The revolution's in full flow

08 August, 2008

Sales of vodka continue to march at the expense of Scotch.

So how much more can the spirit advance, asks Laura Clar

k

After months of speculation that blended Scotch was precariously close to being overtaken by vodka as Britain's favourite spirit, the inevitable happened in April: off-trade vodka sales overtook the former top dog by £5 million.

Since then it has kept on growing, with Nielsen's latest figures to July 12 2008 showing

vodka has a 27.1% share of the off-trade spirits market - compared

with 25.5% last year. It is 1% ahead

of blended whisky at 26.1%.

Vodka sales have continued to race ahead, growing at 12.7% to £778.7 million. Compared

with this impressive climb, blended whisky has increased sales by a modest 1.9% to £749.9 million.

Analysts predict this current growth puts vodka on track to overtake the combined fortunes of blended and malt whisky by the end of the year.

For those commentators watching the market closely, signs of vodka's imminent ascendancy to the number one spot had been evident in the surge of premium brands hitting the

market and

an increasing desire among younger consumers for a fashionable, neutral-tasting spirit.

By contrast, Scotch whisky struggled to shake off its stuffy image, despite massive efforts by the industry to attract a new, youthful audience with flavoured variants, experimentation with different types of casks, and clever marketing advocating whisky's versatility in cocktails and long drinks.

The differences in flavour between the two spirits is seen as largely responsible for the consumer shift away from Scotch.

"Vodka is a fairly neutral -tasting spirit that is much more accessible than whisky in taste profile and complexity," says John Bradbury, off-trade sales director at Whyte & Mackay, which has Vladivar vodka and blended Scotch range Whyte & Mackay in its portfolio.

"In comparison to whisky it is also a spirit that is mixable, and although whisky cocktails are coming into the forefront, vodka is arguably the most accessible spirit for cocktail-making due to its neutrality in taste," he adds.

Vodka's success has also been driven by drinkers' desire to move away from traditional serves, such as out dated vodka and cola, according to Halewood International's senior brand manager Sue Beck.

"Consumers are experimenting with different ways of drinking the spirit and also trying new flavours and premium variants. Many

now keep vodka in their freezers and drink it neat, not always drowning it in Coke ," she says.

Investment in the vodka category has stepped up a gear in the past few years, claims Smirnoff marketing manager Chris Lock, who

cites the brand's increased TV spend from £12.5 million in 2007, to £15 million in 2008, as evidence of this. "This increase is a reflection of our own belief in the marketplace and our category portfolio, and recognition of increased competition," he says.

Brands on the up

The entrance of a multitude of new players into the category

has also boosted vodka's

sales and popularity, claims Bradbury.

"We have seen a number of new vodka brands come on to the market and also with some great marketing campaigns from the established brands, this is no doubt helping to further push vodka into the forefront of consumers' minds," he adds.

One of the biggest drivers behind renewed consumer interest in vodka has been the arrival of Russian Standard, which Nielsen consultant Graham Page hail s

"one of the most successful spirit launches for some time".

Distributed in the UK by First Drinks Brands and launched only

10 months ago,

Russian Standard has seen sales soar to £11.3 million, making it the

seventh best selling vodka in the off-trade (Nielsen to July 12 2008).

But its aspirations don't stop there, with First Drinks' managing director Chris Mason announcing "ambitious growth plans over the next five years with the commitment and resources to shake up the UK vodka sector and take Russian Standard

to the top spot in the

premium

category".

An £8 million marketing budget initially helped Russian Standard make serious waves in the market, and last week First Drinks announced its first

cinema advertising campaign. The ad will be seen throughout

this month, with a high level of activity around the new Batman film,

The Dark Knight.

"We've shaken things up coming in as a big player," says marketing director Katie Rawll. "We're not just growing volume, we're also growing value. Russian Standard is a big -scale brand.

We're in it for the long haul - we're not just giving it a big push

then disappearing."

Is heritage important?

Rawll believes

a "genuine interest in where vodka comes from" has fuelled sales, coupled with a "fascination with Russia". "People want to know more

about history in terms of where the brand is coming from," she says.

"Russia is a place of real heritage and mystique. The cinema advert shows Moscow's Red Square and parties set against a sexy Russian backscape."

But heritage isn't everything, according to Rawll, who says the desire shown by consumers to understand more about the

brand's origin is on a par with "the taste of the liquid, the marketing message and the packaging".

Without all

these four components, brands will struggle to secure repeat purchases and will soon find themselves elbowed out of an already overcrowded market , she believes.

Bradbury agrees

country of origin is playing a decreasingly important role in branding and marketing. "In research, consumers are primarily looking for purity when selecting a vodka rather than place of origin," he says.

