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Competition Intense As Marketers Vie To Carve Up Vodka’s Expanding Pie

July 19, 2012

With growth of 4.8% last year to 66 million cases, according to Impact Databank, the vodka category remains not only the largest spirits segment in the U.S. market by far, but also arguably the hottest. As new growth opportunities continue to abound—notably in the flavored and accessibly-priced import segments—competition is heating up as well.

Of the U.S. market’s top 10 vodka brands, only two—Absolut and McCormick—declined last year. But the meteoric rise of relative upstarts like Svedka and Pinnacle is making added share more difficult to achieve for the category’s traditional leaders. Svedka, which has added more than 2 million cases since 2007, overtook Grey Goose last year to become the third-largest vodka in the U.S. Pinnacle leapt by 1.3 million cases in 2011 on the back of its flavor range (particularly its Whipped flavor). With similar growth this year, backed by the resources of new owner Beam Inc., Pinnacle will easily enter the market’s top five brands by year-end.

Even amid the competitive environment, category leader Smirnoff rose 0.5% to 9.6 million cases last year, and Diageo has amped up the brand’s advertising activity, especially in the multicultural market. “Smirnoff remains the industry leader, with a 20 share in total vodka and a 30 share in flavored vodka in the U.S. market,” says Larry Schwartz, president of Diageo North America. “We plan to take price on Smirnoff and keep feeding the brand above the line.”

Meanwhile, after a brief rebound in 2010, second-ranked Absolut took a step back last year, sliding 1.3% to 4.6 million cases. Fellow import Stolichnaya eked out 1% growth, but remains nearly half a million cases shy of its 2007 volume. Likewise, Grey Goose was up slightly in 2011 but hasn’t yet recaptured the 3.5 million cases it sold in 2008.

“There’s a lot of pricing pressure in vodka, as the $12 price point is seeing growth that just wasn’t there four years ago,” says Simon Hunt, president and managing director, North America, at William Grant & Sons. “But consumers are now returning to premium brands, particularly with the on-premise starting to recover.”

For a full report covering the U.S. and global vodka markets, see the July 15 issue of Shanken’s Impact Newsletter.

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