Move out of neutral...

What's the story with vodka in pubs? It is the category in the on-trade with the largest number of new brands and new entrants to the market. And yet in pubs it is one of the least innovative drinks categories around.

When customers go to the bar they rarely if ever call for a specific brand. And yet vodka is hardly a flim-flam of unknown brands - 70 per cent of vodka sold in the on-trade is Smirnoff. It is the highest volume and highest value category in spirits in the on-trade and yet it is badly marketed in outlets and unimaginatively retailed.

And if you ask those in the know, vodka has also entered a bit of a difficult period. Roger Harrison, head of marketing for vodka at Pernod Ricard, believes that after a long period of calm seas, vodka has sailed into a minor squall.

"If you had asked me at any time up to August last year then I would have replied 'vodka, vodka, vodka!' It was going brilliantly," he says. "However, since then as a category standard vodka has fallen - certainly accordingly to Nielsen. And this is because men are now moving away from vodka towards darker spirits, be that whisky, dark rum or cognac."

AC Nielsen stats show a two per cent year-on-year fall in sales volumes up to November 2006 - although, to be quite frank, its statistics show a pretty gloomy picture for spirits all round. So what is the problem with vodka?

Premium has no cut-through

There is no worse word used in marketing than 'premiumisation'. And nowhere does it rear its head more than in discussion about vodka. "The future is in premiumisation," they say - they being yet another brand owner.

But the truth is Britain's drinkers are not really taking to premium vodka in a big way. According to AC Nielsen only four per cent of all vodka sold in the on-trade (and that includes premium vodka's best mate, the style bar) is premium. Statistics from March last year showed that standard vodka makes up 78 per cent of the market's value and 64 per cent of the volume.

Roger says Pernod Ricard has looked for some years to use Stolichnaya as a means to get pub vodka drinkers to trade up from Smirnoff et al.

There is nothing wrong with that - having the premium option is a useful little margin earner from time to time.

"But an emerging problem," says Roger, "has been that, in order to try and be different, some pubs and bars are using premium brands like Stolichnaya and Finlandia as pouring brands on that bar. And that is a worry because customers will automatically be charged more for these brands, and will not understand why they have been charged more when all they asked for was a simple vodka and cola."

Vodka has virtually no identity

The dream for any brand is that the consumer knows it well enough to 'call it' when they get to the bar. In the States it is all the rage, with drinkers calling for a 'Grey Goose and tonic', a 'Skyy Martini' and even an 'Absolut bloody mary'.

This simply doesn't happen here and therefore undermines the chances of brands other than Smirnoff breaking into the mainstream in any

significant way,

"The jury is out as to whether the UK will become a bar-call culture," argues Roger. "Research we have seen shows that only five to six per cent of all the vodka sold in the UK on-trade is 'bar-called'.

"And I think one of the big reasons behind this is that it is a neutral tasting spirit. So, as they see it, why should licensees stock low awareness brands at a higher price point? They want to stock products that will fly off the back-bar.

"In vodka this is particularly acute because it is more difficult to pick out the flavour differences between the brands. That is vodka's Achilles' heel."

Jeremy Hill, managing director of Hi-Spirits, bought the super premium Effen vodka into his portfolio last year. But where he has had good success with sambuca brand Antica, vodka is a different game.

"It's a difficult market for us to break into," he says. "The clientele is much less likely to make a brand call than in the style bar market - and premium vodka relies on a brand call. So if you do rely on that and are not a pouring brand then your sales are going to be flat."

He believes that for a brand to be successful you have to find that point of difference.

"Right now Effen is not targeted at pubs," he says. "In a year from now or so we might start to look there. The thing with vodka is that you have to have a point of difference. If you are not saying 'I am the cheapest vodka available' then what is your brand saying?

"When it comes to volume there are only a couple of brands that hit the mark and that is because they are valued brands. So the point of difference has to be in packaging and taste."

David Brown, on-trade sales director of Vladivar brand owner Whyte & Mackay (W&M), agrees. "There is not an awful lot of brand franchise with vodka - it is very generic," he says. "There is nothing as big as vodka in the on-trade without a bar-call. But it is the least developed drinks category in terms of brand patronage."

Target the brand

And this is why W&M decided to rebrand and repackage Vladivar last April, using a completely new bottle design and pushing the brand towards younger drinkers. "We decided to target the 'fashionable, mainstream' niche in the market and we are encouraged by the reaction," he says.

And Nielsen bi-month figures show that after the relaunch Vladivar's sales volume rose by 18 per cent. So, careful targeting of a vodka brand is one way for growth to come back into the market.

Because as things stand Smirnoff completely dominates and no one can effectively challenge their position. Andrew Bond, creative manager at Global Brands, says the strategy for the company's VK Vodka brand is to box clever.

"VK Vodka plays an important strategic part in our whole portfolio. Looking at it from a relationship point of view, if a pub is going to stock a house brand then they will go for Smirnoff," he says.

"The way it works for us is when a pub wants to stock one of our other products then they may want to take on our vodka as well - in other words it works well as a portfolio product."

So perhaps this is the direction vodka is heading - brand leader Smirnoff and then a whole host of brands either promoting on price, or more interesting little niches in the market.

Look at the example of Ultimate Brands, which is distributing and marketing 666 Vodka. It's a 66 per cent vodka packaged in a really rather striking devil-shaped bottle. If you are looking for a point of difference then you can't beat that.