Examining the Vodka Industry Smirnoff vs Absolut BIA

Examining the Vodka Industry: Smirnoff vs. Absolut BIA Presentation By Blair Coward and Mollie Jo Holman 1

Company and Product • • Owned and produced by Smirnoff No 21 Vodka: Diageo, a British company. The world's leading vodka. Results 2008 Brand began with a vodka -25. 1 million 9 -litre cases distillery founded in Moscow. -8% volume growth -12% net sales growth It is now distributed in 130 Top five markets 1. US countries. 2. Great Britain Smirnoff products include 3. Canada 4. Brazil vodka, flavored vodka, and 5. South Africa malt beverages. 2

Situational Analysis • • • In 2006, vodka was the largest growth category of any major international spirits sector. Total global consumption in 2006 increased 1. 6%, or over 8 m cases, to top 513. 5 m cases, according to the International Wine and Spirit Record estimates. Recession-weary U. S. vodka drinkers are switching to lower-priced rivals such as Smirnoff, Skyy and Svedka, this has hurt Absolut. • Smirnoff is the largest vodka in the U. S. by volume Absolut is the second-largest, according to research firm Beverage Information Group.

Competition Analysis Brand Smirnoff Absolut Grey Goose Svedka Skyy Producer Diageo Ad Campaign Summary Used to emphasize purity and its premium-status, now markets interactive “Be There” campaign focusing on sharing special moments in life. Long running ad campaign based on the distinctive Pernod Ricard bottle shape and the phrase “Absolut_____. ” Currently “In an Absolut World. ” Bacardi Marketed as a premium brand vodka and has luxurious lifestyle brand to correspond, for those who value refined subtleties in all aspects of life. History of overt sexual ads, newest campaign set in Constellation 2033: introduces futuristic, party-going fembot Brands Svedka_Grl, “Voted #1 vodka of 2033. ” Focused on Skyy Infusions with bold ads highlighting SKYY Spirits the blue bottle and the colors of the infusion and LLC sexualized art.

Competition Analysis • “Diageo's Smirnoff -also lower-priced than Absolut- has been outperforming its rival. ” ◦(David Kesmodel. (2009, September 4). Corporate News: Absolut's U. S. Sales Fall, Pressuring Its New Parent --- Pernod Ricard Bet Big on Brand Last Year, but Recess. ion Has Led Some Americans to Turn to Less Expensive Vodkas. Wall Street Journal) • • Smirnoff's volume in North America rose 1% in Diageo's fiscal year ended June 30. The company has been offering mail-in rebates for Smirnoff and other brands this year in U. S. newspaper ads. It also for the first time rolled out new flavors of Popov, one of its discount vodkas, whose sales have risen in the economic slump. 5

Smirnoff Campaign Objectives • To provide a platform for brand consumer content around “Be There, ” while using an engaging interface to communicate the brand’s tone.

“Be There” Positioning • “The campaign marks a shift away from a traditional marketing approach and aims to inspire consumers to experience and create exceptional, unexpected and inexplicable there moments for themselves, ” said Anita Robinson, marketing director for Smirnoff.

“Be There” Messaging Strategies • • • Focus on being there in the moment Emphasizes having fun and sharing it with friends Focus on being social , friendly, and lifestyle based, as opposed to previous positioning emphasizing purity and its premium-status

Target Audience Segmentation Smirnoff “Be There” New campaign focuses on men and women 18 -35. Looking for a cheaper option but still high quality. Found mostly on the web. Enjoy having a good time, good sense of humor. } • •

“In an Absolut World” Messaging Strategies • • • New take on and continuation of “In an Absolut World” Recovery from Spring campaign. Emphasis on tradition, creativity, being genuine, classic yet modern and ready for the future.

Target Audience Segmentation In An Absolut World Men and women 21– 50. Looking for a high-quality, reasonable vodka Wish to savor and enjoy beverage Enjoy perception of class } • •

Smirnoff’s Tactics • • “Be There” Campaign (7/13/09) Commercials and online videos Promotional Parties Contest: suggest moment Interactive Website Media Tie-in Facebook Print and interactive ads (which have not been released yet)

Absolut’s Tactics • • First TV spot Making of TV spot Print Ads Interactive Website Online Ads Utilization of Facebook and Youtube Share your inspiration feature iphone application

Results of Smirnoff’s “Be There” Campaign • • Smirnoff sales are increasing due to the economy Too early to tell direct impact from campaign Mixed reviews from Critics Success to be based on level of interaction and response from possible consumers

Suggested Ways to Improve Smirnoff’s IBP • • Clean up the website and make it more navigable, since so much is website-based. Tie back in the purity factor.

Suggested Ways to Improve Absolut’s IBP • • Stick to the classic Absolut values Emphasize clarity and purity - “classic yet modern” nature of the brand Tie commercial to print endeavors as part of more cohesive campaign Reincorporate the bottle

Smirnoff Weaknesses that Suggest Opportunity for Absolut • • • Website hard to navigate Approach is very different from previous efforts-will it resonate? Isolate part of market? Difference between being in the moment and sharing the moment. Very reliant on online media/events Emphasis on social media, yet no visuals of phones, cameras, etc. Campaign grows out of smaller marketing project in 07 -08 -will consumers find it hackneyed?

Suggestions for Absolut • • The U. S. accounts for more than half of the brand's retail revenue and the majority of its profits, according to the industry journal Impact and analysts. Restoring volume growth in the U. S. will be "key, " even though Absolut enjoys healthy growth in countries like Brazil and Mexico, said Laetitia Delaye, an analyst with Kepler Capital Markets in Paris.

Conclusions • • Absolut should stay the course Smirnoff campaign great concept but flawed in its deviation from its core values and a poor execution • Absolut can take advantage of Smirnoff’s deviation to present itself as the pure, classic, and innovative choice for consumers