March 2012 The No.1 choice for global drinks buyers

Ian Stoli's bootleg Wisniewski success booze Asks what's next Val Mendeleev We investigate the for p14 reveals all p20 silent problem p24

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Rathnau wins tops 2012 Brand by the Vodka Cup Value list

inlandia has selected the 14th champion of its ive vodka brands feature in this annual international cocktail competition, the F year’s Brands by Value list, with F Vodka Cup. Smirnoff at the top of the category, in Polish bartender Krzysztof Rathnau prevailed from a fourth place behind Johnnie Walker, 20-strong field to take the honours in Helsinki and a Bacardi and Hennessy overall. winner’s prize of US$15,000. The list – compiled by brand Contestants had to create an aperitif, long drink and valuation consultancy Brand Finance ‘quick mix’ cocktail, with a Finlandia product required to – features in the March issue of be the primary ingredient of each. Drinks International. While Rathnau accumulated the most points overall, Brand Finance created the list using Monica Berg of Norway scored highest in the ‘quick mix’ a complex matrix of calculations based category, Jarkko Issukka of Finland took the aperitif on financial results, future forecasts, round and Andrei Todosi of Romania scored highest for brand strength and ‘royalty relief’. his long drink. The other vodka brands are, at Rathnau’s long drink: Rose Marie number 11 Absolut, number 13 Grey 4cl Finlandia Tangerine, 2cl De Kuyper Sour Rhubarb, Goose, 40 and 42 Ciroc. 1cl home-infused rosemary syrup, 4cl fresh orange juice, 4cl lychee juice, a piece of fresh mango, 15cl Schweppes ginger ale. Garnishes: melon, chrysanthemum leaves and Ads to educate flower, apple slices, lime slice, lemon slice, orange slice, is taking flight with Virgin Atlantic. The grape, star anise. vodka brand has created movie-inspired cocktails that about flavours Muddle mango with rosemary syrup. Add alcohol, orange will be available in the Loft at the Virgin Clubhouse juice and lychee juice. Shake with ice. Strain into hurricane at London Heathrow airport. The theme is in honour iageo GB is to invest £1m in an glass. Top with ginger ale. Garnish. of the awards season and cocktails include Le Citron D outdoor advertising campaign for Julep inspired by The Help; the Grey Goose Silent Vanilla Smirnoff to educate consumers Martini inspired by The Artist and the French Hawaiian on how to drink flavoured vodka. inspired by The Descendants. According to Diageo, vodka is the Over the coming months, Virgin Atlantic Upper largest category in the off-trade and is Class passengers can expect more events in the growing at +10% in the latest MAT, Grey Goose Loft as the brand partners with art, with Smirnoff No.21 growing ahead music, fashion and film. of this at +13%. The flavoured vodka category is growing at 18% year-on- year. Diageo said Vanilla Smirnoff has Quince is ripe for drinking “performed well”, reaching a retail sales value of £1.1m 16 weeks after its EDC has launched a quince vodka under its launch in September 2011. C brand. Soplica Pigwowa has been made using ripe The flavour range also includes: quinces harvested in 2011, in Poland. Soplica Pigwowa Lime Smirnoff, Green Apple Smirnoff extends the portfolio of Soplica tinctures (Sour Cherry, and Blueberry Smirnoff. Hazelnut, Raspberry). The new product will have an RRP of PLN 22 (£4.45). The launch will be supported with PoS and through Antek Soplica’s Facebook profile: facebook.com/antek.soplica.

Pinnacle to distribute SSG in the UK and Ireland

tock Spirits Group (SSG) has world’s fastest growing spirit in 2009 Some of the brands have already Sstruck an agreement with (Millionaires 2010); Limonce, made debuts in the UK and Irish The Pinnacle Drinks Partnership to which SSG claims is the world’s markets through Tesco and other distribute some of its key brands in biggest selling limoncello; Stock XO, independent retailers. the UK and Ireland. a brandy; Grappa Julia Superiore; The Pinnacle Drinks Partnership was The SSG brands include Czysta and Fruits – a formed in mid 2011 by Steve Howard De Luxe Zoła˛dkowa vodka, the vodka liqueur. and Mike Heaton.

6 Drinks International Launches

Skyy Infusions Coconut Cîroc Peach Brand owner Campari America Brand owner Diageo RRP in 50ml: $1.99, 750ml: $18.49, 1l: $23.49 and 1.75l: $26.99 RRP $34.99 for a 75cl bottle Markets US Markets US Contact skyyspirits.com Contact Diageo +44(0)208 978 2749 Skyy Infusions Coconut joins Dragon Fruit, Blood Orange, Pineapple, Ginger, Cîroc is made using French Mauzac Blanc and Cherry, Grape, Citrus, Raspberry and Passion Fruit. Ugni Blanc grapes, which are distilled five Jason Daniel, brand director, Skyy vodka says: “The coconut category as a times. Cîroc launched nationwide in September whole, especially coconut waters, has seen a tremendous surge of popularity 2003. In October 2007, Diageo entered into in recent years. Campari America has elevated this trend by creating a natural, a strategic alliance with Sean “Diddy” Combs. refreshing infused coconut vodka that will appeal to both consumers and Cîroc Peach is available in 5cl, 20cl, 37.5cl, bartenders as they search for more exotic and authentic flavour experiences.” 75cl, 1l and 1.75l sizes. The abv is 35%.

