Vodka has been outshone by other white spirits in recent years, but despite the challenges, there are reasons for producers to be cheerful, writes Joe Bates
The devastating impact of the pandemic on the on-trade markets of leading vodka-drinking nations made 2020 a very difficult year for the vodka category. Pre-Covid-19, vodka was already losing ground to other spirits and volumes were declining at lower price points due to anti-alcohol measures in vodka-belt markets. Add the effects of the pandemic into the mix and IWSR Drinks Market Analysis predicts that global vodka sales will not return to pre-Covid levels until 2024 — signalling that there is long road ahead for the category.
Nonetheless, there are some encouraging trends to cheer vodka producers. It is the base spirit of choice for many of the RTDs being launched in the US and Europe. Demand for premium-plus vodka is also growing in both established and emerging markets; flavoured vodkas are enjoying a renaissance. Finally, an increased focus on sustainability, a cause dear to the hearts of many millennial and Gen Z consumers, is giving vodka a new hip status.
Vodka and RTDs: a match made in heaven?
RTDs was the only category to enjoy volume growth in 2020, according to the IWSR, which predicts it will post a CAGR of 21.8% between 2019 and 2024. Vodka is emerging as a popular base spirit for many of the RTDs being launched into the market both from established brands —such as Diageo’s Ketel One Botanical Vodka Spritz, which is now available in 20 US states — and companies previously outside of the vodka sector, like US craft beer producer Two Roads Brewing Company, which released a 7% ABV RTD line of Daybreaker Vodka Cocktails in March.
“We are seeing a surge in vodka-based RTDs in the US because of the mixability and similar attributes to hard seltzer,” agrees Brandy Rand, IWSR COO of the Americas. “While most hard seltzers are traditionally fermented malt or sugar based, a vodka-based seltzer appeals to vodka drinkers, especially premium branded vodkas.”
Vodka back in flavour
Flavoured vodkas are also growing in popularity, with many consumers in lockdown experimenting at home with different cocktails and flavour profiles. James Stocker, marketing director at Halewood Artisanal Spirits, the owner of JJ Whitley Vodka, cites Nielsen figures forecasting that flavoured vodka sales in the UK could double over the next year.
“To tap into this proliferation of flavoured variants, having a wide range of options is key,” he argues. “With its broad range of flavours, from raspberry to vanilla, JJ Whitley is well positioned to tap into this, providing options for a variety of taste preferences and flavour trends. The range has been created to incorporate a mix of popular flavours that we know consumers are looking for in cocktails and long-drink serves.
“Our new JJ Whitley Passion Fruit Vodka is a good example of this — passion fruit has been a popular flavour in multiple categories of spirits and cocktails over the last few years, particularly as a result of the exponential growth of the pornstar martini serve.”
In UK at the higher price band, flavoured vodka is performing better than traditional vodka, according to IWSR research director Humphrey Serjeantson. “There is no doubt that the growth of flavoured gin is helping this — though of course it must be remembered that flavoured vodka was around long before flavoured gin,” he says. “At this price, key flavours tend to be fruit-based — rather than some of the sweeter flavours more present at lower price bands — and among these, berry flavours are doing well.”
Bright future ahead for premium-plus vodkas
Premium-plus vodkas have held up well during the pandemic. Besides the US, the IWSR highlights Russia, the UK, China and Australia as being markets to watch. Of market trends in Russia, IWSR research analyst Ivan Kolarov says: “Premium-plus continued growing in 2020 in Russia both in terms of volume and in terms of share even though some large brands which had been more heavily dependent on the on-premise channel saw volumes and value drop. Even though the category overall is in slow long-term decline, it will continue to attract consumers’ and brand owners’ imaginations and spend for many years to come.”
Certainly, Marc Torterat, marketing director at Marussia Beverages, the owner of super-premium Mamont Vodka, is bullish about the brand’s performance in 2020. “The brand has again performed in 2020, with volume growth of 20% versus 2019, due to the brand momentum, growing off-trade distribution and activation, especially in Russia with our 60° [adventure expedition] programme Mamont Camp,” he says. “E-commerce has not played a key role in this region and remains marginal overall versus Western Europe.”
Brands step up digital marketing during pandemic
Online sales may not have been a prime factor behind Mamont’s success, but the brand did mount a successful marketing campaign on social media during the pandemic.
“We have extended our social media activities in 2020, reaching 60m targeted consumers and implementing various activities such as an influencer programme, drive-to-store campaigns and Instagram stories,” says Torterat. “In Russia specifically, we have also set up a programme on vodka and food pairing as per the local consumption patterns and recent trends.”
