the way the highest quality eaux de vies are
produced. We crush and mascerate the fruit and let it steep
in the wheat vodka, first making a wine out of it, and then
put it through a redistilling process in the pot still for
blending into the final product. This also leaves some
slight coloration from solids in the fruit as well, which is
pleasing to the eye.”

Ainsley explains
that for flavors, he and Jorg chose intensely aromatic fresh
fruits like “Buddha’s hand” citron that’s not at all like a
standard lemon. It’s an Asian fruit with no center, and no
juice, which has become a hot item in trendy upscale
restaurants for its remarkable citrony aromatics, but it
possesses none of all that powerful lemon-taste acidity you
find in most other lemon flavors. “In China this fruit is
used to perfume dwellings,” says Ansley, “and it’s not easy
to obtain these guys. It also costs us three bucks per
fruit, but it’s just what we were looking for. For another
flavor we use a Kaffir lime, which is a knobbly unattractive
Indonesian fruit. But it has lovely flavor, and is well
known in Thai cuisine. In our vodka, it’s beautifully soft
and fragrant. The third Hangar One flavor is Mandarin
Blossom, where Jorg decided on using mascerated fresh
flowers of tangerines. And, actually, our unflavored Hangar
One vodka product turned out to be the toughest challenge of
all. What Jorg does is to distill a very high-proof eau de
vie out of voignier wine and then blends it into the wheat
vodka base. It’s the damndest thing because it just takes
away all that ethanol hit that you get in most other vodkas
products.”

The first huge
business breakthrough happened three years ago, when Ainsley
showed the brand to Vern Underwood, who owns the
distributorship giant Young’s Market Company in Southern
California. “Vern has a great reputation for recognizing and
building quality brands,” says Ainsley, “and what he said to
me after our first tasting was, ‘I’m really going to get
behind this, because, in time, I believe I can sell 2OO,OOO
cases.’ Then, he looked at me, and said, ‘Of course you know
the vodka market’s already crowded.’ I nodded. ‘Well, what
are you going to do?’ he asked. I told him, ‘All the
category is showing us is stuff we don’t want to do. We want
to do everything the way the big guys don’t.’ He leaned back
in his chair and smiled. ‘That’s just what I wanted to hear
from you,’ he said. And would you believe, since that
meeting, he’s gone ahead and has opened over 15OO accounts
for us in Southern California, alone, and we’re now in key
markets all over the US.”

All this has
been happening so fast that Jorg and Ansley’s heads are
still spinning. “Our first full year out was really 2OO4,”
Ansley points out. “We’ve now moved into a new 6O,OOO
square-foot hangar space, bought new distilling equipment,
and purchased an automatic bottling line that has really
heated up production. This year we think we might even be
approaching 5O,OOO cases. Yet, we’ve completely bucked
normal methods of creating brand recognition. We ship no
free goods. We do no print advertising. The ingredients in
our products are expensive and our prices are fair, so we
offer no volume discounts, deals or giveaways that are so
prevalent in the marketplace. We’re in this for the long
haul, looking way ahead, and we want to protect the margins
for our trade customers to enjoy 1O years down the line. We
think all this comes down to having respect for the brand
itself. We want people to buy what’s in the bottle, and we
believe that customers like this are what create a solid
brand.”

One other
notably remarkable brand discovery, which illustrates this
new and promising micro-distilling vodka movement, happens
to be right here in Massachusetts on the upscale getaway
vacation retreat of Nantucket Island.. It’s a high-end
super-premium vodka called Triple Eight, selling around the
$3O level for a 75O, its only available size. The brand also
has two flavors in the lineup, Cranberry and Orange, which
just scored bigtime by winning the prestigious Chicago
Beverage Tasting Institute’s “World’s Best Orange-flavored
Vodka Award” earlier this year. It’s the same kind of boost
that Sidney Frank received back in 1998 when his new Grey
Goose won the BTI’s “Best Vodka In The World” honor. And if
you haven’t yet heard of the brand in the marketplace, you
soon will. It is already all the rage in every Nantucket
resort, bar and restaurant. In fact, currently, two
Nantucket package stores, alone, are selling 6O cases of it
every week at both locations, and tourists coming here from
all over the country and abroad are starting to badger their
local retailers back home to somehow get it for
them.