Platinum 7x Brand owner Sazerac Company RRP $12.99 75cl Markets US Contact sazerac.com The seven times distilled vodka has been repackaged. The launch will be supported by trade advertising and the vodka is made using American grain. It comes in 1.75L, 1L, 75cl, 37.5cl, 20cl, 10cl and 5cl Valt Vodka bottles. The vodka is 40%abv. Brand owner Valt Vodka Company RRP €35, £27.99 Markets UK, Singapore, Thailand, Malta, Spain, Italy, Germany, Austria, Latvia, Poland & Ukraine. Contact Valt Vodka Company, 21 Forbes Place, Paisley, PA1 1UT +44(0)1418 492090 Valt is a single malt vodka, made from Absolut London Scottish malted barley Brand owner Pernod Ricard and Highland water. RRP £17.89, €21, US$28 Although it has been Markets UK only around for a few years, Contact Pernod Ricard UK 2012 marks a new era +44(0)208 538 4484 for the brand as it is The latest Absolut incarnation is a collaboration with now made at a new UK artist Jamie Hewlett. The bottle was launched in distillery, in a specially Selfridges and Harvey Nichols on March 1 and from designed reflux copper March 22, fifty Absolut London collectors’ gift pot still. The independent packs will be available to fans exclusively through company is run by partners www.facebook.com/absolutuk. The bottle will then Ricky Christie, Donald be available to the wider on- and off-trade from April. Buchanan, and Oliver Absolut London is the newest edition – and Storrie. It is bottled first European city – to feature in the Absolut at 40%abv. Cities collection.

8 Drinks International Overview Overview

he recent launch of Naga region grew by more than 1% in Corporate Landscape in Vodka Chilli Vodka (containing 2011 as the resurgent cocktail culture The tipple’s Vodka continued to remain a fragmented the equivalent of 100,000 and consistent promotional and neutrality category in 2011, with the top five Scoville units and coming innovation activities retained interest in and companies accounting for only 24% of with a skull and crossbones the category in the face of any and all mixability global volumes, compared to 74% in Twarning sign on the label) fittingly socio-economic headwinds. blended Scotch. summarises vodka’s predicament. However, if the otherwise crumbling have been Local and regional companies dominate The ubiquitous tipple’s neutrality and Western European market looks relatively both a the top of the rankings, with Diageo and mixability have historically been both a healthy, the vast majority of regions blessing Pernod Ricard positioned first and third, blessing and a curse, making it accessible are positively booming. According to and a respectively, being the only international to hordes of young urbanites around Euromonitor International, vodka’s curse companies appearing in the top 10. the globe while gimmicky launches regional growth rates ranged from a irreverently tested the boundaries of healthy 2% in the post-Arab Spring Leading international vodka innovation, production methods or, Africa and the Middle East companies ultimately, common sense. Interestingly, to a skyrocketing 8% in advancing In 2011, Diageo strengthened its position and to the dismay and bewilderment of Latin America. as the world’s leading vodka player, purists and spirits aficionados, this has Vodka’s relevance hence remains increasing its volume share to more than the indiscreet charm also repeatedly proven to be a winning universal while the dual drivers 7% thanks to sales growth of 5%. It strategy. It still is. of premiumisation and flavour was not, however, its leading Smirnoff According to Euromonitor sophistication continue to expand the brand which drove growth but its super- International, vodka witnessed relatively category’s penetration, demographic premium Cîroc brand which continued to of neutrality healthy, if unspectacular, total global appeal and drinking occasions. perform exceptionally well. In contrast, volume growth of 1% in 2011. While this Can this last? The long and short Smirnoff saw its volumes remain static figure might appear underwhelming at of it is, yes. Vodka has repeatedly yet again and has not seen any real first, it has to be analysed in the context demonstrated its chameleon-like growth since 2008. of the mature Russian market which adaptability and remains one of Smirnoff continues to suffer from the faces the additional burden of a series the pioneers in terms of radical maturity of its two largest markets, the of Kremlin-backed legislative attacks. experimentation, boldly going where US and the UK, which accounted for Excluding Russia, vodka grew by 3% no other spirits category has gone more than 50% of the brand’s volumes in globally in 2011. before. While the results have been far 2011. Despite strong price promotional Eastern Europe is indeed the thorn from successful on many occasions, the activity in both markets, Smirnoff has in the category’s side and the wound category has never faced the creeping seen its volumes stagnate in the US has been haemorrhaging for quite a danger of dwindling interest and and decline in the UK in recent years. while now. Russia, vodka’s homeland, cyclical disillusionment. Additionally, Despite strong growth for the brand accounted for an impressive 40% of the aspirational reflexes across mature in smaller markets, such as Brazil category’s global volumes in 2011 but and emerging markets have and Canada, this has not been that share has been consistently falling, provided a seemingly infinite enough to offset the weakness and while shifting drinking patterns are pool of drinkers willing to in its two key markets. This partially to blame, excise tax hikes and loosen their purse strings weak performance has derived a series of legislative limitations in terms even during times of severe from Diageo’s too strong a of channels and selling hours are merely economic turmoil. focus on driving growth in its paving the way for further declines According to Euromonitor key markets, a strategy which moving forward. International, overall vodka historically proved successful Nevertheless, beyond the legislative sales are expected to witness and generated large volumes issues in Russia, severe recessionary flat total volume growth over but means weak growth of pressures and shifting consumption 2011-2016. However, as is the brand is likely to be seen habits across a number of key Eastern always the case, the devil is in as its volumes are rebalanced European markets, the rest of the world the detail. so dynamic markets such does not seem to even have come close to While volumes in Russia as Brazil and India assume quenching its ever growing thirst will retain their sobering greater importance. for vodka. trajectory, hence dragging The only other international Western Europe, facing chronic global growth down with company among the leading stagnation across the spirits market them, all other regions will players, Pernod Ricard, saw along with a deluge of looming sovereign continue to unreservedly slower growth than Diageo. By Spiros Malandrakis, alcoholic drinks defaults, plummeting consumer embrace vodka in its myriad Its performance continues confidence and soaring unemployment, guises, with global volumes, to be held back by its large analyst and Jeremy Cunnington, Euromonitor can always be used as a benchmark for excluding Russia, growing by Polish-based brands such as judging any category’s resilience. And 13%. . In addition, its International senior company analyst vodka has triumphantly reaffirmed its After all, and as its Russian major brand Absolut saw only resilience even in such rather unfortunate bastion increasingly fades into sluggish growth, primarily circumstances. According to Euromonitor the background, it is now a due to the maturity of the International, vodka volumes in the truly international spirit. brand in the US, which p13

