Marketing strategy of Absolut vodka

Absolut Vodka is a brand of vodka, produced near Åhus, Skåne, in southern Sweden. Lars Olsson Smith, famous entrepreneur and also known as the father of Absolut Vodka established Absolut Vodka in 1879. Following the ups and downs of the product, Absolut is Absolut is number one brand of premium vodka worldwide Absolut Vodka is made in Åhus in southern Sweden in accordance with more than 400 years of Swedish tradition, for centuries it is a region famous for its vodka. and is made solely from grain using a special method of distillation. The vodka is made from winter wheat. Approximately 80,000 metric tons (2,900,000 bushels) of wheat are used annually to produce Absolut Vodka. Over one kilogram of grain is used in every one-liter bottle. In its first year on the US market, only 10,000 nine-liter cases of Absolut Vodka were sold. The product was launched first in Boston; then New York, Chicago, Los Angeles, San Francisco and eventually all over the country.

By 1982, Absolut Vodka had passed a major Finnish competitor that had entered the US market ten years earlier! In 1985, the biggest Russian competitor was overtaken, making Absolut Vodka the leading imported vodka in the US. After its success, both in its home country and in the US, Absolut Vodka was introduced in most European, Asian and Pacific countries starting in the mid-80's. Today, Absolut is the number one selling imported vodka in Canada, the USA, Finland and other counties

Today it’s the Third largest spirit brand behind Barcardi & Smirnoff, its sold in 126 countries. Worldwide sales in 2010 are 99m litters. Now, Absolut is owned by French group Pernod Ricard; they bought Absolut for €5.63 billion in 2008 from the Swedish state.

Customers

At the present moment, Absolut vodka is produced for import more than for domestic use. Most of all, it is consumed in USA, Canada and Finland, where it is among top spirits. The vodka is available of broader global scale; it is present and sold in 126 markets.

Competitors

Over long period of time, Absolut was doubtless leader in imported spirits category on American market. But at the moment, it experiences difficulties of confronting new serious competitors which gain popularity and customer loyalty among Americans. The brands are Grey Goose, Ketel One and Belvedere (Miller, 2004), with cost per bottle higher than Absolut. These competitors gain ground in luxury drinks market, while such domestic company as Smirnoff with the cost per bottle lower that Absolut’s, compete for loyalty of middle-class customers. The company takes measures, such as launching of Level brand, to deal with the threats coming from its competitors (Miller, 2004). . Their Absolut Level brand is marketed as being extra pure. Absolute Level was launched in a slim, frosted tall bottle, which retained the silhouette of the iconic Absolut bottle. Level is an elongated version of the classic bottle design with a heavy base but has a more fresh, fruity and distinctive flavour than competitors offerings. A bottle of Level would sell in the US for $30 a bottle, whereas Absolut would sell for $20 a bottle. It utilises the catch-line “smoothness and character”. So people want to think they are buying the best, and use price, and the quality of the packaging as their primary inference into the quality of the product.

Marketing Mix

Product

The brand’s name is Absolut, derived from primary name of “Absolutely pure vodka”. The style and package of the product differentiates it from all the other vodka producers around the world (the bottle shape was taken from classical Swedish medicine bottle which was weird at the time since it differed from the standard vodka bottle shape. The product also aims to differentiate itself in quality dimension: Absolut defines its approach to vodka production as One Source. This One Source is Åhus, a small picturesque town in the south of Sweden near the birthplace of Absolut founder Lars Olsson Smith, where every drop of Absolut vodka is made. The water for vodka comes from Absolut-owned well, “deep in pristine subterranean aquifers”, as mentioned on their site. Producing all the production of the company in single space using local raw materials provides Absolut with total control over all production stages and ensures that every drop in its 500,000 bottles made daily comply with its high quality standards. A revolutionary distillation method invented by Olsson Smith, the continuous distillation process is used to produce Swedish vodka to ensure that Absolut achieved the quality it claims to have. Continuous distillation process serves a superior way to remove impurities in vodka while maintaining the taste and character of the raw materials used. Thus, it is evident that practically all parameters of the product concerned are unique.