The Triple Eight
idea was evolved a few years ago by the very imaginative
small and youthful production team at Nantucket’s Cisco
Brewery, already well-known for their signature microbrew
Whale’s Tale Pale Ale, who mused, why not get into spirits,
using an organic corn base, an exceptionally pure water
source from a filtered glacial aquifer thousands of feet
below the surface of the island, and really get something
going? And how about giving the brand the same name as the
#888 water-well the water comes from? And what was a
seemingly improbable pipe-dream for a hand-crafted,
seriously upper-premium, Nantucket-produced vodka of superb
quality only a few short years ago is now a startling
reality.

I spent a
laughter-filled hour chatting with fun-loving Jay Harmon,
the 3l-year-old Chief Operating Officer of this Triple Eight
Distillery project, and a remarkably savvy boyish
entrepreneur who clearly loves his work, the way you might
say same-aged Theo Epstein enjoys being the General Manager
of the Boston Red Sox. Both young men have a common purpose
going for them, namely a commitment to produce a world class
product in the their respective fields. Theo managed to
achieve it last year with a World Series championship. Jay,
it seems, is well on the way. “You’ve heard of the Nantucket
Nectar juice guys?” he asks. “Well, we’re the Nantucket
booze boys.”

He first arrived
here to work at the Cisco facility with brewmaster Randy
Hudson and the enterprise’s founder-distiller-winemaker Dean
Long, while researching a college master’s thesis on
microbrewing production. He’s never left. It’s been a
closely-knit team effort ever since. “We started
distributing Triple Eight locally with our own truck in
2OO1,” Jay remembers with a chuckle. “It was a 1975 VW
camper decorated with Eight Balls like on our label, and
looked sort of like our vodka bottle label on wheels. In the
first six months, we picked up 3OO accounts in the metro
Boston area and received considerable interest from major
distributors. The truth is that no account really said ‘no’
to us. It seems people were intrigued at the sight of a
producer pulling up in an ancient VW and trying to sell a
product. Some might have wondered if it was even legal. But,
the neat thing about Massachusetts is that, when you get a
so-called “farmer’s distiller” license that we have, you
also get a wholesaler’s license, which has allowed us to go
direct and do the hand-sell thing. It sure helps keep some
of the money in your pocket, when your trying to build a
small brand, and you can represent yourself on the first two
tiers. “We were the first in this state to actually obtain a
micro-distillery license and we’ve grown rapidly to a point
where we’ve now partnered with an outside distributor,
opting to go with a smaller house, Commonwealth Wines and
Spirits, who also do a lot of hand-selling of high-end
wines. We’re getting widespread demands for our product and
are now in 14 states.

Jay strongly
believes that one development that can have a big impact on
future success and continued interest in the vodka category
is this business of licensing smaller distilleries so that
they can get into the game. Many of them have great products
and wonderful stories to tell. He feels that eventually it
could build into something like the microbrew phenomenon and
all these regional high premium beer products that have been
coming on the market, which can compete directly with the
high-priced imports. “This will always be a small portion of
the market, of course,” he underscores. “The vodka market is
so large that you’re always going to have your big guns and
major players out there. But having a well-represented
market segment of small innovative distillers can only add
tremendous interest to this category. But I have to caution
anyone involved with a small distillery that just decides to
pop up and expects to just get into the business. With a
distilled spirit, you really have to get out there, and it’s
fairly expensive to be considered a competitive
brand.”

“We went through
a couple of marketing phases,” he remembers. “The first year
we did a lot of print media, but now we’re finding that the
majority of our marketing dollars are best spent for direct
tastings at liquor stores, telling customers our story,
putting our product in their mouth. In fact, this is the
first year we’ve really had a major presence in a lot of
retail stores, including Luke’s Liquors on the Cape, Marty’s
in Newton, Martignetti’s, Blanchard’s, Big Y, Yankee
Spirits, and Kappy’s – Bob Selby was just here last week
making a huge buy for all his stores. Our Commonwealth
distributor has really been giving us this kind of breadth,
cause there’s no way we’d be doing this in our old
VW.”

“On-premise
exposure around the state can be tougher and has a lot of
room for growth,” he points out. “We’re in the top 2O to 3O
on-premise accounts and upscale establishments like No. 9
Park, Spire at Nine Zero, The Fireplace. But there are so
many accounts in Boston that are affiliated with larger
restaurant groups. But we have a hard-working brand
ambassador, Matt Lambo, buzzing around the territory, and
people find it difficult to say no to a very pleasant
persuasive guy doing door-to-door sales and focusing on just
one brand.”

