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Russian vodka market faces ‘systemic problem’: analyst

By Ben Bouckley , 22-May-2012

Russian vodka market faces ‘systemic problem’: analyst

The Russian vodka market faces a systemic problem with rapid initial growth amongst brands offset by declines after several years due to lack of brand equity and ‘consumer fickleness’.

That’s the conclusion drawn by Olga Murogava, Euromonitor research analyst, who warned in a company webcast that this lack of goodwill and name recognition ultimately held back sales.

It can be considered as a systemic problem within Russian vodka market – the brands appear on the market and show high growth rates, but after a few years of success they decline,” she said.

Murogava added that vodka producers across Eastern Europe as a whole (sales down 1% in 2011) faced other challenges in a “very competitive” market.

Less potent drinks

These included greater consumer choice driven by international spirits brands, as well as a wider variety of ‘less potent’ alcoholic drinks such as beer, cider and wine.

Murogava said: “Quite a number of Russian, Lithuanian and Russian brands – in 2011 – posted a decline, mainly due to developments within the vodka category, with consumers switching from one brand to another.

“[Consumers were] choosing something new, for example, a new flavour [raspberry, apple, strawberry, vanilla-flavored vodkas], better quality products or more advertised products.

“Although, due to better promotion or distribution methods, a number of brands managed to stand out from this competition,” she added, name checking Russian brand Pyat Ozer (5% growth 2011).

In Poland, Murogava said that many vodka brands saw volume declines in 2011 – with consumers switching to international spirits categories, while others suffered due to market share redistribution within the vodka category.

Success for CEDC

She took the example of fast-growing brand Czysta de Luxe, which posted a sharp decline in Polish vodka market share in 2011 (just above 16.5%) from 2010 (20.5%).

“At the same time, newly launched brand Zubrowka Biala – a pure brand extension of Zubrowka saw considerable growth,”she added.

Launched in November 2010, vodka group CEDC markets this vodka (pictured) upon the basis of an “absolute purity and mild flavor, “due to six rounds of distillation and the only platinum filtration in Poland.

In January 2011 alone, AC Nielsen data shows that Zubrowka Biala outstripped Wyborowa, Sobieski, Stock Prestige, Finlandia and Smirnoff with 760,000 litres sold, with CEDC claiming the most successful Polish vodka launch in 10 years.

Murogava also noted that, in contrast to local vodka, international spirits continued to gain market share and grow across Eastern Europe in 2011 and especially in key markets Russia and Poland.

One notable success was whisky (8% volume growth), with Diageo brand White Horse, family-owned Scottish brand Grant’s and Ballantine’s all showing double-digit growth in 2011.

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