Crosscut Advisory: Culture and Commerce Report: Vodka
1. SMIRNOFF CULTURE DASHBOARD
Smirnoff Innovation - Jeffery Fink, U.S. Director (646) 223-2000
SMIRNOFF: Diageo
REPORT:1Q10
CELEBRITY MEDIA INTOXICANT SUCCESS
INFLUENCE CONSUMPTION
COMMERCE 93 89 82 77
CULTURE &
The Economic Benefits of ‘Clarity’ in the Culture of Fast-Moving Consumer Goods.
The value of Clarity in vodka is a at lower price points and for new
translucent but important occasions. Key Performance
characteristic of choice - the The vodka category is being Indicators
preference of alcoholic beverage is an commoditized much in the same way
affirmation’s of one’s fundamental ‣ P4W consumption
U.S. bottled water brands experienced
values and Culture. ‣ Agree: Smirnoff is the vodka I think of
proliferation in the 90’s based on
when I think of vodka
In 2009 the Culture of Intoxicant benefits ranging from taste, purity, and
Consumption was mostly driven by even ‘Green.’ Vodka is heading the ‣ Brand strength on/off-premise
consumers’ “trading-down” drinking same way, but what is more ‣ Product performance - ‘Purity’
‘value’ brands of bourbon, vodka and concerning for the world’s most ‣ Brand perception - ‘Original’
tequila, much to the expense of the recognizable and widespread spirit is ‣ Image - ‘Unexpectedness’
super-premium category. Add to that, that the product has little barriers to ‣ Good to enjoy with friends
consumers are drinking more at home entry. This further complicates Clarity
than in the past, impacting overall per in the Culture of Intoxicant
capita consumption. Consumption. What isn’t vodka? obvious choice for alcohol
This shift in American alcohol The value of all spirits sold in the consumption, for its ease of mixing,
consumption (and global to some U.S. in 2009 was $18.7 billion brand selection is more complicated.
extent) is altering the vodka segment, according to the Distilled Spirits More than 250 new vodka brands
forcing Masterbrands to innovate Council of the United States (DISCUS), have debuted in the past five years,
traditionally positioned marque brands and vodka accounted for roughly 25%. fueling its growth and popularity.
While vodka, as a product, may be an
Google Trends Vodka Search Activity
Absolut
Grey Goose
Smirnoff
Copyright 2009-2010, Crosscut Advisory, LLC. All rights reserved. For demonstration only. Culture & Commerce is a registered trademark of Crosscut, LLC.
2. But is vodka becoming too Tastemaking Democratized tends to be gender-neutral which
ubiquitous and accessible? It has been means increased consumption of
the driver of spirits for the past 10 In recent years vodka’s innovation ‘shared interests.’
years and will be so for the next five has followed the bell curve model, with Lastly, “Green” as in eco-
years. With new innovation and diffusion originating from Innovators consciousness, is becoming more of
occasions the Clarity of vodka can only and slowly spreading to Laggards. And an option for vodka drinkers who are
become more distorted to new with the majority of consumption from mindful of our environment. It is an
entrants. the middle - Early and Late Majority - innovative positioning but far from
Vodkat, a schnapps-based product mainstream vodka portfolios are best mainstream as its price points renders
with 22% vodka distributed by positioned to capture new occasions, it to super-premium and even luxury.
Intercontinental Brands, recently lost a experiences, and opportunities. The
High Court case where Vodkat was trick is not to dilute the trademark Managing Vodka
viewed as “...deceiving the public that it franchise. However, this feat is often
Managing a brand for success in
is vodka...”While vodka appears to harder to do that said.
the vodka category requires a keen
finally have protection as does whiskey Smirnoff, is the most recognized
vision and the ability to decipher
and champagne, more intrusions via vodka and spirits brand in the world.
between trend and Culture. The
innovation should be expected. As a mainstream premium vodka, its
‘cocktail culture’ isn’t really a Culture,
portfolio is more flexible and suitable to
so to speak - Culture are tangible
Super-Premium & Luxury meet the growing and diverse range of
things that humans share.
