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MARCH 2010 VODKA VODKA VODKA OPINIONS IN THE US PACKAGING Insider views from Premiums pause Getting to the bottom around the trade p14 for thought p16 of the bottle p20 Contents 16 Quietly Supplement Editor David Longfield Market Overview confident +44 (0)1293 590045 6 Vodka rides out the storm [email protected] The Euromonitor International team of Spiros olourless and (broadly speaking) Managing Editor Christian Davis Malandrakis and Jeremy Cunnington analyse how neutral in flavour it may be, but +44 (0)1293 590047 this quintessential water of life has fared through vodka is far from uneventful. While [email protected] the deathly economic climes of the last year the world has been reeling from the News & Website Editor Lucy Britner Caftershocks of the 2008 financial meltdown, some +44 (0)1293 590046 of the major spirits categories have felt the impact [email protected] News & Launches of consumers turning away from ostentatious Production Editor Jaq Bayles 9 round up spending on the top-end juice, particularly in the +44 (0)1293 590048 The Drinks International team highlights the on-trade environment. [email protected] latest brand activity from the world of the pre- But vodka has all the bases covered, and the Designer Neal Honney eminent white spirit increasing segmentation of the market (“low- Advertisement Manager premium” anyone?) appears to be cushioning Justin Smith this most profitable of sectors from the worst of +44 (0)1293 590041 Features the recession. [email protected] 14 World of opinion What Diageo might lose in bar sales of Cîroc Senior Sales Executive It’s the people at the frontline who really know or Ketel One, say, it is just as likely to recoup at Carmen Poel Francesch what’s going on. David Longfield elicits the the other end as people pick up a bottle of Popov +44 (0)1293 590042 carmen.poel@drinksint. thoughts of some top bartenders and producers or Gordon’s to drink at home. com The US market is still the engine, approaching Sales Executive Renata Stefanovic 60% of total global premium vodka market +44 (0)1293 590043 16 US Scene share in 2009 (Impact Databank), but the world [email protected] It may not be the largest sector but the US is vital to awaits the next brand that will catch on big time Publisher vodka. Tom Sandham checks out this dynamic market – there’s no shortage of willing candidates. Russell Dodd And if you want a measure of how seriously +44 (0)1293 590052 the business is regarded, you need look no further [email protected] 20 Packaging than Stolichnaya. In the long-running dispute Lucy Britner talks to some top creatives about a over its control, there’s a titanic storm brewing Drinks International, Gateway Place, 42a East Park, Crawley, West Sussex RH10 6AS key element of vodka branding: the bottle over this iconic piece of Russian drinks history. United Kingdom Tel: +44 (0)1293 590040 Meanwhile, with its new Be There digital and social media campaign, Smirnoff continues to 25 history lead the way as the world’s biggest spirits brand Hasse Nilsson peers back through the mists of time – showing no signs of slipping to see how modern day vodka came about back below that 25 million case mark. 29 Vodka in cocktails Who is doing what with vodka? Ben McFarland David Longfield talks to the great and the good of mixing Supplement Editor March 2010 DRINKSINT.COM VODKa SUPPLEMENT DRINKS INTERNATIONAL 3 Euromonitor International alcoholic drinks analysts Spiros Malandrakis and Jeremy Cunnington decipher vodka’s performance in the year of the Great Recession Vodka rides out the celebrated “elixir of the On the other hand, and taking eastern masses” in its eastern Europe out of the equation, vodka’s European birthplace and high mixability credentials and vastly a gleefully endorsed tipple heterogeneous audiences provided for for the scores of aspiring some defiantly bullish growth rates, youngA urbanites hitting city centres even in the midst of one of the most globally, vodka’s ascent from regional pronounced economic blips in post-war speciality to international sensation has history. Total volume sales grew by 7% been stratospheric in its speed and seismic in Asia-Pacific, 8% in Australasia, 4% in in its impact. the Middle East and Africa, 3% in North The category’s ubiquitous presence and America, 4% in Western Europe and 2% iconic status hence came to represent an European markets that acted as a dead in Latin America – loudly reaffirming the ideal barometer for trends within the weight, dragging global volumes down category’s exemplary resilience in 2009. spirits industry and beyond. Reflecting with them and presenting a gloomy Nevertheless, resilient as it may be, the mirror image of a global operating façade for an otherwise still