Has flavoured vodka run its course?

Figures suggest wacky flavours like cupcake and whipped cream have begun to cannibalise the US vodka market. Tom Bruce-Gardyne asks if the party is over for flavoured vodka?

The vodka has becomes become increasingly saturated with wacky flavours, meaning the traditional vodka category is itself becoming cannibalised

Some years ago, UK consumers discovered an intriguing new way to drink for free. By consuming a bottle of own-label vodka from the supermarket they learned to leave the last half-inch and add a cigarette butt. Then it was simply a case of returning to the store the next day to complain about the “foreign body” lurking at the bottom. The supermarket would not only offer a refund but also a free bottle for the distress caused. Naturally the cost of all this, plus a hefty admin fee, was passed on to the supplier.

Little did they know it, but these consumers were ahead of the curve. A Dutch firm recently released Ivanabitch tobacco flavoured vodka, which the US spirits writer, Geoff Kleinman, sees as a seminal moment in the drink’s history.

“Ivanabitch is like the proverbial canary in the coal mine for flavoured vodka and a clear indication that the category has now completely run its course,” he wrote in the online magazine drinkspirits.com. “Vodka producers are going to have to go back to the drawing board to find ways to remain relevant, because it’s not going to happen with another ‘out there’ flavour.”

The flavoured vodka story is very much an American one, and to write its obituary may be premature. The category grew 19% in the States in 2012 to 153 million litres, while neutral vodka was down 2% to 460m litres according to Euromonitor, whose analyst Spiros Malandrakis has a definite sense of déjà vu. He recalls: “The whole process reminds me of what happened with the alcopop generation of the 1990s, and the initial rush of excitement with everyone jumping on the bandwagon and trying to be part of it, especially younger consumers who really subscribed to it.”

He continues: “The flavours went from super sweet to extra super sweet to extreme sweet, and they just became sickly sweet and artificial and everyone started to migrate away from it.”

Of course the demise of alcopops had a lot to do with tax, at least in the UK, but Malandrakis is surely right to suggest the flavour boom may soon collapse under the weight of its own absurdity. “When you get salmon and English breakfast flavour, where can you go from there, really?” he asks, mentioning just one of the new variants on offer. He could have included bubble gum, bacon, peanut butter and jelly… you name it.

Candy and fruit-flavoured vodkas have pushed sales of brands forward, but they may not have long-term potential

“The alcohol beverage industry is very hard to break into,” says Scott Hanson, founder of the organic, grape-based Hanson of Sonoma vodka. “A lot of the candy-flavoured vodkas are trying to make a mark and get some attention, and because they’ve got traction some of the more established players have started to follow suit.”

Inspired by the success of Beam’s Pinnacle Whipped, Diageo chimed in with Smirnoff Whipped Cream and Fluffed Marshmallow in late 2011, followed by a stream of others. Smirnoff now comes in 30 flavours and claims to have over a quarter of the entire flavoured market. Apparently around half its growth in the sector comes from the so-called “confectionary” vodkas dreamed up by Luca Lupini and his team. In an innovation webcast broadcast in May, Diageo’s technical innovations director sounded more like a contestant on the BBC’s The Great British Bake-Off. “You’ve got the toppings, which are the icing, giving you those real top notes, down to the juiciness of the dough and the cake all the way through.”

“I can see why many companies are opting for this because it does provide a short term boost in the category,” says Malandrakis. “If you look at the top line figures without breaking it down, everything seems to be fine, but it isn’t.” While he gives the flavour boom a couple more years to run before it implodes, he feels the vodka industry is vulnerable. “The danger is – will consumers move completely out of the vodka category once they become bored?”

That may have already started to happen in the UK according to Leanne Davidson, product training and mixology manager for Bacardi Brown-Forman. In her World Without Vodka presentation at October’s London Cocktail Week, she claimed bartenders and consumers have “fallen out of love” with the spirit. However there is no sign of that yet in America where total vodka was up 4% and super premium by 10% according to the Distilled Spirits Council of the US.

Flavour extensions might sustain and even help grow leading vodkas like Smirnoff and Absolut, though arguably at the expense of the mother brand by cannibalising sales. Marco Ferrari, chief marketing officer at SPI – Stolichnaya vodka’s parent company, disagrees. “I wouldn’t call it cannibalising. What flavours have done is extend the category, and led to its growth. However I personally believe we are reaching the peak for flavoured vodka, and a lot of premium vodka is now looking for innovation elsewhere. I believe there will be different trends going forward.”

Some commentators believe flavours could be overtaken by provenance and history as bait for consumers

Chipping away at the edges of the established vodka giants are thousands of pop-up brands. It is invariably the first spirit any new distiller brings to market, inspired by the ease of production and the prospect of gaining even a small share of this massive category. Meanwhile, the really ambitious aspire to fill the shoes of the late Sidney Frank, the businessman who created Grey Goose and sold it eight years late for over US$2 billion to Bacardi.

Ferrari believes the flavoured category has been stretched too far, but if there is a shakedown in the category it will be the brands with a genuine story that will survive and prosper. Speaking about Stoli, he comments: “You cannot buy 80 years of legacy the brand has been through from the Russian Empire, through Soviet Russia to the Cold War and beyond.”

Over in Sweden, Claes Stenmark, CEO and co-founder of Virtuous Spirits is dismissive of most flavoured vodkas, calling them fakes. “It’s like vanilla vodka that’s made from rotten wood rather than vanilla pods.” Using no artificial aromas or additives, Virtuous Spirits produces six flavours including raspberry, bitter lemon and ginger. “I’m pretty sure nature produces better flavours than a laboratory,” says Stenmark, a self-proclaimed “flavour nerd”, who is on the cusp of distribution deals in Germany, the UK, Italy and Spain.

Hanson of Sonoma vodka shares the same ethos of using “honest ingredients” says Scott Hanson. “I don’t believe flavoured vodkas are going to go away. There’s a large number trying to attract attention with outlandish ideas, but I do believe there’s longevity in natural, wholesome flavours in vodka.”

Meanwhile other spirits are watching on with interest – do they simply wait to catch the potential fall-out from vodka, or do they delve deeper into the world of flavours? Brands like Jack Daniel’s have stuck to honey so far, which is probably just as well. The thought that one day there could be a whipped cream Jack smacks of desperation somehow. sb