Crosscut Advisory: Culture and Commerce Report: Vodka


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Crosscut Advisory: Culture and Commerce Report: Vodka and Smirnoff

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Crosscut Advisory: Culture and Commerce Report: Vodka

  1. 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. 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. 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. 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. 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. 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. 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: Copyright 2009-2010, Crosscut Advisory, LLC. All rights reserved. For demonstration only. Culture & Commerce is a registered trademark of Crosscut, LLC.