Since Absolut positions itself as a luxury brand, it uses skim pricing strategy to support its claim for leadership in chic market. Skim pricing aims at skimming the cream of the top of the market by setting a high price for its product (Porter, 2001) The bottle of Absolut costs 30-$35 while a bottle of American Smirnoff is worth $14. Thus, Absolut sends a message to the higher-strata consumers about coolness of its brand (Mucha,2004). In this, the company pursues quality leadership objective. Recently, a number of competitors, such as Grey Goose, emerged on American market with price per bottle even higher than that of Absolut. They attracted a considerable share of customers’ attention, since they appealed to the customers with similar message: a sign of extremely high quality and chic. Absolut responded by launching Level, a new brand of Vodka with most innovative distillation process based on combination of continuous and batch distillation, which is revolutionary to vodka production. It is understood that the price per bottle is high as well underlining the uniqueness of production process and appealing to luxury market segment.

Absolut Vodka is available in 126 countries and the third largest brand of alcoholic brandin the world. Absolut first and strongest market is in USA which Absolut has a 60% share of USA Vodka market. Absolut Vodka sold in most of the store in USA, other than that AbsolutVodka also using online store to distribute their product to the end user such asmissionliquors.com. After its success, both in its home country and in the US, Absolut Vodkawas introduced in most European, Asian and Pacific countries Promotion decisions

In Absolut’s case, promotion element of marketing mix was the most important decisive part of brand building and differentiating the brand on the global market. Absolut ad campaign has increased vodka sales of V&S Group by 14,900% over the course of 15 years. This innovative advertising helped to create brand recognition and awareness around the world. Absolut became famous through its iconic advertising and packaging design. The star of their adverts was not the drink, but the bottle it came in. Here the distinctive shape of the simple Absolut bottle was pervasive in every single press or magazine advert. Since the beginning of promotional campaign in 1980, over 1500 absolute advertisements were created. The ad campaign has adorned art galleries, and popular culture exhibits across the world, it has won over 150 advertising awards. The adverts became art pieces in themselves rather than commercial advertising. The company has collaborated with artists such as Andy Warhol, Damien Hirst, and fashion designers such as Jean-Paul Gaultier, Stella McCartney, and Gianni Versace. In 1999, Advertising Age named absolute ad campaign among the ten best advertising campaigns in the twentieth century. In 2002, Forbes named Absolut Vodka the number-one luxury brand globally. Since the takeover the Absolut brand by Pernod Ricard, a different approach to marketing has been adopted.

In line with this, the firm created their global advertising campaign “In an Absolut World”, where they challenge a bold and optimistic view of the world and encourage people to question what the world would be like if everything was a little more ‘Absolut’. This campaign has also seen the brand launch several limited edition bottles, such as Absolut Naked, with the tagline, “In an Absolut World, there are no labels”. This was to support the brand’s “No label” campaign, encouraging customers from around the world to discard their labels and prejudices about sexual minorities. For more then twenty years of Absolut ad campaign, it was running solely in print ads form, with Internet and TV ads added to the advertising concept not so long ago. Absolut vodka also embracessocial media campaign to promote their sales using a one day event that usually open for people to sign up and join the event.

SWOT analysis Strengths

1. It is a Premium category Vodka which offers a unique taste. 2. The shape of the bottle is unique & has its Bottle Ad campaign has won over 350 awards in the past. 3. Digital Age. The Absolut website is a hit amongst the masses. Also, there is a dedicated ABSOLUT Facebook page which has improved the brand loyalty. 4. Absolut Flavours. It offers nearly 20 different flavours which cater to all types of drinkers. 6. Sponsorships. It has tie-ups with major events & programmes 7. unique production methodology (revolutionary distillation process). 8. powerful image of the company closely connected with strong associations to art and chic.

Weaknesses

1. Controversial Marketing campaigns in the past have dented the image to some extent. 2. The company has huge outstanding debts which is a concern.

Opportunities expanding channels of Advertising campaign establishing new brands to meet variety of customers needs concerning cost and style of the product (Level) expansion on other markets worldwide. Absolut is present in 126 markets, but further development as to deeper representation and promotion is possible to gain leading positions on local markets.

Threats emergence of new powerful competitors (Gray Goose, Ketel One, Belvedere. In last three years, 120 brands of vodkas were introduced on American market.) Pressure from both more expensive brands of the luxury liquor segment, and from less expensive brands such as domestic Smirnoff. active usage of TV, radio and other advertising means by the competitors in the industry.