taste, price, occasion, environment,
Grey Goose led super-premium vodka The ‘cocktail culture’ is a trend,
and experience of the modern spirits
with a 48 share. Grey Goose was the and more importantly it is a descriptor
drinker. In fact, ‘trading-down’ is a
fastest brand to reach 1MM in cases for how people behave. For example,
huge opportunity for Smirnoff to
at a significantly high price point. But there is the ‘Culture of spirits’ and the
innovate and gain share from less agile
how it achieved this feat is of particular spirits culture; the difference is the
interest to Crosscut - Grey Goose grew vodka brands. Because of it’s wide
former is universal, enduring and
exponentially faster than other vodka ‘share of occasions’ Smirnoff also has
attached to something, while the latter
brands because the brands luxury minimal business and market risk than
is temporary activity. In other words,
image was carefully nurtured. its competitive set.
you cannot innovate successfully for a
Vodka is being used in more ways
Grey Goose’s success can be long period of time off of the ‘cocktail
today than ever before. The versatility
attributed to the successful integration culture,’ because it will end.
of vodka and its ability to invigorate
of the Culture dimensions of Celebrity The U.S. is a mature drinks
taste and sensation only heightens the
Influence, Media, Success, and market which is being driven by a mix
use of the product. As ritual, tradition,
Intoxicant Consumption replacing of LDA-29 drinkers who are feeling a
and custom, vodka is used in as many
purity, taste, flavor, provenance, and multitude of emotions independently
ways as there are Cultures.
tradition as preference drivers. and collectively. American drinkers are
Crosscut believes that the future
The Luxury vodka segment has the slightly optimistic yet cautiously careful
of vodka is reliant on mainstream taste
highest cache, but it has sparked as they live life today. It’s not the same
and preferences. And we believe
many competitors with similar product as yesterday, in the 2000’s. They are
Smirnoff is in the best position to
and brand experiences - Ketel One, more concerned about everything in
continue momentum as the global
Ciroc, Belvedere, Stolichnaya Elit, etc. life - this extends from attitudes to
vodka category experiences further
Is the consumers palate so their behavior. Today, spirits
fragmentation. Growth, we believe, will
sophisticated in a challenging market? executives must do more than manage
be generated from low-end/price-value
Can these brands demonstrate Clarity their portfolios, they must manage new
vodka and super-premium vodka - a
to a discerning consumer? consumer expectations.
dumbbell effect.
‘Bottle service’ is the modern To do that one must better
A cursory scan of industry figures
equivalent of 17th century Czardom understand human and Culture
will show that U.S. vodka grew 4.4% in
where liquid, vessel and service defines dynamics that are shaping how
2008, albeit at a slower rate than
status and ritual. Brand selection is a Americans consume vodka and spirits.
previous years (1990-2000s). But
key element in the process akin to the Key Brand Performance Indicators
most of the growth is from super-
decanting of wine. But does bottle should be aligned to measure the
premium vodka, which grew almost
service facilitate repurchase and impact Culture has on the business -
14% in the same period. Pernod
loyalty? Or are brands simply “renting case sales and brand equity and
acquired the Absolut brand and is
volume” for the easiest and most performance. Understanding why and
finally getting its new distribution and
accessible consumers? how current trends are shaped by
organizational strategies in place.
Ciroc has brazenly omitted bottle higher human order benefits, is
Despite all of the above, there are at
for tuxedo, selling image rather than intelligence the vodka marketplace is
least 600 vodkas in America with most
substance. Its unique selling omitting in its marketing mix. With
of the innovation occurring in the
proposition, the first vodka from 600 vodka brands in the United
super-premium segment.
grapes, is incidental at best. It’s about States, how many clear, articulate
Flavor is the easiest way to
the party. And ‘taste’ in class not in value propositions can there be?
innovate and line extend in vodka and it
product. But the success of Ciroc is Clarity is not only the single most
is the most obvious delivery system to
inextricably linked to Diddy and his important attribute of vodka, it is also
define drinks experiences as they
continued popularity as an aspirational the single most important element in
relate to a specific target. Flavor also
celebrity personality. vodka brand messaging. Crosscut
permits a brand to either line extend
Advisory, LLC.
or add new variants to its portfolio
across its ‘value spectrum.’ And flavor
Copyright 2009-2010, Crosscut Advisory, LLC. All rights reserved. For demonstration only. Culture & Commerce is a registered trademark of Crosscut, LLC.