10 Drinks International March 2012 drinksint.com vodka SUPPLEMENT Drinks International 11 Overview

at least grew after a number of years Pernod Ricard, ranked only 15th, all the Fragmented and fluid: the dual of decline, while the benefits of Pernod other leading players are either local or drivers of premiumisation and flavour sophistication continue to expand Ricard’s superior distribution to V&S regional companies primarily focused on the category’s penetration have yet to take full effect. the three largest Eastern European vodka markets of Russia, Ukraine and Poland. strong growth of its brand International companies with Polish-based CEDC was the world’s in the US, while Sazerac, with its smaller global presence second biggest vodka player in 2011, economy range of purchased Other international companies have also which, despite its financial troubles, from Constellation Brands, continued to struggled to achieve volume growth, saw some growth during the year. perform strongly. primarily due to However, the company overreliance on a single must be worried that a 2012 and beyond market for their brands. The vodka number of its brands, The vodka category is likely to remain Bacardi saw slight category particularly its dominant fragmented as well as fluid. While both growth in 2011 thanks is likely Zelenaya Marka label, Diageo and Pernod Ricard will remain to its Eristoff brand, but to remain have reached maturity the leading players, the rapid growth and the company continues fragmented in key markets and decline of vodka producers in Eastern to be held back by its as well as will struggle to grow. It Europe is likely to continue. largest brand, the super- fluid could well be witnessing Further consolidation is possible, premium Grey Goose, a familiar problem for notably if Roust successfully acquires a which is struggling to vodka producers in the majority stake in the struggling CEDC. see any growth in its region, especially Russia Such a deal would position Roust as dominant US market. – that of seeing rapid the world’s number two player, just Campari faces a similar growth before stagnating behind Diageo. Additionally, Diageo issue to Bacardi and and declining. could strengthen its position by Grey Goose with its Ranked fourth is acquiring a majority stake in the Ketel Skyy vodka brand, with growth in its Russian producer Synergya, which, led by One brand. vital US market stagnating. Meanwhile, its Belenkaya brand, is still seeing strong Yet much of the category’s growth Brown-Forman and its Finlandia brand growth. Fifth-placed Ukrainian-based is likely to be organic, with companies continue to struggle in Finlandia’s Bayadera, with its Khlibny Dar brand, is from fast growing markets expected to be largest market, Poland, as well as from also doing well, although how sustainable among the biggest players. changing distribution in another key its growth will be in the future remains Indian giant United Spirits, which has market, Russia. to be seen. already seen its share of global vodka Beneath those companies, it is double to over 1% between 2006-2011, Local players dominate interesting to note that despite its is likely to continue to perform well over With Bacardi, the next biggest financial troubles Belvédère still 2011-2016 as the category achieves a international company in vodka after performed well thanks to the continued strong double-digit CAGR. DI

March 2012 drinksint.com vodka SUPPLEMENT Drinks International 13 Analysis Analysis

“Two years ago there was an anti-vodka So what’s next? feeling among bartenders in the USA. Now it’s cool to like vodka again, only Ian Wisniewski it’s become more specific, bartenders are saying I love brands with an interesting takes a look at message and flavour profile,” says Claire Smith, head of spirit creation and established and mixology, .