Mamont is not alone in falling back on digital marketing strategies during the pandemic. Consider the case of Poliakov, the French vodka owned by La Martiniquaise, which enjoys a 40% share of the French on-trade. Since 2019, the brand has forged a partnership with DJ Hiddn, staging activations at many music festivals. Covid-19 meant a change in strategy, explains Poliakov international brand manager Manon Brochet. “Within the Covid-19 context, events and festivals were postponed, so in order to let people still enjoy great music from home, safely, we organised a live music set with DJ Hiddn shared on social media to our community and music lovers,” she says. “We also kept in touch and interacted with them via social media, sharing cocktails recipes and tips.”
Roust Group, the owner of Russian Standard and Żubrówka, has also been very active in the digital sphere. Roust Group head of UK marketing Rebecca Heathcote says: “In Germany, a core market for Roust, we launched a new campaign on Instagram called ‘Kitchen Standard’ which showed consumers how to get creative and use Russian Standard vodka as an ingredient in food recipes.
The virtual event was filmed live with our brand ambassador. A prize draw to win an online mixing workshop also took place during lockdown for five winners with three friends to win a two-hour live mixing session with three popular cocktails — a cosmopolitan, an espresso martini and a Russian mule.”
Last October, Russian Standard entered the Chinese domestic market for the first time and Heathcote says the brand has enjoyed a positive start there. “Russian Standard Vodka has seen very strong depletions growth in China — even during the pandemic — and this trend has continued in 2021,” she explains. “Chinese consumers are very discerning and place a high value on authenticity and premium products. They recognise and appreciate quality and provenance.”
Cognac and Scotch are, by far, the largest imported spirits in China, but a growing number of younger LDA consumers view the drink as a more traditional option, creating opportunities for other aspirational categories, such as premium-plus vodka.
“Premium-plus vodka has grown strongly in China but it remains very brand-led — consumers are seeking a brand rather than a category,” says IWSR research director Tommy Keeling. “The concept of premium vodka does not resonate as much as a premium brown spirit, which is seen as more distinctive, special and premium. Nevertheless, further growth can be expected over the next few years, though Covid has hit the category in 2020.”
In India, brown spirits and beer have traditionally dominated the drinks market, but in recent years, white spirits have started to gain traction, fuelled in part by a growing cocktail culture among parts of the urban elite.
This trend along with a growing consumer interest in brands with Indian provenance was behind the creation of Indian craft vodka Rahasya, which means ‘mystery’ in Sanskrit.
Entrepreneur Varna Bhat, CEO of Blisswater Industries Private Limited, wanted to create a product that was premium and captured the “essence of India”. Currently available only in Goa, Bhat plans to launch Rahasya in Karnataka, Maharashtra and a few other Indian states in 2021.
“The new Indian consumer takes pride in what is Indian, not just in terms of being manufactured in India, but something that speaks of India in its identity,” she says. “We are now opening up to appreciate products made and inspired by our country.”
Focus on sustainability
Consumers have only grown more concerned about the environment and climate change during the pandemic and vodka producers have been quick to respond. Finnish state-owned drinks group Altia has launched a Koskenkorva
Vodka called Climate Action, which uses regeneratively farmed barley grown in fields that are carbon sinks. There’s also a new focus on vodka made from what would otherwise be waste products. San Diego‐based vodka brand Misadventure is distilled from surplus baked goods, while in Scotland brewer BrewDog plans to launch a vodka called Bad Beer Vodka made from beer deemed not good enough to sell later this year.
Another vodka made from waste product is UK-based Black Cow Vodka which claims to be the world’s first pure milk vodka. Produced in West Dorset, it was invented by dairy farmer Jason Barber and is made from a by-product of cheese making.
When milk is separated into curds and whey, the curds are used for cheese but the whey is often discarded. Black Cow ferments its whey into a milky beer using a yeast which converts the milk sugars into alcohol. That beer is then distilled, blended and filtered through coconut-shell charcoal to create the single-ingredient spirit.
Black Cow comes in three variants — Pure Milk Vodka, English Strawberries and Christmas Spirit. Last month it launched the Black Cow Negroni RTD — the first in a series of RTD cocktails.
The company says it has always been important to make Black Cow products in a way that is sensitive to the environment, whether that be using waste materials as ingredients to make its cheese and vodka or ridding its packaging of plastic.
As well as utilising milk curds for cheese and whey for vodka, Black Cow packages its cheeses using leftover lambswool from a mattress company, sources wonky strawberries for its
English Strawberries variant and last year redesigned its bottle to be more easily recycled, lower its price point and reduce its carbon footprint. Black Cow co-founder Paul Archard says there has been an increase in interest in companies which operate in a more thoughtful way. “Our commitment to minimising waste runs through everything we do,” he says. “It’s great to see more and more companies follow suit.”
Vodka brands trumpeting sustainable credentials won’t solve all the category’s long-term challenges, of course, but the optics will find favour with many in the consumer groups that are key to vodka’s long-term survival. ●
