For vodka, the problems in America started before Russia invaded Ukraine
Empty spaces in the shelves of a vodka section of a Pennsylvania liquor store after Russian labels were removed.
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James Bond’s favorite spirit for “Mad Men” and “Sex and the City” characters, vodka has long held the dominant position in the US liquor market.
The top-selling spirit in the United States since the 1970s, vodka generated more than $7.3 billion in revenue in 2021, $2 billion more than the second-best-selling spirit, tequila and mezcal. , according to the Distilled Spirits Council of the United States. More than 78.1 million 9-liter cases of vodka were sold in the United States in 2021, roughly the same number of 9-liter cases of American whiskey, tequila and mezcal, and rum combined.
Initially gaining a foothold in the United States in the 1940s when World War II mandates pushed whiskey distilleries into producing alcohol for products like munitions and rubber, then taking off later in the 1950s before climbing to the top spot in the 1970s, spirits and cocktails historian David Wondrich said there was a period of about 40 years when “everything went like vodka”.
“What you got was a liquor market where people were either vodka drinkers or they drank all the other stuff,” Wondrich said.
This elevated brands like Smirnoff and Ketel One from Diageo, Svedka from Constellation Brands, Absolut from Pernod Ricard, Gray Goose from Bacardi and New Amsterdam from E&J Gallo.
Tito’s, produced by Austin-based Fifth Generation, is the top-selling brand across all spirits in the United States, selling more than 11 million cases in 2021 with 6.3% year-on-year growth. other, according to data from Impact Databank.
But in recent years, vodka’s popularity has started to decline due to a variety of factors, from the introduction of spirits like tequila and mezcal to the market, to the growth of the craft cocktails that put more emphasis on spirits like whisky. and bourbon, or a desire by consumers to move towards other spirits that simply provide more flavor.
“There was a time when vodka was on a higher selling trajectory than everything else combined, and that’s definitely reversed and a lot of other things are growing at the expense of vodka,” Wondrich said. “It’s that dynamic where they figured out how to market the least offensive product that most people would tolerate, and then people got bored.”
The growth of whiskey and tequila
In 2010, vodka accounted for 33% of the volume of the entire spirits market in the United States, according to data from IWSR Drinks Market Analysis, while the broader category of whiskey (which includes American whisky, Scotch and Irish whiskey) accounted for 24.6% and agave-based spirits such as tequila and mezcal accounted for 6.1%.
By comparison, vodka accounted for 32.1% of the market in 2020, while the whiskey category accounted for 30.5% and agave-based spirits 9.4%, according to IWSR Drinks Market Analysis.
Brandy Rand, COO of Americas at IWSR Drinks Market Analysis, said that between 2000 and 2020, vodka had a compound annual growth rate of 4.2% compared to 3% for whisky. However, over the past five years, whiskey has significantly outperformed vodka, by 5.1% and 1.7%, respectively.
“We expect the whiskey category to overtake vodka in volume by the end of 2022,” Rand said, adding that when looking at revenue generated by the overall category, “whisky is currently significantly superior to vodka (and has been for years), as most whiskeys tend to be premium while standard priced vodka makes up most of the value in the vodka category.
The explosion in popularity of tequila and mezcal has also come at the expense of vodka somewhat. The U.S. spirits industry grew 12% in 2021 to $35.8 billion, with tequila and mezcal responsible for more than 31% of the total increase in spirits revenue.
“Tequila has a very good chance of overtaking vodka because it’s not just for margaritas anymore,” said John Coyle, director of sales and engagement at T Edward Wines & Spirits, a wine importer and distributor. and spirits based in New York. “For someone who wants to drink a cocktail or who runs a cocktail program, tequila gives you a lot of things to play with, there’s a palette of flavors that you can use with all the different drinks – vodka, c is just one.”
Some of the growth is likely due to celebrity investment and the rise of tequila and mezcal, notably with the $1 billion acquisition of Casamigos by Diageo in 2017, which was founded by George Clooney . Celebrities from model Kendall Jenner to actor Dwayne ‘The Rock’ Johnson launched tequilas in 2021, while Constellation Brands invested in mezcal launched by “Breaking Bad” co-stars Bryan Cranston and Aaron Paul.