emerging trends to Enriching the brand’s story With the brand story so vital, delivering try and predict what the right message to different audiences is more important than ever. the future holds “We are leveraging the media mix in different ways to give different depths of messaging. We use broad consumer media for awareness and image. Close to the shelf you might find more direct e all enjoy discussing messaging on occasions or suggested what’s going to usage (mixes, cocktails etc). The website happen next, and even and social media allow us to deliver a though we state our much greater depth of content. Things opinions with are also changing in how information aW great sense of conviction (assured is gathered so on Facebook and we’ll be proved right), we can’t blogs etc it is more about facilitating unfortunately provide any guarantees. dialogue between consumers. There’s The best we can do is to look at an increasingly high level of brand established and emerging trends, and communication – not just about what estimate their future potential. you say about yourself but about how Let’s start with bartenders, who play consumers talk about your company and such a vital role in the development of brands to other consumers,” says Neil brands and cocktail culture. Vodka has Punwani, SVP managing director for Galsworthy: Each bottle has Sam Galsworthy, founder of Sipsmith “Distillery tours have been incredibly an amazing record, driving the cocktail Finlandia vodka. a batch number and the most vodka, adds: “You do need to have popular, we’ve had thousands of people visited part of our website is revival in the UK and USA (which began Production details have long been a a check list of credentials but it can’t visiting in the past few years, and people the ‘Your Batch’ page in the mid-90s). But the past few years significant element of brand messages, be manufactured and it has to fit each love the experience, they meet us and has seen a ‘bored of vodka’ mind-set with the focus on distillation and market. It’s not the amount of credentials, they feel they know the product, they feel among a growing number of bartenders filtration for several years. But that’s all it’s better to have one that resonates a part of it. Visiting the distillery is in both markets. In one sense this was set to change. rather than trying to manufacture like a drinks party but they also get hardly surprising. After several years “Country of origin and ingredients are five or six. You have to find what information they can use. It helps us of intense focus on vodka, it was time becoming the main story, the two are works in each market, as what works enormously, I think we’d be for various bartenders to move onto linked, enabling brands to talk about in one won’t necessarily work in 60% behind where we are today other creative challenges, particularly terroir, which is a great opportunity to another.” without visitors to the distillery,” gin, which was in again. But with so enrich the brand story beyond stating A pinnacle of consumer interest is adds Galsworthy. many sales reps and brand ambassadors the number of distillations, and there’s a provenance, and this interest can be promoting numerous brands, gin has now heightened level of interest in provenance catered for in a very specific way. Niche brand growth replicated vodka’s trajectory. And guess and the ingredients,” says Claire Smith. “Each bottle has a batch As the vodka category has what? A number of opinion-forming And as soon as any brands up the level number and the most visited grown in volume and range, bartenders in the UK have already had of information it raises the stakes for the part of our website is the ‘Your the rise of the niche brand has enough of gin, and are now looking at competitor set, who are under pressure We are Batch’ page, which says what become a significant factor. vodka with renewed interest – but only in to follow or risk being left behind. leveraging was happening in the distillery, Of course some niche brands brands with a great story to tell. Meanwhile, consumers expect brands and elsewhere, while that batch may come and go, but plenty the media mix Reading the “The change in bartender attitudes to tick ever more boxes, so will we see was being produced. People remain in front of an eager, and seems to be down to the growth of brands continually extending the list of in different keep telling us that they love growing audience. luxury vodkas and bars appreciating credentials they promote? ways for for knowing the story behind a Niche brands can now that the interest in vodka shows no sign “I think consumers simply will not different particular batch, because it compete on relatively equal of waning. There has also been a new grasp too many initial messages – all depths makes the brand real to them,” terms (or at least less unequal approach taken within vodka as the the information should be detailed on says Galsworthy. terms) with big budget brands. Neil luxury brands are changing expectations the website, however, two to three key Punwani Another way to personalise A mega launch is hardly by showcasing their rich heritage and messages with a universal appeal is most Finalandia the brand story is opening necessary, and what’s just as product stories,” says Mark Holdsworth, important when marketing a brand,” the doors to the distillery, and important as the marketing UK marketing controller vodka says Matthew du Cann, director of brand providing a warm, informative spend is spending quality time signs ▲ for Bacardi-Martini. development, Snow Queen vodka. welcome. with opinion formers, p16

14 Drinks International March 2012 drinksint.com Vodka SUPPLEMENT Drinks International 15 Analysis

trends are becoming more international, as the internet enables the bartender community to be truly global, this also means that influences can easily travel the world, and the way Japanese bartenders work for example is now influencing western bartenders. This also raises the question of how vodka is placed to capitalise on current cocktail trends. “Classic cocktails continue to be popular. With more boutique cocktail bars serving such drinks, consumers are more aware of and enjoying modern interpretations on classic recipes. There is also more emphasis on the ‘experience’ with rituals or unique serves becoming popular. Vodka is often the entry spirit for consumers sampling cocktails and so vodka will continue to do well in the cocktail category in general,” says Matthew du Cann. And a growing element of cocktail culture is flavoured vodka, which retained bartender interest during the ‘bored of’ era, by offering a more definite starting point for recipe development. “The interest in flavoured vodkas is a strong trend that is here to stay. There is a big consumer group that looks for variation and flavours are a great way for them to find it. In some markets where which can produce serious results. limited editions automatically generates a Westphal: There are many flavoured vodkas are still fairly new the Similarly, using PR, social media, sense of anticipation, what’s coming next consumers looking share they take in cocktails will grow as for variation and flavours are etc. can be very effective and is far and when? a great way to find it they drive the cocktail culture forward; more affordable than a major whilst in more mature markets it will marketing campaign. Neat or mixed? more likely remain stable,” says Mathias “There are a lot of new niche Sales volume in western markets Westphal, global brand director, Absolut. brands in the market and that will continues to be driven almost With the UK and USA now mature continue, there’s real excitement in entirely by mixability, with cocktails markets both nevertheless still offer the market for small, discoverable established in the UK and USA as an brands great prospects. The inevitable brands that people feel they can be a essential element of contemporary question is which will be the next big part of, and they become advocates lifestyle. Meanwhile, growth in the markets? Contenders include Brazil, India for the brand because they feel consumption of neat vodka to sip and China, though the economy is of a part of the family,” says and savour is projected to keep course a vital factor. Galsworthy. growing, but this volume is “Asia is dominated by local spirits. Matthew du Cann adds: currently tiny. When it comes to international spirits “The leading bartenders will In eastern Europe the whisky and cognac largely dominate. always stock niche brands traditional neat serve still Vodka is emerging and challenging these of quality to show their accounts for the majority categories that are mature, very similar knowledge of the emerging of sales. Cocktail culture is The interest to what happened in Europe in the early market, to demonstrate they developing rapidly in Poland in flavoured 80s. Asia is an enormous opportunity for are in the know with the latest and Russia and is key to vodka is vodka and Absolut is leading the way of brands and sometimes to recruiting younger consumers, a strong new modern consumption, more versatile make their bar unique – ie. ask who want a different serve trend that and mixable for the young generation. for an exclusive for a certain from their parents’ generation, is here You could say that Asians who have period of time.” but the cocktail circuit is at to stay been studying abroad (in the USA in Another developing niche an early stage of development. particular) are helping establish this trend in the category is the limited With cocktail culture also Mathias but more importantly I would say that edition, whether packaging or developing across Scandinavia Westphal the new generation does not want to absolut a flavour. Apart from creating and Asia the prospects for drink what their parents drank. We are peaks of excitement, any vodka’s global success are very seeing genuine signs of this in Korea and brand with a track record of positive. And while cocktail Thailand,” says Westphal. DI

