Vodka's new niche of life

New vodka brands come and go, but they all face one common problem - how to cope with the dominance of Smirnoff.

The growth of vodka has made it arguably the most competitive category within the spirits market - yet for every brand that comes on to the market there's one overriding question: what to do about Smirnoff.

The Diageo brand is sold in 130 countries and has sales worth £762m in the UK on-trade alone, according to AC Nielsen figures for 2004, with a 68.5% share of the total UK vodka market.

New entrants coming into the market have to cope with its saturation-level distribution, backed by powerful portfolio selling and a £12m marketing package that most just can't match.

The power of Smirnoff in the market means that when it launches a new vodka itself it has an instant head start. Smirnoff Norsk, a vodka flavoured with Nordic berries, was launched into the on-trade only in 2004 and was quick to make an impression.

Senior brand manager Julie Bramham claims: 'In just six months following the launch it was five times bigger than its nearest competitor in the flavoured vodka category and, after a year, is now available in 12,000 outlets.'

Such a claim is enough to cause the people behind brands like Stolichnaya and Absolut in the UK to break into a cold sweat.

Stolly has just joined the Pernod Ricard port-folio, alongside Wyborowa, and Roger Harrison, the company's head of marketing for white spirits, acknowledges that the Smirnoff issue presents a huge challenge. The solution, he maintains, is not to compete head-on.

'If we took Wyborowa mainstream there wouldn't be any space for us, because Smirnoff is so dominant. Instead, we're really pushing our Polish links and talking about provenance a lot more.'

The brand is also getting behind some unusual flavours in almond, pear and rose that don't just mimic other ranges on the market.

It's also borrowed ideas from the wine market with Wyborowa Single Estate, which uses grain from one designated farm, as wine producers do with grapes for single-estate wine.

No time for mainstream pubs

Harrison says there are parallels with wine in the way the vodka market is developing around brands from different countries rather than the traditional Polish and Russian brands.

Realising the commercial restrictions, many of these are targeting top-end style bars and don't even waste their time trying to crack the mainstream pub market.

Justin Bade is the UK ambassador for the premium New Zealand vodka brand 42 Below, created by an ex-Saatchi advertising executive as recently as 1999.

Bade says: 'He was inspired by reading a magazine article on a plane on a trip back from the US and thought if America can do it why shouldn't New Zealand as well?'

As he only started out distilling by trial and error in his garage, it's no surprise that six years down the line, 42 Below is nowhere near operating in the same league as Smirnoff.

Instead, the brand is building slowly, nurturing associations with bartenders and spirits writers to give the brand a premium cachet.

Bade says: 'Our consumers are very much in the category of premium spirit drinkers and our competitors, therefore, are brands like Belvedere, Ketel One and Grey Goose.'

Remaining obstinately niche

But while the likes of Grey Goose have arguably crossed over into the mainstream under its new owner, Bacardi, 42 Below remains obstinately niche.

'We're not really in the lower end of the market, like Smirnoff or even Absolut,' says Bade.

'Our consumers are really those with high disposable incomes who can afford a high-price product. We're in top-end cocktail bars, hotels and clubs and we don't really want to push through mainstream pubs.

'Wetherspoon's does Grey Goose on optic at £1.50 but most pubs wouldn't want to sell 42 Below at the price we want to sell it at. We're not in that market and we never will be.'

Martin Horner, senior trade marketing manager for Grey Goose at Bacardi Brown-Forman, acknowledges that the niche Grey Goose occupies has become considerably large, but doesn't think that dilutes the brand.

He feels that as the nature of the pub and bar trade becomes more upmarket, some premium brands will inevitably cross into the mainstream.

Paying more for quality

'Premium brands are not just about the top-end in London any longer. If you go to places such as Manchester or Brighton there's a lot of design and investment going into bars and pubs and they're not inferior to London any more.

'And the range of drinks they're selling and serving means they're right for something like Grey Goose.

'The right sorts of consumers are always going to pay more for quality, and Grey Goose is made in France in the Cognac region, which means the quality of the raw ingredients and the distilling expertise is fantastic.

'It does provide licensees with a great oppor-tunity for trading up and making better cash margins.'

The ability to talk to consumers on a micro level about product quality and distillation methods has helped premium brands differentiate themselves before now, but Smirnoff is about to make things even harder with its latest ad campaign - by occupying the same marketing ground itself.

Its new campaign focuses on the facts that Smirnoff is triple distilled and 10 times filtered through Polish silver birch charcoal.

'We're telling people specific facts about the lengths we go to ensure the purity of Smirnoff,' says brand director James Pennefather.

we are in top-end cocktail bars and clubs and we don't want to push through mainstream pubs