Bonfort’s Vodka Report 2018

By Editor-in-Chief, Natasha Swords

According to the Distilled Spirits Council, vodka has become the backbone of the spirits industry, accounting for 32% of all volume. In 2017, 71.3 million 9-liter cases of vodka were sold in the United States, generating $6.2 billion in revenue for distillers.

The Council states that an important growth driver has been the continued popularity of flavored vodkas as they now account for around 21% of all vodkas sold in the U.S. Today, consumers can enjoy vodkas that have been infused with natural spices, refreshing citrus flavors, raspberry, vanilla and other alternatives.

Melkon Khosrovian, Co-Founder & Spirits Maker at Los Angeles-based Greenbar Distillery agrees. “Everyone loves vodka because they can easily build cocktails on top of its neutral taste,” he says. “It’s neither complicated, nor is it likely to offend anyone. At Greenbar Distillery, we’ve been trying to push vodka’s flavor envelope for 14 years —- from our early days of making black truffle (yup, the mushroom) and pear lavender, to our most complex current offering, TRU Garden vodka.”

Barry Young, Co-Founder and Master Distiller at Pennsylvania Pure Distilleries, which makes Boyd & Blair Potato Vodka, sees pupularity in flavored vodka changing, and says he predicts the category continuing with less flavored offerings. “I do find it encouraging that the number of artificially flavored vodkas is decreasing and focus is returning to traditional non-flavored vodkas. I believe the growth continues in vodka because it is such a clean spirit and people are more conscious of what they are drinking and how it affects their body.”

Barry Young, Co-Founder and Master Distiller at Pennsylvania Pure Distilleries

Distilled Spirits Council Chief Economist David Ozgo pointed to the strongest growth in high-end premium and super premium products across most categories. The revenue for those price points increased 7.1 percent and 6.1 percent, respectively, and by 7.3 percent and 4.9 percent for volume.

Vodka, the sector’s largest category and representing one-third of all volume, had another solid year with overall volumes up 2.2 percent and revenues up 3 percent to $6.2 billion, Ozgo said. Vodka sales were paced by high-end premium products with revenue growth of more than 15 percent to $1.6 billion.

“Adult consumers, particularly millennials, continue to gravitate toward high-end and super premium spirits products,” said Ozgo. “Companies are creating excitement in the marketplace with new products and new technologies to interact with spirits customers.”

Greenbar’s Melkon Khosrovian says vodka must stay relevant though. “As an entry point for many into the world of spirits, vodka will likely grow as long as there are 21-year-olds in America. With the rise of craft like Tito’s, imports no longer seem to carry any cache and any growth will likely go to local makers. The premium versus super-premium movement in vodka is quite telling,” he says and he approaches the category from a different angle.

“Whereas most growth seems to be taking place in super-premiums in similar categories, like gin, the opposite seems to be happening in vodka. Until or unless brands can offer something more distinctive than straight vodka, which is hard to differentiate, then the slide to the bottom will continue.”

Khosrovian adds, “The category that comes closest to vodka’s versatility and volume potential, in my experience, is rum. That’s mostly a conceptual challenge, though, and will take a long time to develop. The good thing is that many craft distilleries, including us, have taken up the challenge and could help raise the category at the grass-roots level across the U.S. TRU Garden Vodka has an SRP of $26.99.

Justin McColgan, Partner/Founder at Bare Bone Vodka says vodka’s stake in spirits is slightly higher than the Council reports. As a brand new vodka (launched in 2018), Bonfort’s asked McColgan, what would motivate him and his team to create a new brand out of Texas, in an already overcrowded, albeit continually growing, category?

“Vodka represents over 34% of all spirits consumed annually in the US, of which 63% are domestic vodka brands. The underlying trend in the US marketplace is strong growth, with consumers looking for local, craft and domestic brands. Tito’s and Deep Eddy are good examples of this trend. Deep Eddy grew to a valuation of $450 million in a little over five years, built on a combination of a strong distribution network and creative marketing. Bare Bone is well positioned to capitalize on its strong foundation-of-brand, distribution, and marketing experience with a team that has the “miles in the legs”. Bare Bone Vodka has an SRP of $17.99.

McColgan offers that according to Statista, “Revenue in the vodka segment amounts to US$14,393m in 2018. The market is expected to grow annually by 2.8% (CAGR 2018-2021). In global comparison, most revenue is generated in the United States (US$13,403m in 2018). In relation to total population figures, per person revenues of US$39.46 are generated in 2018. The average per capita consumption stands at 1.7L in 2018.”

Consumer Shift Toward Cocktails

A new Morning Consult survey, with a nationwide sample of more than 2,000 adults, finds that “a plurality of Americans prefer liquor drinks.” Barry Young of Pennsylvania Pure Distilleries agrees, “Vodka is such a great vehicle for delivering maximum cocktail enjoyment and I believe Boyd & Blair is especially adept. Since Boyd & Blair is distilled from potatoes, it has more natural mouth feel than most vodkas, and coupled with its great smoothness, it’s perfect for cocktails.” Boyd & Blair Potato Vodka (80 Proof) 750ml $29. Boyd & Blair Potato Vodka is sold in 42 states and five countries.

“To me the spirit and the spirit’s properties (slight sweetness great mouth feel in the case of Boyd & Blair) should be a distinct part of a cocktail, otherwise why are you using the spirit? I find mixologists choose Boyd & Blair in fruit-forward cocktails using seasonal produce as well as classic cocktails like the Vesper and Martini. It mixes so well but also stands on its own..”

According to the Morning Consult poll, 39 percent of consumers prefer distilled spirits, either in a cocktail or straight, 32 percent prefer beer, 25 percent prefer wine.

These findings reflect trends in the current marketplace, as spirits reported record sales in 2017, with an eighth straight year of market share gains versus beer and wine, according to Distilled Spirits Council data.

“The spirits sector has seen impressive growth driven by innovative products, the revival of cocktail culture and a fascination with premiumization across all spirits categories,” said David Ozgo.

Another interesting trend identified in the poll is millennials preferring distilled spirits, with 50 percent saying they would choose cocktails or straight liquor, over beer or wine.

“Adult consumers, particularly millennials of legal drinking age, continue to gravitate toward the vast array of spirits products as companies create excitement in the marketplace with new products and experiences,” Ozgo concluded.

The survey also included a snapshot of consumer preferences by category of spirits. Consistent with Council data, vodka remains the most popular spirit in the United States.

Natasha Swords
Natasha Swords

Natasha Swords is an accomplished editor and writer with 20+ years of creative composition, reporting and management. She hails from Dublin Ireland where she held the position of Editor at Jemma Publications. Natasha honed her editorial skills by delivering engaging content on a wide range of topics, before finally focusing on the alcohol beverage and cannabis industries. She is Editor-in-Chief at Bonfort’s Wine and Spirits Journal as well as Drink me Magazine, where she leads all editorial content from story-idea generation to commissioning freelance writers and photographers. She also heads up CannEpoch, a lifestyle publication for the newly cannabis curious. In 2018, Natasha launched Bonfort’s Wine and Spirits Journal from inception, as well as the Bonfort’s Lifetime Achievement Award, a top-tier industry event connecting leading brands with key buyers. Steeped in the alcohol industry media, she was previously editor of Off-License Magazine, California Beverage News and Patterson’s California Beverage Journal (now Tasting Panel Magazine), and ran corporate communications for a number of alcohol supplier companies including TGIC (now Guarachi Wine Partners) and distributor, TITAN Wine and Spirits.

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