16 Drinks International Vodka map Vodka map

Each country’s key ingredient infuses a unique flavour profile. Spirits expert Ian Wisniewski explores the world of vodka... spiritget into the FACT BOX: The category is dominated by wheat vodkas, with fewer rye vodkas and even fewer potato, barley or grape vodkas. Each ingredient provides a specific flavour profile, with the ingredient being the most influential factor in the character of the resulting vodka. But the exact influence of the ingredient also depends on the house style. Some brands have a mellower flavour delivery, while others are more upfront.

Wheat typically provides aniseed notes, often accompanied by creaminess.

Rye vodka is characterised by rye bread notes and sweetness.

Barley gives a mellow, luscious grainy character. USA UK France Netherlands Poland Norway Sweden Finland Russia Potatoes provide boiled potato or Key raw ingredients: Key raw ingredients: Key raw ingredients: Key raw ingredients: Key raw ingredients: Key raw ingredients: Key raw ingredients: Key raw ingredients: Key raw ingredients: mashed potato creaminess. Corn and rye Potatoes and barley Wheat and grapes Wheat Rye and potatoes Potatoes Wheat and potatoes Barley Wheat and rye

Brands Brands Brands Brand Brands Brand Brands Brand Brands Grapes deliver raisin, citrus, Corn: Rain vodka Potatoes: Chase Wheat: Grey Goose Wheat: Ketel One Rye: Belvedere Potatoes: Vikingfjord Wheat: Absolut Barley: Finlandia Wheat: honeyed notes. Rye: Square One Barley: Sipsmith Grapes: Ciroc Potatoes: Potatoes: Karlsson’s Gold Rye: Parliament

