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| Wine & Spirits |
The New Luxury
Anthony Giglio
04/01/2004
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Battle of the Titans
In Trading Up, The New American Luxury, authors
Michael J. Silverstein and Neil Fiske report that, during the 1970s and early
1980s, the industry consolidated, and the large players were content to milk
long-established brands for profitability. Then Michel Roux, president and CEO
of Carillon Importers, broke away from the pack with the creation of Absolut,
which was priced 75 percent above the industry leader, Smirnoff. Between 1985
and 2000, consumption of Absolut grew from fewer than 1 million cases to 5
million worldwide, a compound annual growth rate in volume of
13 percent.
All the while, Americans began drinking fewer spirits in general, claims
Trading Up. “In sharp contrast to wine, per capita consumption of spirits in the
United States has been flat or declining for more than three decades,” report
Fiske and Silverstein. “In 1975, Americans consumed two gallons per capita of
hard liquor every year. By 1995, that figure had fallen to 1.2 gallons, just
over half its previous level.” But the new high-end market has successfully
avoided these shoals. Since 1995, Silverstein and Fiske report, premium and
super premium brands have seen a renaissance, growing by 40 percent in volume
from 1995 to 2001, while the nonpremium segment declined 5 percent. Americans
are drinking less, but drinking better.
While Absolut emerged as the market
leader in the late 1980s (today it is the third largest international spirit in
the world), a parade of wily entrepreneurs—not to mention corporate think
tanks—began jumping on the luxury-vodka money train. In the early 1990s, two
noteworthy newcomers gave Absolut a run for its money. Entrepreneur Maurice
Kanbar created Skyy. With its distinct cobalt blue bottle and claim of being the
purest vodka, Skyy grew from 3,000 9-liter cases in 1993 to just under 1.5
million sold domestically in 2002. According to the Adams Handbook Advance 2003,
Skyy saw an increase of 15.1 percent over 2001, and a four-year annual compound
growth rate (ACGR) of 20.7 percent. Today, it is the leading domestic super
premium vodka in the United States. Similarly, Dave van de Velde, a visionary
who negotiated the rights to import Ketel One from his homeland of Holland,
touted its European pedigree. Adams Handbook reports that in 2002 Ketel One
broke the 1-million-case barrier for the first time, registering a 10.6 percent
sales increase, with a four-year ACGR of 23.2 percent. Absolut made vodka
artistic; now the spirit was becoming sexy-yet-pure through “triple distilling.”
That is when Roux set his sights on rebuilding Stolichnaya, and Millennium
Import’s Phillips was preparing to take vodka to the next level.
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