Flavoured vodka is growing at an explosive rate in the US and will continue to do so as long as producers can keep rolling out new extensions. But as Anne Brockhoff reports there is still a healthy degree of caution in regards to NPD, despite temptations to expand portfolios.
Flavoured vodka isn’t a truly new phenomenon. Distillers for centuries used ingredients like honey and herbs to mask impurities before current filtration methods were developed. However, today’s producers are infusing vodka with vanilla, citrus and other flavours for a modern purpose: to capture the imagination and dollars of consumers.
That strategy has worked so far. Flavoured vodka sales grew by a third in 2002 and accounted for about 17% of all the vodka sold in the US, according to AC Nielsen. That gain comes within a category already outpacing rum, Tequila and other spirits. But can such growth continue?
Yes, say company executives and industry watchers.
“Flavours add even more excitement to what is undoubtedly the most dynamic category in US spirits today,” says Andrew Cox, vice president and brand director for the Americas for Brown-Forman’s Finlandia vodka. “The extent the flavoured category continues to grow is linked to our ability to deliver new flavours to consumers.”
The trend began in the mid-1980s, when Stolichnaya Limonaya and Absolut Peppar hit US shelves, then gained momentum a decade later when cocktails like the Cosmopolitan surged in popularity. Flavoured vodka sales reached 1.6 million cases in 2001, a 68% jump over 1997 figures, according to research from the industry analyst Canadean.
Large off-premise retailers such as Sam’s Wine & Spirits in Chicago now carry more than 30 different flavours, and companies are rolling out more each year. Diageo added green apple to its Smirnoff Twist line last autumn, while spiced, vanilla and berry offerings from Skyy were introduced in April. Allied Domecq, Stolichnaya’s US distributor, will launch cranberry and citrus vodkas in June.
What’s driving the innovation? Fickle consumers in constant search for the latest, greatest flavour, says Jerald O’Kennard, tasting director for the Beverage Testing Institute in Chicago. The target demographic for flavoured vodka – women between legal drinking age and about 30 – grew up on flavoured waters, teas and coffees and is now seeking similar variety in alcoholic beverages, he says.
Citrus is the leading flavour, with Absolut’s Citron and Mandrin together accounting for about 38% of the category’s sales in 2001, by Canadean’s count. Vanilla and berry are next in popularity, and demand for them grew respectively 177% and 59% in 2002, according to AC Nielsen.
But it’s not just about having a “hot” flavour. To be successful, a brand must be backed by quality, O’Kennard says.
“A lot of the bigger players realise you just can’t put anything in a bottle,” he says. “You have to spend money developing the flavour profile.”
After Allied Domecq acquired the US rights to Stolichnaya in 2000, the company studied consumer preferences then spent two years developing its latest offerings and bringing them to market, says Joanne Kletecka, group marketing director for Allied Domecq Spirits & Wine North America.
Those efforts also told Allied what consumers didn’t want: a lemon-flavoured vodka. So Stoli Citros will replace the brand’s inaugural flavour when it launches.
Skyy also paused after introducing its citrus vodka in 2000 to research consumer preferences before developing three more products to appeal to a variety of palates, says Sue Hern, a spokeswoman for Skyy Spirits, a unit of Campari Group.
“We’ll only roll out flavours that offer a long-standing opportunity for us,” she says. “We’re not going to just throw it on the wall and see if it sticks.”
Most premium vodka makers take a similar, methodical approach to studying consumer preferences when developing new products, O’Kennard says. What’s next then?
“Everybody these days has a pretty solid foundation,” O’Kennard says. “From there, it’s purely a question of branding and imaging.”
Skyy is backing its new flavours with a national print campaign that will break this summer in fashion, entertainment and lifestyle magazines such as Cosmopolitan, Stuff and In Style, as well as an out-of-home campaign that ties into its existing cinematic theme. Advertising and promotion for the entire line of Skyy vodkas will come to US$30m in 2003, but the company doesn’t break out how much is dedicated to flavours alone, says Hern.
Brown-Forman assumed marketing control of Finlandia when it upped its stake in the brand to 80% last year and will unveil a new advertising campaign for the line within six months, Cox says. He declined to say how much the company will spend promoting its flavours, which now account for more than 5% Finlandia sales. That share is likely to increase as the company develops additional brand extensions.
“I don’t want to get into specifics about where we go next, but we’re certainly looking to add attractive new flavours,” Cox says. Companies don’t seem concerned about the increasingly crowded marketplace, or worry that new offerings will cannibalise existing products. Instead, most maintain that new flavours win new consumers away from other products because of their versatility and mixability.
And the numbers appear to support that confidence. Canadean’s forecast pegs flavoured vodka sales at 1.9 million cases in 2003, and 2.0 million in 2004.
“The vodka movement is still very explosive, and remains a good investment for the larger companies,” O’Kennard says.