18 Drinks International March 2012 drinksint.com vodka SUPPLEMENT Drinks International 19 Profile

over 50 different water sources, from might have coincided with the current Middle East and Africa +21%, Greenland to Tanzania to Siberia, before crisis but it was a clever, well-timed and Eastern Europe +65%, International choosing the pristine natural reservoir relatively cost-efficient way to acquire Duty Free +117%. located 3,000 metres above sea level new consumers. Do you regret any business decisions? in the Langtang National Park in the I rarely regret anything, with the Himalayas. The process includes the elit Mendeleev on: Mendeleev exception of not making personnel patented freeze filtration process. What’s the secret of your success? decisions fast enough. I mean cases Are you working on any new flavour Open-mindedness, tenacity and luck. when someone is continuously innovations? I am glad to have been able to live and underperforming, or shows inappropriate 2012 will see the 50th anniversary of our work in 13 countries across Eastern and attitudes such as arrogance, inflexibility, first ever flavoured vodkas. We will also Western Europe, Asia, Middle East and lack of teamwork... Indecision in such extend our range of indulgent flavours North America during my career, starting matters can be costly for the organisation with some really tasty new propositions. from my native Russia and ending up so I try to act fast, firmly and fairly in What advice would you give to people in Luxembourg. Operating in varied order not to regret later. thinking of launching a vodka? environments taught me to view the What do you do to relax? 1) Differentiation is key: find your USP world from different angles, things that After long journeys to Asia or Latin such as the taste profile, packaging, are taboo in one country may be a success America, family time is very relaxing positioning and launch markets, which driver in another, so I usually don’t stop (we have two young children). Besides may be relevant for a substantial segment when others give up. that I like a good read or a great movie of consumers, and think hard how to Describe your average day… (comedies preferred). In summer, I love communicate it to them. I travel some 150 days a year around taking a ride on my unicycle! 2) Product quality: do not compromise the world visiting our markets, factories What books are on your bedside on it. Great packaging may attract and properties. So a typical day starts in table? consumers but it is the quality of the a hotel room with brief conference calls The Prize (a history of oil) by Daniel liquid that will eventually retain them. with my team to catch up and discuss Yergin, Luxury China (a guide to On to a clear 3) Ensure a strong route-to-market: most urgent matters such as M&A marketing to China’s expanding middle for small or start up brands, it may be projects, pending recruitment, our new class) by Michael Chevalier, The Big difficult to be the vodka of choice for a marketing campaign... anything that can Short (about the current financial crisis) major distributor that may already sell be discussed and solved on the phone. by Michael Lewis and Los Mejores thousands of SKUs. Meet with a distributor in the morning to Chistes del Siglo (The Best Jokes of the 4) Chose partners wisely: look for review latest sales results, our competitive Century) by Pepe Muleiro. shared or mutually respected long-term position, status of brand investment, and What’s your favourite drink? (besides goals, product, sales and marketing continued priorities. Whatever can be Stoli, of course) philosophy. With pure financial backers, solved is solved on the spot. Visits to I don’t have a single favourite drink but look for patience and resilience, and off-trade or production facilities, love to discover different and new spirits discuss potential pitfalls early on. followed by break for emails and longer and cocktails. The last drink I enjoyed Which is the most exciting vodka Standing proud: 5) Marketing investment: be realistic conference calls. In the evening, a team much was an espresso martini made Val Mendeleev celebrates Lucy Britner chats with SPI Group CEO market in the world and why? about the objectives, timing and dinner with a local partner combined with Patron XO Cafe in Sequoia bar in 50 years of Stoli flavours Based on size and complexity, it is USA, financing. Funding is required to sustain a with on-trade visits. Sometimes these Washington DC. Val Mendeleev about 50 years of Stoli the world’s largest premium market. In new brand until critical mass is achieved. will just be visiting four or five places or Is there anyone that has inspired you my last trip to the East Coast, I counted Distributors can distribute, but they do sometimes I will have in-depth talks with and your career? flavours, brand growth and unicycles. over 100 different vodka brands, not not create demand. Creating demand our on-trade partners, other times I will There isn’t a single person but a to mention flavoured brand extensions; through marketing support is a brand be hopping between dozens of bars, clubs combination of various events and all sold at different price points. It is a owner’s responsibility. and restaurants to get a full picture of people. I started my first business with al Mendeleev runs spirits and imported brown spirits such as paradise for product innovators! What lessons have you taken from the competitive landscape. Lastly, more two partners 25 years ago, they were SPI Group, the owner of whisky and cognac. But personally, and based on the the financial crisis? emails before going to sleep in the early experienced businessmen twice as old vodka. Besides 2012 will see a greater use of mobile long-term future growth potential, it is It is important to protect your brand hours when I realise another day has as me. Since then I have been lucky to Stoli, SPI Group owns, technology to enhance the vodka China. Here there is a growing economy in a tough economy. Consumers will gone by without going to a gym. have smart and creative colleagues, manages or distributes 380 shopping experience – drink recipes, tools and a burgeoning middle class seeking We are come back to premium brands after the What was the best decision you bosses, partners and shareholders who wineV and spirits brands, both globally for bars and parties and location-based international trends and products that downturn is over. In some markets, they ever made? challenged and encouraged me to take and in local markets. The group also apps. Digital advertising will increasingly will drive both Asian and global growth extending are already starting to trade-up again In the context of SPI Group, it was a larger responsibility and make bold operates 75 alcohol retail shops and owns squeeze out traditional TV media. for the next decade. We bet on China our flavours – and brands that stayed true to their decision to decentralise and expand it decisions. At different stages of my wine properties. It has recently built a And the most daunting prospect? and invested accordingly – a few months with some original pricing are back on fire. Make during the past two years, despite the life and career, I have also had many raw alcohol plant in Russia. The group Retail price erosion of premium spirits. ago we opened our fifth office there. Stoli really sure not to give away your brand equity crisis. During 2010 we set up a regional opportunities to interact with heads employs 2,500 people. Can you tell us about your latest sales in China doubled in 2011, and we tasty new with short-term volume actions. structure: seven regions with business of states, top government officials and distribution deals? expect this trend to continue. propositions Product innovation and well thought supporting HQs – in Sydney for Asia, global business leaders such as Jack Mendeleev on: the industry We have new distribution deals in United What made you decide to investments are a good recipe during in Miami for Latin America, plus travel Welch, George Soros, Warren Buffett, and What is the most exciting thing about Arab Emirates and Oman, which are experiment with water for your crisis times to increase awareness retail. This allowed us to be closer to many others. Being around exceptionally the 2012 vodka market? fast growing markets for ultra-premium Pristine Water series? and attract new consumers. The the markets, distributors and the action. smart and successful people who think The continued expansion of the category vodka, such as elit by Stolichnaya. Next It was both an exciting and difficult encroachment of all types of alcohol into I am happy it paid off as the regions’ very big and very long-term has inspired into new markets and channels (eg Asia) to come are new distribution contracts in journey to look for water of such quality. flavours previously “owned” by vodka results speak for themselves: in 2011, me to set ever-higher targets both for my historically dominated by both local Africa to close some territorial gaps. We searched the globe and appraised (ie flavoured bourbon, rum, and tequila) Asia was up +36%, Latin America +54%, career and the businesses I run. DI

20 Drinks International March 2012 drinksint.com vodka SUPPLEMENT Drinks International 21 Flavours From whipped cream to fluffed marshmallow, Lucy Britner gets a taste of the latest flavour trends

Pudding in a

t’s impossible to ignore the amount continue to be widely enjoyed by Infusions range – and it has just launched of flavoured vodkas pouring out of our consumers, which is why we’re Coconut (see What’s New page 8). distilleries. consistently adding innovative, high McGinn says: “Unlike previous In the US, the barn doors are quality flavours to the Smirnoff portfolio. generations, who were content wide open and convention has “We’re confident that the new Whipped experiencing flavours they found in their Idefinitely bolted. The most discernable Cream and Fluffed Marshmallow local supermarket, today’s millennial trend seems to be for desserts. From flavoured vodkas will be broadly consumer is an explorer, seeking out new Pearl’s Wedding Cake vodka to embraced, much like their namesake flavour experiences at farmers’ markets Underdog’s Cupcake vodka – which dessert counterparts.” and organic food stores.” Cue online comes in six flavours – Verry Berry, Steve Raye, managing partner of retailer Master of Malt’s launch, with Chiffon, Frosting, Original, Devil’s Food marketing and consultancy firm Brand what it claims is the “world’s hottest and Ginger Snap – pudding in a glass is Action Team, talks about how the chilli vodka”. The vodka, named 100,000 big news. trend started. He says: “Beginning with Scovilles – Naga Chilli Vodka, is an White Rock Distilleries, which Pinnacle’s Whipped Cream, we’re now infusion of vodka with Naga Jolokia – a produces the Pinnacle and Epic vodka seeing everything from cake, cotton chilli rated on the scovilles scale as being brands, hasn’t missed a trick. Pinnacle candy and even bubble gum vodka. And one of the world’s hottest. comes in 30 flavours, including Cake, they’re selling.” The vodka category is also helping to Cookie Dough, Cotton Candy and There is an arguably more quiet trend add new life to liqueurs. Chocolate Whipped. Even drinks giant for market garden-type flavours. Beam At the beginning of January, two UK- Diageo thought it was worth keeping launched a cucumber vodka under based craft distillers launched liqueurs Smirnoff fans sweet and the company its Effen brand last year. Gary Ross, that counted the base vodka among launched Whipped Cream and Fluffed senior brand manager at Beams, says: their credentials. Chase launched a Marshmallow under the Smirnoff brand “Cucumber water has become very potato vodka and rhubarb liqueur, while last year. The launch was fronted by popular at spas and high end hotels and Adnams went for a Morello Cherry model and socialite Amber Rose. we felt we could capitalise on this trend.” liqueur – made with the company’s barley Whether you want your vodka whipped Maura McGinn, group brand director vodka. With provenance at the forefront or fluffed, the products cost $12.99 for – vodka & cordials at Skyy Spirits (now of consumer decision-making, this is 75cl. Fluffed Marshmallow is 35% abv called Campari America) says consumers likely to be the beginning of a trend. So and Whipped Cream is 30% abv. want to explore when it comes to we’ve had the farmers’ market and the David Tapscott, brand director, flavours. Skyy counts Blood Orange, cake shop, where will distillers go next Smirnoff, says: “Flavoured vodkas Dragon Fruit and Ginger among its for inspiration? DI

