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Special Report: Top Vodka Brands Struggle While Flavors Lose Momentum

July 29, 2014

While the whiskey boom has been the talk of the U.S. spirits market, vodka continues to carve out solid growth. Last year, vodka’s top 10 brands rose by a collective 4.7%, and the overall category was up 2.5% to 72.5 million cases, according to Impact Databank. However, for all its success, the U.S. vodka market has also become notoriously competitive in recent years, with accessibly-priced entries and an endless array of flavor innovations continuing to crowd the market.

U.S. category leader Smirnoff (around $15 a 750-ml.) has been impacted by such pressures, as accessibly-priced and flavor-focused entries like Svedka, Pinnacle and Burnett’s continue to gain ground. Smirnoff, which declined by 0.2% to 9.7 million cases in the U.S. last year, has made efforts to keep pace with flavor and low-calorie trends, while also targeting female consumers with its Smirnoff Sorbet Light range, extended earlier this year with a new Pineapple Coconut expression.

Bacardi’s Grey Goose ($30) has also softened in the U.S. in recent years. The upscale French brand fell nearly 5% to 3.3 million cases last year. As a result, Bacardi emphasized Grey Goose’s provenance and authenticity with its “Fly Beyond” campaign. “The competitive landscape is certainly growing, with new entrants and existing brands expanding their offerings,” Grey Goose brand director Michelle Beauchamp told Shanken News Daily earlier this year. Pernod Ricard’s Absolut (around $20) is also facing a challenging environment in the U.S., where the brand was down 0.5% to 4.6 million cases. In the past few years, Absolut has taken a more focused approach with its limited edition local series, featuring specialty variants inspired by places like New Orleans, Los Angeles, Boston, Brooklyn, San Francisco, Miami, Chicago and, most recently, Texas. Absolut also has taken a leadership role on the mixology front, with a particularly strong presence at Tales of the Cocktail, the international festival for bartenders and spirits professionals that draws more than 20,000 attendees at its annual event in New Orleans.

Some leading vodka brands are showing torrid growth, with upstarts like Tito’s Handmade vodka and New Amsterdam vodka now among the U.S. spirits market’s hottest brands. A five-time Impact “Hot Brand,” Fifth Generation Inc.’s Tito’s vodka ($20) puts a more straightforward spin on high-end vodka, offering a single, unflavored small-batch entry made using a traditional pot still. Tito’s was up 50% in 2013 to nearly 1.3 million cases. After making its debut in 2012, E.&J. Gallo’s New Amsterdam hit 1 million cases in less than a year, becoming the fastest spirits brand to ever reach that mark in the U.S. Last year, the brand followed up on its record-breaking performance with an 80% increase, reaching 2 million cases while it expanded its flavor range with Pineapple and Orange editions.

New Amsterdam’s introduction of new flavors comes as consumer enthusiasm for flavor innovation in vodka appears to be waning. This is especially true in the on-premise, where research firm Restaurant Sciences reported that flavored vodka fell by double-digits in 2013 (while the overall vodka category dropped by 6% in the channel). As a result, marketers are altering their approaches on flavors.

Late last year, Stoli Group USA announced plans to revise Stolichnaya’s flavor approach in the U.S., starting with the phasing out of select entries within the brand’s 17-flavor lineup. “Retailers are still saying yes to flavors, but for every new one, they’re saying, now you have to take another out,” Stoli Group USA president John Esposito told SND, adding that Stolichnaya’s updated positioning would shift toward a more “classic” approach.

Impact’s global vodka overview appears in its July 15 issue.

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