buoyant vodka could not escape trading down, environment still pretty much in a vodka industry. with value sales growth dropping to state of disarray and underlining the According to Euromonitor 5% in fixed US$ exchange rates, down disintegrating economic state of its International, vodka sales in eastern from a CAGR of 7% over 2004-09. eastern European bastion, vodka posted Europe plummeted by more than 3% in Rampant discounting in the vast majority a sobering 1% total volume decline in total volume terms in 2009, essentially of core markets was the manufacturer 2009. But things are far better than top- tripling the pace of the category’s and retailer answer to the dawn of the line figures might suggest. downward growth trajectory, which new era of frugality which momentarily stood at -1% over the 2004-09 period. derailed the seemingly steadfast Green shoots beneath the gloom With sales in the region still accounting premiumisation bandwagon that had While severe recessionary pressures for a mind-boggling 67% of global been largely spearheaded by the category. formed – quite predictably – a bleak volumes in 2009, it is easy to see why backdrop and indeed played a major overall performance for the year appears Economic conditions affect part in vodka’s less than inspiring global skewed towards disappointment. corporate performance performance in 2009, declines were What’s more, vodka’s demise in eastern The global vodka market remains one anything but uniform. The core of the Europe originates in the ongoing shift to of the most fragmented of all spirits category’s problems is regional rather lower abv variants, underlying saturation categories. The top five vodka producers than financial. issues, evolving westernisation and, last accounted for only 22% of global vodka Although a number of regions did but not least, the unprecedented depth of sales in 2009, compared with 75% witness marginal slowdowns or static the financial contagion. In other words, for the top five producers in blended volume growth compared with 2008, it the landing of the recession only provided scotch. This is in part due to the size of was the plummeting sales in key eastern the icing for an already deflating cake. the category, but mainly because most 6 DRINKS INTERNATIONAL Overview of the world’s largest vodka markets however, are still primarily focused on Top 10 vodka Association was delighted with the Euromonitor International alcoholic drinks analysts in eastern Europe have little history of their local markets. markets 2004- verdict, which of course has much more branded products and have been highly As rapidly as these eastern European 2009 far-reaching consequences than putting Spiros Malandrakis and Jeremy Cunnington decipher fragmented. companies can rise, they can just Market Sizes – Historic an end to the claims of a minor schnapps This is, however, beginning to change as quickly fall. At the end of 2009, Total Volume (million brand in the UK. vodka’s performance in the year of the Great Recession through a combination of merger and Ukrainian-based sixth-ranked Soyuz- 9-litre cases) acquisition activity, the development of Victan closed down after a couple of UB Group on the rise 2004 2009 large eastern European companies and years of financial problems, while at Eastern Europe has not been the only Vodka the dynamic growth of vodka outside the start of 2010 ninth-placed Nemiroff Russia 209.8 163.2 source of rapidly rising companies. core markets. began to look for someone to invest in it US 45.4 58.1 The rapid growth of vodka outside the In 2010, for the first time in more than or even buy it completely. Ukraine 37.3 54.7 traditional eastern European markets a decade, Diageo lost its position as the Both these companies looked for Poland 26.8 32.2 has also meant the rapid rise of certain leading producer of vodka in volume expansion outside their domestic market Belarus 7.6 14.9 companies from outside the region. sales terms. This drop to number two of Ukraine, but lacked the resources United Chief among them has been the Indian- Kingdom 8.6 11.3 came about from fourth-placed CEDC to push it through. Their plight has focused UB Group. The company, Kazakhstan 11.3 10.2 completing the takeover of third- probably not been helped by the credit which dominates the Indian spirits Uzbekistan 5.5 7.2 placed Russky Alkohol ZAO, giving crunch that affected eastern Europe, Germany 4.6 6.5 market, has benefited from the rapid CEDC a 7.2% share of global vodka especially Ukraine, limiting the possibility India 1.6 6.4 growth of vodka in India, which rose by sales compared to Diageo’s 7.1%. This of gaining credit to fund expansion. Rest of the 180% in volume terms between 2004 and acquisition follows on from Pernod World 41.8 50.5 2009 to 58 million litres.