March 2012 drinksint.com vodka SUPPLEMENT Drinks International 23 Illicit trade Illicit trade

This growing problem remains last five years has also seen electronic and chemical additions. Illicit alcohol For packaging designers, glass quality, The circulation of unbranded illicit largely untalked about, Hamish moulding, embossing, holograms alcohol is of grave concern to many and intricate labels can all stem Eastern European countries. Leszek Smith asks why and what are counterfeiting, but are brands taking the Wiwała, president of the Polish Spirit problem seriously enough and investing Industry Association, says: “In Poland brands doing to tackle it? accordingly? “In 18 years we’ve never illicit alcohol is about 10-15% of sales. had anyone even mention anything Most of it is no-name industrial alcohol, other than the most basic counterfeit while counterfeiting is a very small protection on a brief,” says Kevin Shaw, problem at less than 1% of the market. founder and creative director of design We started educational campaigns to agency Stranger & Stranger. “Maybe make consumers aware that when they the standard anti-refill cap plus the odd buy alcohol from unknown sources, over label, stamp or hologram (which they agree on a risk hazard. The are usually legally required anyway) but problem is that consumers are usually that’s about it.” aware of what they buy.” Countering “I had a meeting with some security In Russia illicit alcohol production printers who told me that at any time has reached epidemic proportions. they are only six months ahead of the Bulbash (one of the few to offer an forgers. Six months! If you take into opinion on the subject), which is the consideration shipping and the time a largest selling Belarusian vodka in the counterfeits bottle spends in warehouse and on shelf, Russia, provides anecdotal evidence any new development is obsolete before of the market. “The illegal market in welve per cent of the savethespirits.com – an educational you get it in your hand. There are other Russia is 40-50% and in Latvia it is global spirits market is an resource created by the closures technologies out there and we’re talking about 40%, according to estimations impressive chunk. For most manufacturer Guala – counterfeit alcohol to these people but there are investments from local distributors,” says the spirits groups, such a share is worth US$1bn a year and spirits are involved before these measures brand’s Andrey Butovsky. is the figment of fantasy, for the big ticket pull because of high brand make it into the mainstream.” Illicit alcohol can also Tthe world’s counterfeiters it’s a reality. values and heightened taxation. As Shaw puts it “you could make its way to market Through imitation brands and the be forgiven in thinking that through more deceptive re-filling of genuine bottles with cheap Driving awareness they’ve given up”. Though means. Rogue distillers or industrial alcohol, these nefarious, For vodka, bootlegging is most according to the IFSP’s need only create brands underworld operators are a destructive prevalent where the spirit is popular. Bolt, vodka companies are with authentic sounding presence in the industry. And they are as Eastern Europe is therefore the capital motivated for the fight. names and packaging that implicit as they are illicit. of vodka counterfeits with western “Brands are very closely apes the colour and design The damage is felt to brands’ revenue Europe an increasingly frequent involved [in our work] and of trusted market leaders. and reputation; to governments in lost target. “Counterfeiters are criminal there is a constant dialogue. Western markets are taxation; and most gravely, to consumer entrepreneurs so they target brands that The safety of consumers is particularly susceptible to health. Yet spirits companies, vodka are most popular. It’s also probably easier something that brand owners this rouse. The UK has seen brand owners among them, remain to produce clear spirits like vodka than take very seriously for a spate of activity. In July largely silent on the issue. brown spirits where there is a distinctive altruistic reasons and 2010, five men died in an When probed to comment, many of colour and smell,” adds Bolt. Thompson. “In Eastern Europe brands support of the international spirits brands Clearly toxic: It’s easier to because [otherwise] it’s explosion at an illegal vodka the major companies decided to either The issue is most acute at the premium don’t publicly admit that counterfeiting is which – and I understand why – don’t produce clear spirits than bad for business.” plant and around the same brown spirits where there is a “decline the opportunity” or let others end of vodka where stakes are highest a problem but it’s expected by consumers want to publicise the problem. They distinctive smell and colour. When it comes to spirits time fake vodka circulated speak on their behalf. “Brand owners are and a brand name curries consumer that big brands have a non-refillable could kill their markets overnight.” Right: Tops the lot – Guala’s – unlike Rolex watches and in Derbyshire was found to keen that we do to the talking for them,” trust. “The problem is that in some closure on the bottle.” Polka closure. Prada handbags – there is little contain isopropyl, a chemical says David Bolt of the International markets you have consumers that don’t Thompson adds: “In western Europe Packed with ideas room for complacency. Brand used as a cleaning fluid. Federation of Spirits Producers (IFSP), have a lot of money that are looking for you never see statistics on counterfeits Packaging is perhaps brands’ primary health is one thing, consumer A month later 900 vodka an anti-counterfeit company of 19 years, bargains and are attracted to spirits that and brands tend not to publicise it, so it’s protection to counterfeiting and the Spirits health is quite another. If bottles were seized, with a funded by members such as Diageo, are much cheaper than the alternatives,” very difficult for consumers to check for a closure is the first line of defence. With brands consumer awareness is indeed street value of £7,000. The Pernod Ricard, Bacardi, Moët Hennessy says Bolt. “But if you are buying genuine product.” unit production in the billions, Guala don’t want the key to thwarting the tide fact this haul was packaged and The Edrington Group. “This is a recognisable products in reputable places For Guala publicising the facts about is the largest manufacturer of closures. to publicise of counterfeits, brands will have with red labels and caps delicate area for them, it’s a balance at a recognisable price, the chances are it counterfeiting is a key instrument of “Historically the solution has been the issue to break silence and start talking for is probably no coincidence. In between their relationship with the won’t be counterfeit.” awareness. “Consumers [in western mechanical – a Guala closure which can’t themselves. Ironically, spirits brands November a student purchased a Dave Thompson consumer and not wanting to alarm or Consumer awareness of counterfeits European markets] accept there are be re-filled,” says Thompson. “These Guala are forever educating the trade and “cheap” bottle of vodka from a overstate the problem.” varies wildly from region to region. “If Prada handbags that are fake but not go from very simple closures containing consumer of the ‘uniqueness’ and shop for £5.99. The substance The IFSP provides training on the you go to Asia and Latin America, a lot that alcohol can be a faked and that it’s a four components to very complex ones ‘authenticity’ of their product. caused lasting damage to her recognition of counterfeit spirits of the spirits brands will advertise in huge market.” According to Thompson that have 14 components.” Guala’s range It would be helpful if the ‘brand eyesight – something that is to the trade and law enforcement newspapers to tell consumers what to a concerted effort from the big brands is includes tamper-proof systems with story’ became the whole story, not uncommon according to agencies investigate and report look for to make sure it’s genuine,” says crucial to awareness. “For consumers to bands, tear-off devises and closures made one that includes the chapter the hospital that treated her. illicit manufacturers. According to Guala’s group innovation manager Dave appreciate counterfeiting you need the from specialist or multiple materials. The on counterfeits. DI

