Vodka Splashes Out

When Donald Trump launched the golden-bottled 'Trump super-premium vodka' in 2006, it was purported to 'demand the same respect and inspire the same awe' as the man himself.

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Last Updated: 09 Oct 2013

He even unveiled a couple of cool new cocktails: the Trump & Tonic and the Trumptini. Not everyone was convinced. 'What kind of asshole will you seem like when you order one?' asked the New York Hotlist style-blog. Trump's tipple hardly wins awards for authenticity - its creator doesn't drink, and avoids those who do. But its $40-a-bottle price reveals something about the vodka trade: these days, branding is everything.

Not only is vodka the world's most popular spirit, worth £7bn across Europe and £1.8bn in the UK alone, but it's also experiencing stronger growth than any other. Sales have shot up 5.7% in the past five years. Marketers seem to have pulled off the impossible - taking a clear, largely odourless and flavourless liquid that's cheap to produce, and peddling it at ever-more astounding prices.

According to online market researcher Just-Drinks, the $30-a-bottle super-premium category, which has been driving growth in the US over the past decade, grew 39% globally in 2006. And the high end keeps getting higher. The American market for ultra-premium vodka - bottles retailing at over $45 - has expanded by at least 20% a year for the past five years. In fact, vodka is proving so alluring that even British spud farmers are queuing up to take a slug. The new spirit from Tyrrells, the Hertfordshire potato-chip manufacturer, retails at £33 a bottle.

'We've been through this luxury fever before,' says cultural commentator Peter York. 'The likes of Ben & Jerry's, Green & Black's and Starbucks just take modest treats and double the price. We can't all have Lear jets, but having a bit of luxury liquor makes people feel better about the world.' Hence the success of other high-end drinks, such as Bombay Sapphire gin and single-malt whisky. York likens the phenomenon to the giving of Western alcohol as a gift in the Far East. 'In Japan, the difference between one Western drink and another is meaningless,' he says. 'It's the brand that counts and the fancy story you weave around it.'

The giants of the drinks world may be less crass than Trump, but they're playing a similar game. Already this year, two iconic premium vodka brands have changed hands for intoxicating sums. Smirnoff owner Diageo has pretty much wrapped up a deal for 50% of Dutch super-premium label, Ketel One. The cost: $900m. That's 18 times the brand's operating profit last year. The focus then switched to the Swedish government's sale of the Vin & Sprit company, which owns Absolut, the original premium vodka. Those in the queue included Bacardi and Fortune Brands, owner of Jim Beam. But Pernod Ricard's bid of £4.5bn, or 20.8 times underlying profit, floored them all.

Absolute madness, you may think. But delve deeper into the baffling world of premium vodka and such activity starts to look relatively sober. Take Gold Flakes Supreme, a $60-a-bottle spirit sprinkled with edible flakes of 24-carat gold; Kalashnikov, with its bottle modelled on the AK-47, in loving homage to the 'classic' assault rifle; and, most ridiculous of all, Diva's bespoke range. This features a Shetlands vodka triple-distilled through diamonds and ruby sand, presented in a bottle containing a wand of rubies, diamonds and emeralds selected by a Hatton Garden specialist. RRP: £2,000 to £540,000. And you thought Chateau Petrus was an extravagance.

Drinks companies are rubbing their hands at such 'premiumisation' - for a small hike in production and marketing costs, they get a mouth-watering rise in returns. 'Bacardi paid 26 times Ebitda for the super-premium Grey Goose in 2004,' says Ian Shackleton, an analyst at Lehman Brothers. 'We thought that was a high price, but the brand kept growing. It has more than doubled its profits.'

Someone must have slipped something into the water. Vodka, the liquid, is a simple spirit that has been around for centuries, and its recipe has barely changed in that time. Its origins are conspicuously unglamorous - alcohol was originally distilled for use in medicine, gunpowder and perfume. Sniff it today and you may still question the sanity of the mind that first thought: 'I reckon this is worth drinking.'

Although its exact origins lie in the murky past, by the 17th century vodka had become a popular Russian tipple, known by the accurate but ungainly sobriquets 'burnt wine' and 'bitter wine'. It continues to be made from almost any crop with high sugar or starch content - usually wheat, rye or potatoes, sometimes sugar-beet molasses and, controversially, grapes. In more desperate times, it was apparently even got from coal, lichen and woodcuttings. Despite these unpromising beginnings, Russia had found its national leisure pursuit. And its appeal continues to spread.

'The likes of Diageo and Pernod Ricard have one eye on emerging markets such as India, China and eastern Europe,' says Jeremy Cunnington, alcohol-sector analyst at Euromonitor. 'But the market closer to home is still immature. Unlike blended scotch or bourbon, vodka wasn't traditionally drunk by western Europeans or Americans. Demand is still growing.'

