The spirits and wine categories seemed to have stabilized their sales numbers as the economy and consumers continue to recover from the recession. The spirits category experienced a 3.2 percent increase in dollar sales with $3.6 billion in sales across all spirits categories in U.S. supermarket, drug, gas, convenience and mass merchandise outlets, excluding Wal-Mart, club and liquor stores, for the 52 weeks ending Jan. 23, according to SymphonyIRI Group, Chicago. The market insight group’s data also states that wine increased 5.1 percent in dollar sales for that same time period.
Vodka maintains dominance
For the spirits category, vodka experienced the most growth at 5.2 percent, based on SymphonyIRI data, and remained the No. 1 selling spirit with more than $1 billion in sales. In the vodka segment, New York-based Constellation Brands’ Svedka vodka saw the most growth at 29.3 percent in dollar sales to become the No. 5 top-selling vodka, according to SymphonyIRI data. The segment also saw some high-end and super-premium brands display some growth, such as Grey Goose vodka that saw sales increase 1.2 percent.
“[Super-premium spirits] performed extremely well, unlike if you go back a couple of years ago there’s been a pretty large reversal of fortune because that segment had been declining during the hype of the recession, but as things have improved so has that category,” says Danny Brager, vice president and group client director with beverage alcohol at The Nielsen Co., Schaumburg, Ill. “It’s growing about four times faster than the overall spirits category.”
The Distilled Spirits Council of the United States (DISCUS), Washington, D.C., released its 2010 Industry Review report in January, which states that the super premium category volume was up nearly 18 percent and revenue was up approximately 14 percent.
Garima Goel Lal, senior analyst at Mintel International, Chicago, says that the vodka category along with its super-premium segment have benefited from its mixability for use in cocktails, an increase in the consumer base for the 21- to 24-year-old age group and the number of new products.
London-based Diageo, producers of Smirnoff, which is the No. 1 selling vodka and spirit in the United States according SymphonyIRI data, last year added to the vodka category with the launch of four new vodkas — Rökk, Godiva Chocolate Infused Vodka, Ursus and Moon Mountain — that were each designed to appeal to consumer trends. Rökk was manufactured to appeal to increased demand for Scandinavian products, while Moon Mountain is crafted in small batches using a copper pot still and is U.S. Department of Agriculture certified organic. Appealing to flavored variety segment, Godiva Chocolate Infused Vodka was developed with Godiva Chocolatier to make Chocolate and Chocolate Raspberry varieties. Ursus also is a flavored offering, but incorporates vibrant colors into its Blue Raspberry, Green Apple and Punch varieties.
Nielsen’s Brager says another segment contributing to super-premium vodka growth is flavored varieties because flavored vodka can carry a higher price than non-flavored.
Brager adds that although other segments offer flavored innovations, many of the flavored spirits available are vodkas. Regular vodka segments are up 2 percent, while flavored vodka grew 19 percent. Flavored vodka now represents 17 percent of the entire vodka category in food, drug, convenience, liquor and other select channels for 52 weeks ending Dec. 11, 2010, according to Nielsen data.
Not all analysts see the same impact from flavored varieties on the spirits market. Ty Law, U.S. research associate with Euromonitor International, Chicago, says that rum and vodka maintain strong brand loyalty from its consumers and that flavored offerings have not had much of an affect on growing shares for particular brands, but he does see potential in them.
“The new flavors have drawn the interest of new and current consumers, which is important as spirits in the United States is a mature market with little, if any room for growth,” he says.
One company that expanded the flavored vodka market was Imperial Brands Inc., Palm Beach Gardens, Fla. The company expanded its 4 Orange Premium Vodka to areas within the national market. Initially released in Florida, 4 Orange vodka is an orange-based vodka that is distilled at Florida’s first registered distillery. The vodka contains four Florida orange varieties: Hamlin, Parson Brown, Temple and Valencia.
“4 Orange Premium Vodka has created a groundbreaking new segment within the flavored vodka category,” says Chester Brandes, president and chief executive officer of Imperial Brands. “It’s not a typical orange-flavored vodka; rather it’s an orange-based vodka that is uniquely distilled from four distinct varieties of Florida oranges. Orange flavored vodkas are most commonly distilled from grain neutral spirits.”