“Anyway, it’s
been a ton of fun,” he says. “And the real fun part of it is
just the joy of brand-building and getting people to
recognize what your doing. That’s the true fulfillment for
me. We have no desire to get too big, too quick. In fact, we
are committed to this quaint keep-it-small mentality, but
also are developing a professional approach to selective
off-island niche brand distribution on a national
scale.”

Checking out any
category with frontline bar chefs, as creative bartenders
are now called, is always the best resource for assessing
brand performances, consumer trends and products of special
interest in the on-premise marketplace. And, with the
ever-expanding universe of specialty vodka brands and
flavors, one never knows what might be happening next when
it comes to creative new drink lists and signature
cocktails. For example, consider the ethereal signature
bartender creation, “Jeremy’s Perfect Love”, that’s
presently being featured at downtown Boston’s always-busy
high-profile Radius Restaurant & Bar near the South
Station. “Visually, it’s a spectacular cocktail,” says head
mixologist and bar manager, Joe Gonzalez. “We use Ciroc
vodka with Parfait Amour, which is a French orange liqueur
that has a violet base to it – so it has a nice purpley,
flowery, orange finish to it – and a dash of peach
schnappes, and it’s garnished with a beautiful orchid.”
Ciroc, says Joe, is one of the new vodkas that’s been
generating a lot of on-premise interest. It’s being featured
more and more on signature drink menus in a number of bars.
Typically, it’s mixed with wine, since it’s produced from
snap-frosted grapes, he points out. “The producer claims
that adding wine makes for a smoother, more interesting
martini than using vermouth, and so the whole product
concept is targeted as the wine drinker’s vodka. It took the
brand a few years to catch on, but now bartenders are having
a lot of fun with it, since it’s fairly easy to market, and
comes in a strikingly attractive bottle that has a purple
tinge and can really stand out in your top shelf lineup.”
Like most on-premise drinking establishments, vodka is by
far our best selling spirit here, he says. “When it comes to
a martini, customers routinely just assume it’s a vodka
drink. A couple of years ago, it was estimated that one out
of four drinks poured were vodka drinks. Right now, I’d say
that’s more like one of every three drinks in our business.
If it’s not a cosmopolitan, it’s regular martinis or dirty
martinis or vodka & sodas, vodka tonics, vodka gimlets,
all these signature drinks, and the list just goes on. Our
most popular call brands are Ketel One and Grey Goose. These
are the two big favorites. Grey Goose is of course today’s
most powerful image vodka, but Ketel One also has
considerable drawing power with sophisticated vodka drinkers
where you almost find a cult following for the brand. These
are people who aren’t buying into the higher-priced Grey
Goose image, but they still want something that has
distinctive super-premium upscale quality. Belvedere and
Chopin are two others that do very well for us and have that
beautifully designed long-bottle package presence on the
back bar. And Belvedere has one flavor I especially like
called Pomarancza, which has an incredible orange blossom
bouquet that I love using in classic cocktails. “But here at
Radius we’re not into a lot of the exotic trendy stuff,” Joe
emphasizes. “It’s an afterwork clientele. Most customers
know what they want and they are extremely knowledgable
consumers. We of course have a full line of the Absoluts,
including their new interesting Apeach flavor, and Absolut
Citron is the standard pour we use in all our cosmopolitans.
And one of our popular signature drinks is called the
Connelly Cooler, named after our amazing sous chef Patrick
Connelly. It’s 3/4oz. Absolut Citron, 1/4oz. Absolut Peppar,
with a heavy pour of lemon, a dash of lime, a touch of
sugar, shaken, poured on the rocks, topped with a dash of
soda, and garnished with a jalapeno pepper. This might sound
a bit hot, but the cure to heat in a drink is sugar, so we
give it a good balance of sugar, and the finish doesn’t burn
your tongue at all.” Joe also has a great many Stoli
customers, carries their full product line that are featured
in a number of signature cocktails like a Blood Orange
Martini. “It’s an unusually complete and versatile brand,”
he says, “with orange, peach, vanilla, mango, raspberry
strawberry, and I could go on. Bartenders love this flavor
variety for encouraging creativity, particularly when you
want to concoct a special drink for someone. The interesting
thing about Stoli is that it doesn’t have that much of an
on-premise imatge, it’s not an especially pretty or trendy
package, and it’s not something you often see on a back bar
in an upscale establishment like ours. Yet, unflavored Stoli
is an exceptionally clean vodka and, frankly, is my personal
favorite when I’m making a vodka drink for myself. I’ve done
several blind tasting events with unflavored vodkas, and
Stoli is always consistently judged the lightest and