Such demand has been fuelled by everything, from James Bond and his vodka martinis to Sex and the City and its 'Cosmopolitans' - vodka with triple sec, cranberry juice and lime juice. Naturally, vodka's big guns have been quick to associate with both.

Outside the premium market, Smirnoff puts most of its marketing muscle behind Smirnoff Red, its most versatile and identifiable brand. The main target is booze-loving blokes in their twenties. But the cocktail connection has boosted vodka's profile among women too, drawn by the spirit's lack of odour and calories. 'Look in any bar and drinks packaging is all male,' says Mark Holmes, founder of U'Luvka, an elaborately styled super-premium Polish vodka. 'It's illogical. Women make 80% of retail buying decisions. And they drink twice as much vodka in bars as men do. Ignoring women is tantamount to madness.'

Credit for kicking off the premium craze, meanwhile, goes to Absolut. Back in 1979, it was a small, word-of-mouth outfit selling about 20,000 cases a year. Then boss Michel Roux created the premium blueprint: the iconic but traditional bottle shape; the targeting of trendsetters; the edgy art association; and the courting of the New York gay community. Most visionary of all, Roux charged over $20 a bottle, a figure unheard of at the time, especially for a product that wasn't exactly the smoothest on the market. By the mid-'90s, he was shifting five million cases a year.

Since the late '90s, Absolut has been squeezed by hordes of super-premium brands entering the market, such as Grey Goose and Belvedere. Each follows a similar marketing formula - using elegant packaging, linking the spirit to an exclusive lifestyle and, of course, sharing the details of their production process.

The last ploy seems counter-intuitive. After all, one of the main attractions for vodka producers is that it's cheap and easy to make. Whereas whisky-makers are obliged to base themselves in authentic areas and wait years for their product to mature, vodka is knocked out fast and furiously by continuous industrial stills. Make it today, sell it tomorrow.

Not that there's room in the marketing for that. Smirnoff's 'unique, characterful' premium Black boasts of distillation in a 150-year-old handmade copper still, whose impurities give a distinctive flavour. An interesting contrast to Smirnoff Red, sold on the very fact of its purity.

Stolichnaya launched its ultra-premium brand Elit in 2006. Bottles go for $80, a price clearly justified by the 'whisper of toasted grain', or 'velvety initial mouth feel'. It certainly impressed the experts: it won the platinum award at the Chicago Beverage Testing Institute last year, making it the 'world's best-tasting vodka'. Meanwhile, Belvedere urges website visitors to 'indulge in the beautiful life'. A glance suggests this involves massaging oil into the flanks of naked models, but it actually means booking the Belvedere private room, with personal bartender and masseur.

The key to pushing the premium, it seems, is to tell people why the drink is special, and then convince them that this is what they've always been into. 'Smirnoff Black is for people who care about what they're drinking,' says Chris Lock, Smirnoff's UK brand manager. 'It's not just a vodka and Coke; it's about craft. We need to communicate that it has a distinctive taste profile, and convey why it's a more expensive, more distinguished, more stylish vodka.'

Black targets affluent, professional males aged 25 to 40. Advertising appears in journals like GQ and Esquire. It recently supported the launch of a new Hugo Boss store at Canary Wharf, and last Christmas featured in a Harrods Russia-themed window display.

The final ingredient in the marketing cocktail is heritage, which has been exploited by every top-end brand, from Russia's Smirnoff - whose founder fled Bolshevik death threats in the Russian Revolution - to Sweden's Absolut. Talk to U'Luvka founder Holmes, meanwhile, and the brand's lineage soon leads you into an unlikely description of the exploits of Sendivogius, an alchemist and homeopathic pioneer who, in 1606, was asked by King Sigmund III to create a spirit that meant his people could 'drink all night and work all day'. Holmes apparently unearthed that recipe and passed it on to a distiller in Poland. Voila! - another authentic brand was born. Selfridges sold out of the vodka within an hour of its launch. Price: £62.50.

This thought process reaches an illogical conclusion in the Trump & Tonic, and some of the other more extreme offshoots of the ultra-premium category. Simply put, there's a status that comes from buying what's perceived to be the right brand. Says Peter York: 'Bottles with gemstones are the grown-up equivalent of the Clarks Commandos - the boys' shoes that had a compass in the heel. There's a sort of charm there. It's just not very evolved.'

But Holmes is adamant that there is a genuine place for authenticity in the premium market, even if the more elaborate PR stunts get the attention. 'If I filter vodka through diamonds, that won't make it taste better. It's just taking the piss. But people are tired of the bullshit. Grey Goose tells everyone it's the world's best vodka, but that's patently rubbish.

