Vodka Still Drives Spirits Market

A beverage trade writer recently interviewed me, asking about the big trends in the spirits market. Timely topic, as I was in the midst of putting the finishing touches on our SpiritsTAB report. My response juxtaposed the recent momentum in American whiskey with the fact that vodka’s growth had slowed to a crawl after several years of robust growth. The reporter paused, and then asked, “So is vodka, dead? Did whiskey kill it?”

Good questions. Vodka volume grew 6.7% in 2011 and 5.2% in 2012, and then hit a proverbial wall in 2013, when growth decelerated to 0.8%. 2014 was no better; the category posted a 0.7% gain. To some degree, the ascent of whiskey helped derail vodka’s strong upward trajectory—consumers are increasingly gravitating toward brown spirits—but other factors also contributed to the category’s slowdown. In fact, the vodka category itself is in the midst of something of a sea change: The import segment is in decline, as is the flavored segment. Both had been key growth drivers of the category, but consumers have discovered quality vodkas at premium price points and have also tired of the endless parade of sticky sweet and often contrived flavored offerings. As a result, the leading brand roster is evolving. Several major brands are struggling, including Smirnoff and Absolut, while smaller labels and relative newcomers such as Tito’s Handmade, New Amsterdam and Cîroc are now among the ranks of the top 10 in both domestic and imported vodka. Following the segment and brand trends, suppliers’ shares of vodka volume are shifting: Since 2010, Diageo, Pernod Ricard and Bacardi USA have lost share as Sazerac, Beam Suntory and Campari America have made gains.

Vodka isn’t dead by any means, but similar to domestic beer it’s a mature category in transition. As the largest spirits category, generating one-third of total volume, vodka dominates and continues to drive the spirits industry. Major and minor suppliers are heavily invested and highly active, and product innovation is ongoing and marketing dollars are growing. Twelve of the SpiritsTAB 50 fastest-growing spirits brands of 2014 are vodka, six are domestic and six are imported, and new expressions and flavors are forthcoming from a number of brands. Legacy vodka brands are being recast to establish new points of relevance for consumers and the trade, both on- and off-premise.

Our projections call for increased momentum in vodka in 2015. In the era of flavor-driven, value-seeking drinkers, the supremely mixable, versatile spirit still offers something for everyone, at every price point. The companies that created the mega brands that move the entire spirits market are retooling and the newcomers are bringing fresh ideas to vodka. The category may be down, but it’s not out by any means. Whiskey marketers beware.

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Donna Hood Crecca

A veteran of the foodservice industry, Donna Hood Crecca leads the firm’s Convenience Store Practice and is active in its Adult Beverage Practice. She develops research-based insights and recommendations for leading and emerging supplier and operator companies to enhance their go-to-market and product development programs and strategies.

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Comments

  1. Donna,
    I think you are spot on. Vodka is still the 100 pound gorilla with a lot of room for growth through innovation and realizing additional consumer needs and wants. One such area is the high end. Where as much current growth is coming in the value proprositions, look for someone to come to the table like Patron did with Tequila. Maybe it’s time for ABSOLUT Elyx or something like this iconic high end extension in the Ultra premium category.

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