3. Business Objectives Annual U.S. Vodka Case Sales by Brand
Drive brand growth in volume and (Millions, 9-Liter Cases)
10.0
equity, to broaden Smirnoff’s U.S.
franchise in Super-to-Premium
Vodka, and Adult Beverages. 8.1
1. Consumer Objective: (A) 6.2
Persuade X% of adorers and X%
of adopters to increase
4.3
consumption by 16 and 8
servings respectively; (B) Grow
x% of available and X% 2.4
acceptors in trial. All by FYE11.
0.5
2. Marketing Objective: Significantly 2005 2006 2007 2008 2009 2010E
increase the percentage of
adorers and adopters who agree
Smirnoff Absolut Grey Goose Skyy Svedka
to the statement “Smirnoff is the
first vodka I consider when
choosing any vodka.”
3. Innovation Objective: (A) Devise Situation Analysis
simpler, faster, and better ways The American drinker is changing how s/he drinks. An anemic economy
to create new products and combined with lower real disposable and discretionary income has effected what
occasions for Smirnoff’s portfolio consumers are willing to trade-off (product benefits, brand aspiration, substitute
from Bar-to-Home; Measure the and adjacent product experiences) in order receive the best value for their
impact from innovation drinking dollar.
4. “Be There” Campaign Objective: This phenomena is evident on and off-premise, as more consumers choose
Engage, Experience, and Extend and prefer to entertain and drink at home. Spirits consumption patterns,
the Smirnoff value proposition of behaviors, and attitudes are dynamically expanding and contracting in correlation
“There” to LDA-29 available and with unemployment, consumer confidence, and market sentiments.
acceptor spirits drinkers aspiring Whether through attrition or consolidation, the American vodka category
to new social experiences. needs to ‘weed out’ unprofitable brands, to give consumers more clarity. Vodka
5. Media Objective: Position repertoires are expanding as innovation in flavor and occasions multiply. So the
Smirnoff as a trusted source, current economic impact will be beneficial in the long-term with the strongest
providing long-term utility via brand franchises owning increased shares of all vodka occasions.
relevant social media, digital, The future of vodka lies with LDA-29. Innovation must literally ‘bottle’ the
and mobile applications. experience they will seek tomorrow. New rituals, customs, language and
traditions are emerging influencing and motivating how we consume vodka. As
6. Social Responsibility Objective: RTDs encounter slower growth, Smirnoff will require new innovation to combat
Leverage the consumption of smaller brands such as Svedka and Skyy, and increase share from Absolut.
Smirnoff to advance the
message of responsible drinking.
7. Trade Objective: Educate and
motivation trade/gatekeeper, Opportunity
business line, x-trade channel, Smirnoff has an opportunity to become a 10+MM case-a-year brand in the
and national accounts on United States and accelerate its strategic growth code, by incorporating Culture
Smirnoff quality credentials and into its decision making as a Key Performance Variable.
distinctiveness; Focus - “trading-
down’ and ‘switching across
portfolio’; On-premise proximity.
8. CRM Objective: Increase
Challenge
Smirnoff user data base for To persuade LDA-29 vodka drinkers, not to ‘trade’ within the vodka category,
future one-to-one relationship but to ‘profit’ from it by adopting and adoring Smirnoff. Despite the economic
and direct marketing efforts. climate, premium and super-premium products are seeing the fastest growth
9. Mitigation Objective: Innovate rates, with Smirnoff TM in the most optimal position to recruit new vodka users.
Smirnoff across the ‘vodka value
spectrum’ to meet expectant and
future lifestyle and life stage Risk Management
spirits needs and occasions.
The highest risk is to brand health. An over-extension of the vodka product
10. Culture Objective: Evaluate, can create distortion in what vodka symbolizes, blurring brand and category
Measure, and Apply Smirnoff’s positionings and experiences. The Smirnoff franchise should only be stretched so
Culture dimensions, integrating far, leading innovation, not keeping up with it. The ‘cocktail culture’ trend is a
new intelligence into decision limited window and should not be pursued to the demise of core vodka values.
making and business planning.
Copyright 2009-2010, Crosscut Advisory, LLC. All rights reserved. For demonstration only. Culture & Commerce is a registered trademark of Crosscut, LLC.
