Vodka may be hot stuff in some of the world’s emerging markets, but in its established haunts, the spirit must evolve to reignite sales. By Becky Paskin and Melita Kiely
The global vodka scene has endured a shift in consumer trends, economic turbulence and political unrest in the past year, and has found itself in the midst of a sales slump.
Volume moved at just 0.5% in 2013 to 496.4 million nine-litre cases, and is predicted to have shifted by just 0.2% in 2014 when official figures are released by the IWSR in a few months. The five-year forecast looks even bleaker, with less than 0.1% CAGR predicted between 2014-19 thanks predominantly to the continued slowdown in Russia.
There are many obstacles standing in the path of vodka’s return to meaningful growth, not least the competition from brown spirits. But if the category stands any chance of counteracting the general inertia and reliving its former glory days, then reinvention is going to be key. “Vodka is in this space where it needs to reinvent itself to keep its growth going,” says Matt Bruhn, global brand director, Smirnoff. “We’re in a period of inflection in the category. Vodka has always been on the edge of trends and needs to keep reinventing itself – that’s the biggest challenge.”
Vodka has come a long way since its heyday in the 90s, but equally the category’s loyal drinkers have also evolved over the years. Consumers are now looking for much more from brands through provenance and an authentic story, and are demonstrating a demand for premium products. On a global level, these are the major trends that will shape the vodka landscape for the foreseeable future.
Reinvention is “key” for the vodka category to grow sales
On a more regional basis, the wave of growth from the US seen in the past couple of years as consumers lapped up an extraordinary variety of flavours has begun to wane as ever-more discerning drinkers grow tired of the whipped cream and cake creations, turning their attention to more traditional expressions and even flavoured innovations from alternative spirits categories.
Meanwhile, political unrest in Russia and Eastern Europe has encouraged many producers to set their sights on alternative regions, although there are still pockets of growth in rapidly developing countries. Whereas for Western Europe, on-going hardships as a result of the Eurozone crisis have made for a tough playing field for vodka – though brands are trading rather successfully in one or two specific countries.
Perhaps the greatest potential for vodka has in fact manifested itself in Brazil, where an emerging middle class, blossoming cocktail culture and a nationwide predilection for white spirit cachaça, has created the perfect storm for vodka to flourish.
Asia, on the whole, is being treated as a long-term project by international brands, while Australia is peddled as a region with small, but dynamic, growth. Even Africa, with its penchant for beer and RTDs, and little experience of mixed drinks or cocktails, is showing sure signs of promise for leading vodka brands.
For our annual analysis of the global vodka landscape, The Spirits Business has partnered with the IWSR to present exclusive data, commissioned by leading wine and spirits trade show Vinexpo. The exhibition, which takes place this 14-18 June in Bordeaux, France, commissions research from alcoholic beverage market analyst IWSR each year so as to harness key insights into the development of both spirits and wine. The annual collaborative research allows SB to take a closer look at how vodka is performing in different regions throughout the world.
Continue to the following pages for an in-depth market-by-market analysis of the vodka category.
Source: Spirits Business