Diageo, which also owns premium tequila brand Don Julio, reported that tequila sales increased 56% in the first half of its fiscal year 2022 from a year earlier, and forecast that tequila sales will grow faster than the rest of the spirits industry. for the next five to 10 years.
“The appeal of the category across demographics is significant. It’s been through, multicultural growth is very strong,” Diageo CEO Ivan Menezes said of tequila during the company’s most recent earnings conference call in January. “It crosses age brackets, gender, slices of the day, occasions and the nature of the drinks. It’s not just about shots and margaritas like it was many years ago.
Connection to Russia
Vodka now faces another challenge: its historical ties to Russia.
In the wake of Russia’s invasion of Ukraine, lawmakers, bar owners, retailers and consumers seeking to show their support for Ukraine have called for a boycott of brands with ties to Russia or , in the case of some vodka brands, perceived ties to Russia.
US President Joe Biden issued an executive order on Friday blocked US imports of several Russian products, including vodka and other alcoholic beverages.
“All of our sanctions and export controls are crushing the Russian economy,” Biden said.
Several states, including North Carolina and West Virginia, have separately banned the sale of Russian-made alcohol. The Pennsylvania Liquor Control Board has instructed all of its licensed stores to remove Russian-made products.
However, while several vodka brands play a connection to Russian heritage through marketing or branding, most vodka consumed in the United States is not of Russian origin.
According to Rand, imported Russian vodka represents less than 1% of total vodka volume in the United States, which she says is “not important for category growth.” According to IWSR Drinks Market Analysis, approximately half of the vodka consumed in the United States is made in the United States.
While Russia is the largest vodka producer in the world, accounting for over 30% of global production, over 90% of it is consumed in the country.
Vodka brand Stolichnaya, which roughly translates to “capital” in Russian, took the initiative to officially rebrand itself as Stoli last week to further distance itself from Russia. Luxembourg-based Stoli Group, which produces the vodka in Latvia, said its rebranding was prompted by “the founder’s strident stance on the Putin regime; the determination of Stoli employees to act; and the desire to accurately represent the roots of Stoli in Latvia.
Workers prepare shipping boxes for Stolichnaya vodka, operated by the SPI Group, at the production line in Riga, Latvia.
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“While I have been exiled from Russia since 2002 due to my opposition to Putin, I have remained proud of the Stolichnaya brand,” Yuri Shefler, the founder of the Stoli Group, said in a statement. “Today we made the decision to change our name entirely because the name no longer represents our organization. More than anything, I want ‘Stoli’ to represent peace in Europe and solidarity with Ukraine.
Shefler has fought the Russian government in recent years over global vodka brands as Russia claims the brands were wrongly sold by a company as part of Russia’s privatization after the dissolution of the Soviet Union.
The vodka industry has already been rocked by its ties to Russia. By the 1980s, when Stolichnaya was still under Russian control, it had become the most imported vodka in the United States by a “massive amount”, according to Wondrich. However, amid the Cold War and the subsequent backlash from the Soviet Union shooting down Korean Air Lines Flight 007 in 1983, the brand’s popularity in the United States declined significantly. At the same time, the Swedish vodka brand Absolut is launched in America, boosted by an advertising campaign with Andy Warhol.
“The Russian connection has always been a bit of a vulnerability for vodka, even though almost nothing in America is Russian,” Wondrich said. “But people work in broad symbolism and that’s not going to help.”
Smirnoff, for example, was founded by a Russian émigré who fled the country during the October Revolution, eventually opening a distillery in Connecticut after Prohibition ended in 1933 and later sold to Diageo. Still, the perception of Russian ties does exist – Smirnoff’s website currently features a large image noting the company’s history and stating that it is “proudly made in America”.
Wondrich said that while vodka is likely to remain the top-selling spirits category in the United States for the next few years, it likely won’t reclaim the bulk of the market position as it did before.
Coyle agreed, noting that the vodka was “pushed from center stage”.
“If you go to a cocktail bar, there will always be a vodka cocktail,” Coyle said. “But the days of James Bond, calling for a specific brand of vodka, it’s in decline, it’s not going to be the next wave of growth in the spirits industry.”