24 Drinks International March 2012 drinksint.com vodka SUPPLEMENT Drinks International 25 Design

on a bottle he health of the economy rejected concept from a Diageo design is always reflected in the pitch. A big opportunity missed. products that we buy and Similarly Wodka is a proper Polish how they’re packaged. Design brand sold on a clear price platform: is a great mirror on life itself. “Escort quality at hooker prices”. The TIn these recessional times, extravagance sadness is that they have missed a trick in and overt shows of wealth are out and the packaging. A dull, rather retro design sackcloth and ashes are in. The received does nothing but make you feel depressed wisdom is that people would carry about going value. on going out drinking to drown their If you’re selling a value product to sorrows and that women would stop someone who previously bought the buying LBDs (little black dresses) and super premium version, then you have to pick up a Chanel lipstick instead. give them an excuse so they can justify Perversely, restaurants are closing as it to themselves and their friends. It’s quickly as high street shops and people are all about being smart and it’s why the drinking at home. This isn’t necessarily the car parks of Aldi in Germany are full of case globally, but there are few economies high-end Mercs and EasyJet has a goodly that aren’t suffering and it is where it share of ad execs flying to their weekend gets interesting for vodka. Global brand homes in France. They aren’t frightened owners have excelled at creating super of showing how they understand value premium brands selling us craftsmanship, and they’re the standard bearers for the provenance and purity but when the chips clever customer. are down, there’s not much difference between one vodka and another. How can Basic value the value of the difference be sustained Interestingly, we created a Basics range when times are tight? for Sainsbury’s some years ago. Their customers, who felt themselves to be a Glimpse of the future cut above Tesco, struggled to shop in the Vodka does seem locked in the past. fast growing value category. In the end, it Just as the Filofax and Yuppies were to was a liberal dose of wit that did it. Value Thatcher, so Revolution bars, Grey Goose flour became “a little less refined, but and Absolut Mirror Ball are to Cool still rises to the occasion”; bin bags were Britannia and Tony and Cherie. Making value look “thinner but not rubbish”. It’s the trend for low priced, yet Sainsbury’s customers were tickled premium vodka that offers a glimpse of premium is key to because they thought it reflected their the future and an opportunity for design. intelligence and its growth has been little These premium brands are best success in the current short of staggering. exemplified by Sobieski, which is It feels to me that branded value endorsed and part owned by Bruce Willis. climate, says design vodkas may be the way to go, but it takes It describes itself as a “truthful brand” bravery to make someone chuckle in helping consumers to understand that agency Williams front of the drinks fixture. The one that they don’t have to pay a “king’s ransom” dares to do it will be laughing all the way for premium quality vodka. The ads say Murray Hamm’s to the bank. that Bruce even designed the bottle and label, well, if he did, stick to the day job, Richard Williams Richard Williams is chairman at design Bruce. The packaging is the one thing agency Williams Murray Hamm. that lets the brand down. It looks like a www.williamsmurrayhamm.com DI

26 Drinks International