Segments of growth
Vodka was not the only segment of the spirits category that exhibited growth this past year. Whiskey increased 3.7 percent in dollar sales with only two brands in the top 10 experiencing decline — Southern Comfort and Black Velvet — according to SymphonyIRI.
DISCUS’s 2010 Industry Review report states that whiskey posted revenue growth, notably in the high-end and super-premium market, which increased 5 percent and 8.1 percent, respectively. Within the super-premium segment, bourbon and Tennessee whiskey were up more than 17 percent, the report states. Irish whiskey also showed growth with a 21.5 percent increase, according to the report.
Nielsen’s Brager says that although Irish whiskey is a smaller segment of the market it’s still showcasing dynamic growth rates. Jameson Irish whiskey was the No. 10 selling whiskey, based on SymphonyIRI data, but saw the most growth at 31.3 percent in dollar sales.
Although not in the top 10, Maker’s Mark also showed strong growth with a 22.2 percent increase in dollar sales. Last year, Maker’s Mark, a brand of Beam Global Spirits & Wine, Deerfield, Ill., released Maker’s 46, its first new product in more than 50 years. Maker’s 46 is a bourbon whiskey that begins with original Maker’s Mark that is aged for an additional three months in barrels with 10 seared French oak staves.
In addition to whiskey and vodka, other segments that increased revenue sales were cognac with 5 percent growth, tequila with 3.2 percent growth and rum with 1.4 percent growth, reports SymphonyIRI data. Cordials and gin were relatively flat, while brandy sales decreased 1.8 percent for same time period, it says.
Mintel’s Goel Lal says that between 2008 and 2010 cognac, cordials and liquors were hurt during the recession because of the affect from on-premise channel during this time period.
Value of wine
This year the wine category saw value-priced wines gain market share. Barefoot wine posted a 30.1 percent increase in dollar sales to become the No. 1 selling wine for the 52 weeks ending Jan. 23, according to SymphonyIRI. Even with this growth, Barefoot still maintains only 4.7 percent of the market share for the wine category.
“The economic downturn has forced consumers to become educated in making purchase decisions,” Euromonitor’s Law says. “Wines are no exception to this trend as Americans seek to become informed consumers in order to gain value on their purchases.”
Mintel’s Goel Lal also thinks the increase in the number of value-priced wines has helped inform consumers about the offerings that are available at different price points.
“I think there are more wines now that are available in the value-priced range and more consumers are finding that these wines are not bad, so the consumers are finding value for money in wines,” she says.
St. Helena, Calif.-based Rebel Wine Co.’s Three Thieves brand released Bandit Riesling, which is made completely from Washington fruit, last year in select markets. Bandit Riesling was packaged in 1-liter cartons and retailed for $7.99.
The new product also embodied another trend in the wine industry as it was packaged in Tetra Pak cartons. Nielsen’s Brager says he’s seen more wine companies use Tetra Pak cartons as well as 3-liter boxes. Although these packaging transitions are small, he says, they are growing at 20 percent.
Brager also says demographic changes have had a positive affect on the wine category as the millennial generation, which includes consumers who are 21 to 34 years old, has shown an increased interest in wine consumption.
“They’re the ones who are fueling a lot of the growth as they’re choosing relatively more wine and more spirits compared to what that same age group did 10 years ago,” Brager says.
Brager also notes that there are still several million more millenials who are not of legal drinking age who will be in the next few years, which will help wine continue to enjoy positive growth when combined with the wine consumption by baby boomers and seniors.
Of Nielsen’s 120 different categories that it tracks, wine is the third fastest growing category in dollars and the largest growing category on volume, Brager adds.
The wine industry also has benefited from increased awareness of varieties. Euromonitor’s Law says that Malbecs and Moldovan wine varieties have become more popular in United States in recent years. Another variety with notable growth is Moscato. Brager says the sweet, white wine has doubled its sales compared to a year ago.BI
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