"With Vladivar, we have chosen to focus on triple distilled as a message because this is what people understand and want from a vodka," Bradbury adds.

For vodka to continue to attract new drinkers, producers need to "excite the category, be that through new flavours, new types of vodka or methods of drinking,"

says Halewood's Beck.

"Vodka is often the first step for younger consumers as they grow out of the RTD category and start to try new drinks and spirits for the first time," she says.

"So the category needs to appeal to their tastes

- mixers such as cranberry and pomegranate will be important in making vodka accessible for new consumers," she says.

Given "the investment behind the category and its brands", Diageo's Lock believes it is "realistic" to predict that vodka will be bigger than the entire Scotch whisky market as 2008 draws to a close.

But Lock is quick to assert that he's "not in a position to comment on what other categories will do," pointing out that his whisky brand

colleagues will be working hard to counteract vodka's increasing dominance.

Pace gathers speed

The whisky category has certainly got a fight on its hands as vodka's rocketing sales make the feat of eclipsing both single and blended malt sales seem ever more likely.

And for producers

such as Whyte & Mackay, whose two top brands sit in opposing camps, it's hard to know just which horse to back.

"It's going to be a close-run thing," admits Bradbury . "The whisky market is set to see growth throughout the emerging markets and with younger drinkers .

"However, if the innovation and consumer investment continues then I have no doubt that the vodka market will also continue to grow."

The buyers' views

Mike Luck

Sainsbury's

How many vodkas are in your

range? 30

What are your best sellers?

Own-label, Smirnoff and Absolut.

How have you developed your own-label spirits ranges?

We have a strong range across all the main segments and have offerings at the majority of price points. Due to the amount of activity we have run, we are seeing good growth from Taste The Difference . We've also had

success in own-label generally

because of competitive price points.

What are you looking for from vodka suppliers?

Evidence of a plan and the capability of growing the category rather than just launching a new product that

only transfers sales from other brands.

What is behind vodka overtaking blended whisky as the UK's favourite spirit?

Growth has been driven by a number of factors .

Two

key

reasons are that the supply base seems to be more focused on growing their whisky business everywhere except the UK, but I also believe it is due to the versatility of vodka and growth in range and advertising.

Andrew Tiffin

Asda

How many vodkas are in your range?

We

have 24 vodka lines available in store, 21 branded and three own-label. This includes Asda Extra Special Vodka - winner of the Best Vodka awards at the 2008 Own Label Awards. This brand

is combined with clean Icelandic waters

blended with spirits and is distilled five times

according to a historic Russian recipe.

What are your best sellers?

Asda has seen strong sales of own-brand vodkas over the past year, with sales of our own-label vodka up by 18.5% . Top brands such as Smirnoff Red label or Absolut are still firm favourites with our customers.

How much of your vodka is sold on discount?

Only 20% of vodka sales in Asda stem from deals and promotions. This shows

that customers are looking for

deals, but are also keen to pick up the brands they prefer even when not on offer.

What are you looking for from vodka suppliers?

One of the main factors Asda looks for

is a clear understanding of the market and

customer likes and dislikes. Suppliers who understand current trends and who are

on the lookout for opportunities to further develop their products and help the category really stand out.

What is behind vodka overtaking blended whisky as the UK's favourite spirit?

Vodka is the drink of choice in the on-trade and we are seeing this flow through into grocery. Customers are looking to recreate their favourite drinks and cocktails at home, particularly as the purse strings tighten.

Top 10 vodka

brands

Value sales

(£ millions)

Brand Year to July 14 2007

Year to July 12 2008 Change %

Smirnoff Red Label

205.0

239.0

16.6

Glen's

107.6

132.7

23.4

Absolut Vodka

16.4

25.0

52.9

Chekov Imperial

20.2

22.2

9.8

Red Square

16.9

18.0

6.5

Vladivar Classic

14.9

12.9

-13.4

Russian Standard -

11.3

0.0

Royal Czar

6.9

6.3

-7.6

1860 Imperial

4.8

6.1

26.5

Landmark Prince Consort

5.8

5.8

0.8

How indies can boost sales

Independents can maximise vodka sales in four easy steps. Smirnoff marketing manager Chris Lock

suggests how:

Group vodkas together on the same shelf to "help consumers make their choice based on price"

Promote finished drinks to make purchasing easier and increase basket spend. "The more mixer you sell, the more vodka you sell, because it gives people the means to consume more, rather than them buying a bottle and it gathering dust at home," he says

Stock brands that have neck collars with recipes for long drinks or cocktails

Carry

out in-store sampling to help consumers with a "very limited repertoire" to broaden what they drink and understand what mixes well with vodka.

dust at home."




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