4. Smirnoff Culture &
CELEBRITY CULINARY CURRENT
Commerce Dashboard INFLUENCE HABITS EVENTS DESIGN
Culture dimensions are
evaluated, measured, and applied
on quarterly and annual basis to:
Key performance indicators,
DIVERSITY ENVIRONMENT FAITH FAMILY
target consumer understanding,
activity and consumer goals,
search and spin, adapt and
apply, growth code strategies,
and annual business planning.
FAVORITE GAMING & HEALTH &
FASHION
Key Departments: Innovation, ENTERTAINMENT HOBBY FITNESS
Brand management, Sales,
Consumer planning, R&D, Trade
marketing, Social responsibility.
INTOX
INNOVATION LANGUAGE MEDIA
CONSUMPTION
MUSIC TASTE ROLE MODEL SEXUALITY SUCCESS
Enriching Key Brand they will satisfy emergent consumer
expectations and reasons to believe.
Benefits with Culture
The power of Culture influences Culture Applied to
purchase. People, not consumers, Consumer Understanding
share Culture through mutual or mass
experiences, eg. word of mouth or Creating new marketing properties
social (media) networks. The need to that are directly reflective of the
share is primal, and has only been business needs and consumer
accelerated with technological invention positioning are best suited to
and application. economically benefit from Culture.
Today, Culture is one of the single Smirnoff, and brands in the wider
most important variables effecting the Super-Premium-to-Value vodka
consumer Acceptance-to-Adoration segments, are switching from
dynamic. Despite the advancement in product-centric ‘purity’ propositions to
marketing sciences and media, ‘lifestyle’ focused aspirations. “Be
Culture’s innate and intuitive delivery There” communicates to LDA-29 vodka
system is far superior. Society, and drinkers a better vodka brand
especially consumers, have grown positioning in a more effective way,
accustomed to Culture informing and allowing the brand/product to touch
encouraging them to participate with the consumer in a way traditional
the masses in experiences that marketing programs could not deliver.
transcend psychographics. Both product and consumer are
But what is Culture, really? And obligatory for ‘be there’ to be
how do brands who compete in experienced. Spirits Consumption Dynamics
saturated categories truly find a Point The Culture dimensions of Celebrity
of Difference to incorporate into their Influence, Intoxicant Consumption, ‣ ‘Trading-down’ as consideration
business model and value chain? Media, and Success best reflects
‣ Private label included in ‘At
The risk of attaching a Key Brand Smirnoff’s “Be There” campaign. Home’ repertoire and occasion
Benefit to the wrong Culture is Consumers, and vodka drinkers, are
constantly looking for new experiences, ‣ Vodka as the center of ‘social’
apparent throughout a brand’s gravity
marketing mix - communication, media, and ways in which to connect with like
minded peers globally. Culture is ‣ Dual usage of gin and vodka
message, and even value proposition. favoring vodka as All Purpose/
Consumers buy Culture today, not just driving their motivations as they enter
Occasion
brand and product; when brands adopt and exit new lifestyle and stage
segments. Market trends highlight ‣ ‘Reality’ as Release occasion
Culture into their planning, intuitively
underlying Culture value.
Copyright 2009-2010, Crosscut Advisory, LLC. All rights reserved. For demonstration only. Culture & Commerce is a registered trademark of Crosscut, LLC.
5. Culture Dimension Evaluation: “Be There”
“Be There” is entering its second year. The direct call to action, inspiring consumers to overturn
convention in pursuit of one-of-a-kind experiences with Smirnoff, will be ultimately correlated with the
movement of Culture. Today, relevancy and access are determining factors in consumer choice.
How does Smirnoff measure “Be There” and Smirnoff’s KPIs to Culture? ‘Being their’ and ‘in the moment’
requires understanding which attributes and values of Culture can be applied to Smirnoff’s business and
marketing models. What is the Culture insight of “Be There” and what Culture context will create these
experiences?
Culture drives and impacts consumption and performance as it happens in society, specifically: (1)
Awareness, (2) Trial, (3) Preference, and (4) Adoption.
