The just-drinks interview - Skyy Spirits
Gloomy talk of a global economic slowdown have so far failed to dilute growth in the US vodka category. One of the better known contenders in the segment - if only for its ocean blue-coloured bottle - is Skyy vodka. In this month's just-drinks interview, Olly Wehring grills the president & CEO of Skyy Spirits, Gerry Ruvo, over the rise of the company's namesake vodka brand, what the future holds for the Campari-owned unit, and how much longer vodka's moment in the US sun can last.
It's been over ten years since Skyy vodka was launched in the US. Brand owner Skyy Spirits arrived on the scene boasting innovation, style and a premium - but affordable - price point. In the last decade, the sheer volume of additions to the vodka category in the country has served to confirm just how popular the sector has become.
"The vodka category in the US continues to boom," says Skyy's president & CEO, Gerry Ruvo. "It's approaching 52m cases, about 30% of the distilled spirit volume. Certainly, we were the innovative brand in the early 90s. We were the breakthrough brand that those that have come into the market in the last ten years have tried to copy. Our price-positioning is such that we are very premium yet very affordable to consumers. And, because the category's still growing, people are still discovering Skyy vodka."
Currently approaching sales of around 2.5m cases per year in the country, Ruvo is only too aware of the importance of Skyy vodka to the company's portfolio. "We have a very unique place in the business with an innovative, high quality flagship brand which is in growth," he says. "We're not a me-too company." Ruvo believes that recent additions to Skyy's portfolio allow the company to maintain its innovation leadership claim. "We have a lot of other brands with very definite positions, like Campari, Cabo Wabo, X-Rated Fusion Liqueur, and then we have our third-party brands like Midori and Auchentoshan. So, we've a unique position in the business with a unique portfolio."
The mantle of innovation leader is one that Ruvo is keen to keep hold of. "I think we still are innovative," he says. "We're revitalising Skyy vodka through new packaging, we've also been involved in the 'Sex & the City' movie - they chose us over Absolut, which was tied in with the TV programme for a number of years.
"So, are we the only ship out there in the harbour when it comes to innovation? No, but I still think we stand out in a big way for a number of the things we've done to promote the brand, as well as the introduction of Infusions and the new packaging for Skyy."
|Gerry Ruvo, president & CEO of Skyy Spirits|
Taking a closer look at the premium vodka category in US, it is clear to Ruvo who his main contenders are. "We think Absolut is at about 5m cases in the US," he says. "Stolichnaya is at about 2.2m and Ketel One is around 1.7m. Grey Goose is over 3m and Smirnoff is about 7.5m - 8m cases. Those are the main products that we compete against."
Two of the brands named have recently been the subjects of high profile transactions - Pernod Ricard acquired Absolut's owner, Sweden's Vin & Sprit, last month for EUR5.69bn (US$8.37bn), while rival group Diageo bought a 50% stake in Netherlands-based Ketel One for $900m back in February. Up against the financial might of these global spirits giants, Ruvo could be forgiven for eyeing the future cautiously. Not at all, it seems. "I think it (Pernod's Absolut purchase) is terrific," he says. "I think Pernod is a great brand-building company. We've always thought it's a terrific brand and was a breakthrough brand in its own way. We look forward to competing against them." Ruvo's reaction to Diageo's bunk-up with Ketel One is similarly upbeat. "I think it was a great acquisition for them. We will continue to compete against them in many different ways. Ketel One, prior to Diageo, did a terrific job with their brand. We look at our brand and we try to concentrate on positioning it around quality, innovation and style. We welcome our competitors, we think they make us stronger."
The ongoing saga at Stolichnaya - who is set to lose its current distributor in the US, Pernod, at some point this year, has also registered on Ruvo's radar. "It is a great brand and I am sure they are talking to a number of players to represent Stolichnaya in the US. From what I can tell it is a decision they are going to have to make in the next 30 to 60 days." he says.
The current economic downturn in the US, however, is more pressing for premium vodka producers. Ruvo believes that most companies are in 'wait and see' mode. "There's always been a theory that our business overall is, not recession-proof, but it's somewhat recession-resistant," he says. But recent figures from the US have suggested a slowdown in sales for spirits in the US. "I think those numbers are pretty accurate from what we've seen," he concurs. "But from what I can see, the premium business is still relatively strong. We're on-track to make our targets for Skyy vodka for 2008. We're on-plan for around high single-digit growth in the US.
"I would agree with you that things have softened a little bit in the last six months, the last three in particular. But we still look to everyday luxury - we don't consider ourselves an incredibly expensive product. The area that's got to hurt the most is the casual on-premise area. Products that have done well there traditionally are probably getting hurt right now."
Going forward, Ruvo says that the company is targeting double-digit growth for newly acquired Cabo Wabo Tequila, this year . "We're performing very well against that target. We got the brand on 1 January, but we had to change our distributor network in the US, so it took a couple of months to get up and running but the brand is performing pretty much along our expectations right now."
Turning to Gruppo Campari, Ruvo has nothing but praise for the Italian company, which completed the purchase of Skyy Spirits last year. "It's been terrific," he says. "They've spent a lot of money acquiring this company and then, more recently, acquired Cabo and X-Rated to get us brands that we own in the US and that they can take to other places.
"The relationship's been very good. They want to know what we're doing on a regular basis, but they haven't really interfered with the growth of the company. I think what we have is a very like-minded relationship between Skyy and our parent in Milan. I think that comes from the fact that both Skyy vodka and Campari are both unique brands. That really helps to pull the partnership together."
Ruvo continues to hold high hopes for Skyy Spirits and its vodka brand in particular. "We think the brand has a lot of growth left in it, and we're going to continue to work on various programmes to get it grow it even further, both in the US and abroad."
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