Vodka focus: A different league

Related tags Vodka Brand First drinks brands

What with the news of the Scottish & Newcastle sale and the potential merger of Punch Taverns and Mitchells & Butlers you could have been...

What with the news of the Scottish & Newcastle sale and the potential merger of Punch Taverns and Mitchells & Butlers you could have been forgiven for missing the news of Diageo's latest acquisition.

Earlier this month the drinks company announced it was going into a 50:50 partnership to buy premium Dutch vodka brand Ketel One - for the not insignificant sum of £900m.

Diageo already has an impressive array of vodka brands but the deal is further proof that drinks companies view premium vodka as the category to invest in for the future.

Standard struggle, premium growth

Standard vodka may well be responsible for the bulk of volumes sold in any drinks brand owner's portfolio, but premium is the home of growth and innovation. It is where the action is.

Stephen Clarke, purchasing director for spirits, beers and soft drinks at wholesaler Matthew Clark, sums up this trend neatly: "We continue to see significant growth in the flavoured, premium and super premium categories, while standard and value vodkas continue to struggle. This dynamic mirrors other categories such as gin, whisky and rum."

The company says that brands performing particularly well within its business are those that are either preferred or featured within its premium ICON range - and those include Stolichnaya, Absolut, Ketel One and Zubrowka.

However, a category which displays good performance among niche premium brands does not necessarily make for a strong category in sales terms. As Clarke suggests above, standard is struggling.

And November's Nielsen statistics back this up. Year-on-year sales of the spirit were down one per cent - the bi-monthly figures are worse: down three per cent.

Clarke suggests the reason for this is that there is little brand loyalty at the bottom end of the market.

"We find that in a large number of freetrade and national customers, standard and value vodka brands are generally price rather than brand-led and it's really only Smirnoff that commands significant brand loyalty within this area," he says.

But look at the figures a little closer and you will see it is not all bad news. In comparison to the rest of the market vodka's year-on-year decline in the on-trade is minimal. Gin is down three per cent, blended whisky has dropped by eight per cent, and surprisingly white rum is down nine per cent.Impact

So how has vodka kept its head above water? The launch of Russian Standard by First Drinks Brands has certainly had some impact. According to some industry observers its launch has awoken Smirnoff and has really challenged the traditional standard number two, Vladivar.

Whyte & Mackay, which owns Vladivar, has responded to the threat by repackaging and relaunching the brand.

But Andy Corris, senior brand manager for Russian Standard at First Drinks Brands, says there are big plans for the brand this year.

"For 2008, distribution growth is key," he says. "First Drinks Brands recognise that in such a competitive market place, the strong momentum and high level of interest achieved so far must continue to ensure the brand's success.

"The continued high marketing investment will allow Russian Standard to effectively compete with the likes of Smirnoff and Absolut and establish itself as a serious brand in the on-trade."But despite this, it really is a premium world. As if we needed further proof of the value of premium vodkas to drinks companies then we need only turn our attention to the mad scramble currently taking place to buy the Absolut vodka brand.

Received wisdom is that the Swedish government, which owns the brand, is looking to sell, and drinks companies ranging from Bacardi to Fortune Brands (which is represented in the UK by Beam Global) are desperate to purchase.

While pubs are still awash with standard vodkas - many of which are bought on price - and the trade's number one brand continues to be Smirnoff Red, there are strong signs that the premium vodkas that had only found a welcome home in the nation's style bars are now filtering down onto many more pub back-bars.

Related topics Spirits & Cocktails

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