'Even fine-wine drinkers are realising that distinctive flavour profiles are out there. That's why we're in such demand in high-end bars, and being served alongside cognac as a digestif in Michelin-star restaurants.'

Not that the average vodka consumer would ever notice that. Blokes in their twenties aren't exactly known for their discernment, lacking the love of 'nosing' possessed by wine, whisky or even beer buffs. Indeed, according to Smirnoff, 70% of vodka drinkers still take the spirit with Coke. 'The vast majority of vodka drinkers drink Smirnoff,' says Lock. 'And the vast majority of Smirnoff drinkers drink Smirnoff Red.' Hence the brand's closest rival in the UK isn't even one of the premium brands. It's actually Glen's, the economy vodka; that and supermarket own-brands. It makes sense - those with money to spend are aware of the Smirnoff legacy. The rest of the mob couldn't give a stuff.

Not that Diageo will be too concerned. The world's largest vodka producer ships 24 million cases a year. Not only does it own Smirnoff, from Red to premium Black, but Ketel One is now sitting snugly in the gap between that and Ciroc, its ultra-premium grape vodka - which employs rapper P Diddy as brand ambassador.

'Diageo can now go to distributors in all these different markets and say, "take your pick",' says Cunnington. And with 90% of Ketel One's current sales focused in the US, it has enticing growth potential, especially when you throw in Diageo's distribution muscle.

Pernod Ricard, meanwhile, may have drained its pockets on its Absolut binge, but global sales hit 11 million cases last year, making it the fourth-best-selling international spirit brand, behind Smirnoff, Bacardi rum and Diageo's Johnnie Walker whisky. Its purchase will give the French company a market-leading 27% share of premium spirits in the crucial North American market, and a decent shot at the wider market as premium tastes spread - first through western Europe and then, it is hoped, through emerging markets. Soon, the whole world will be pissed up on premium potatoes.

Yet despite their herculean efforts, the marketers can still expect a lot of cynicism. 'I find the idea of discerning drinking in general a bit of a palaver,' says York. 'When you check out the bravado, rituals and expectations around wine, it's about brand-building. Always. Of course, nice expensive wines are broadly better than cheap industrial ones. But above a certain level, the increments of extra gloriousness that the masters of the universe think they're enjoying are not as great as the brand-owners would suggest.'

So much for wine. What about vodka? 'How can you be discerning about vodka? It's a ridiculous idea,' says York.

That's not really in the spirit of things. It's the kind of talk that would have Donald spitting out his alcohol-free Trumptini.

MY BOND IS MY WORD

In Casino Royale, the first of Ian Fleming's 007 novels, James Bond lays out very particular instructions on how to make his 'Vesper' dry martini: 'Three measures of Gordon's, one of vodka, half a measure of Kina Lillet. Shake it very well until it's ice-cold, then add a large slice of lemon-peel. Got it?'

Bond is a vodka marketer's dream, possessing a far more refined palate than most: 'If you can get a vodka made with grain instead of potatoes,' he adds, 'you will find it schtill better.'

The rest of us may not expect as much of our booze as Bond does, but marketers would like to persuade us that we do. After all, the premium market appears impervious to our current financial woes.

Hence some of the finer details of marketing blurbs: ABnormal is filtered for more than 80 hours through 10 tons of special active coal; meanwhile Kauffman Luxury Special Selected Vintage is made from 'the highest quality wheat of one single harvest only in the years when the finest wheat grains are identified'. It apparently contains feint infusion honey, natural extracts of schisandra, and the purest water.

But the prize for most outlandish claim goes to Oval, a 'structured' vodka distilled in Vienna, filtered by osmosis, which boasts a patented method in which 'water and alcohol molecules form a unique crystalline structure and take on the form of a tetrahedron'. All highly impressive, even if it would take a brain as big as Bond's to understand it.

U'LUVKA: This Polish brand likes to push its heritage, starting with 17th-century King Sigmund III. Its production is a 'great revival' of ancient recipes, apparently handled by alchemists. The ultra-premium spirit comes in a stylish bottle with a distinctive wry neck. Price: around £40 a bottle.

KALASHNIKOV: A Russian export based on a recipe approved by the legendary Russian General, who designed the AK-47 assault rifle. Whether that makes it a better drop, you decide. Just don't shoot the messenger.

CIROC: The ultra-premium jewel in Diageo's crown is made from grapes grown at altitude in France, using the techniques of Benedictine monks. The grapes are distilled five times in a copper-pot still. At £40 a litre, don't call it grappa.

TRUMP: The 'epitome of vodka' launched in 2006. Quintuple-distilled in the Netherlands by a Dutch master distiller, it comes in an ostentatious gold bottle designed by Milton Glaser. Teetotal Trump has put his name to several cocktails, including the Trumpolitan and the Trump Billionaire.

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