‣ Hollywood Cocktails - celebrities extend their brands with aspirational lifestyles;
more than 50 celebrity brands launched from 2007-2009
CELEBRITY ‣ Celebrity as ‘Character’ - Reality TV enters its 10th year; 1 of 4 networks shows is
INFLUENCE reality format
‣ Celebrity “Hope for Haiti” raised $19MM using network television
‣ Celebrity Tweets becomes new broadcast medium in 2009
‣ Social media has become trusted sourced, evolving from peer-to-peer to
Community
‣ Consumers are controlling digital dissemination and message, brands must ask
MEDIA
permission
‣ Mobility of device and application create new brand experience in lieu of product
‣ Brands using social media as ‘social commercial transaction platforms’
‣ “Celebrity Rehab” over indexes for LDA-29 consumers
‣ Binge drinking increases as ‘at-home’ consumption rises
INTOXICANT ‣ Marijuana as a legal and medicinal substance become legal in several states in US
CONSUMPTION ‣ Serious national discussion to lower the federal alcohol age limit
‣ “Mad Men” influences a new generation to old world masculine values - drinking
and smoking as real life
‣ Green becomes an aspirational value; substance vs consumption
‣ Counterfeit swiss luxury watch industry worth $250B up from $5B in 2005
‣ Ivy League MBA admission applications have surged by 20% from 2007-2009
SUCCESS
‣ Self-Help is the fastest growing segment of religion
‣ Reward and discernment are personal but shared experiences, especially in a
digital age
Copyright 2009-2010, Crosscut Advisory, LLC. All rights reserved. For demonstration only. Culture & Commerce is a registered trademark of Crosscut, LLC.
6. Culture Dimension Measurement
‣ (90) Reality-based media content
CELEBRITY ‣ (89) Blogs about celebrities
INFLUENCE ‣ (84) Products celebrity use
‣ (80) Sound bytes and new language celebrities use
‣ (77) Movies, filmed, and video entertainment
93 ‣ (62) Sports stars crossing-over into entertainment
‣ (60) Television - cable and network
‣ (86) Social media
‣ (81) Blogs
MEDIA
‣ (77) Viral video
‣ (70) Broadband services
89 ‣ (65) Television and film
‣ (63) Polls and surveys
‣ (60) Publishing
‣ (88) Sobriety and detox
INTOXICANT ‣ (80) Mating and dating
CONSUMPTION ‣ (78) Ritual and customs
‣ (76) Fictional character portrayal
‣ (71) Prescription drugs
82 ‣ (70) Caffeinated alcohol products
‣ (69) Stress
‣ (83) What I give back to society
‣ (75) Luxury car
SUCCESS
‣ (72) What I order to drink
‣ (70) Health
77 ‣ (64) Designer clothes
‣ (60) Name brands
‣ (57) Money
Copyright 2009-2010, Crosscut Advisory, LLC. All rights reserved. For demonstration only. Culture & Commerce is a registered trademark of Crosscut, LLC.
7. Culture Dimension Application
MARKETING
CUSTOMER MARKET SHAREHOLDER
Value Stages PROGRAM
MINDSET PERFORMANCE VALUE
INVESTMENT
•Product •Awareness •Price premium •Stock prices
•Communication •Associations •Price elasticities •P/E ratio
•Trade •Attitudes •Market share •Market capitalization
•Employee •Attachment •Expansion success
•Other •Activity •Cost structure
•Profitability
Cultural Cultural Cultural Cultural Crosscut Value
Insight Context Application Relevance
Stages
Measurement •Clarity •Competitive reactions •Market dynamics
•Relevance •Channel support •Growth potential
•Distinctiveness •Customer segment •Risk profile
•Consistency •Brand contribution
Recommendation
CELEBRITY
Three Areas to Focus Culture in the Smirnoff Value Chain
INFLUENCE
Crosscut has identified three key areas where Smirnoff can leverage Culture as business intelligence:
Product, Activity, and Extension. We have further determined the most optimal and efficient methods to
implement and integrate the Culture dimensions - Celebrity Influence, Media, Intoxicant Consumption, and
Success - into a successful and engaging consumer campaign and marketing mix.
To access the Culture solution contact Chappy at Crosscut Advisory, LLC:
Chappy@Crosscutadvisory.com
Copyright 2009-2010, Crosscut Advisory, LLC. All rights reserved. For demonstration only. Culture & Commerce is a registered trademark of Crosscut, LLC.