Absolut vodka has developed into one of the largest spirit corporations in the world. The Swedish company’s campaign of “constant creativity” have caused it to perform strongly over the years. Absolut was founded in 1879 by Lars Olsson Smith, and by the time he was in his twenties, Smith controlled one-third of the Swedish vodka production by improving the production process and using local products (Pernod Ricard). Distilling this fine liquor in a country where vodka was already a rich tradition, Smith invented the process of continuous distillation, where the liquor is continuously distilled through its production. This allows the vodka to keep its flavor, though the impurities are removed. In addition to this, the vodka is made using local water and ingredients from Åhus, Sweden, making the company a distinctly Swedish cultural icon. The vodka not only uses local water, but it is also grown from local Swedish winter wheat, which gives the powerful alcoholic beverages the company produces its unique taste.
Absolut Vodka grew exponentially over the years, as the company expanded and production increased. Now, production encompasses 500,000 bottles of vodka a day, and is one of Sweden’s largest exports. Absolut’s history in Sweden is full of turmoil, as the city of Stockholm had a monopoly on spirits, but the company’s initiative and innovation that has so characterized the company allowed it to flourish. The company continues these trends today, by introducing new and innovative branding techniques, and increasing its cultural significance.
Absolut was sold all over the world long before it ever reached US shores. In 1979, the first shipment of Absolut arrived, and Absolut’s success in America is largely due to the creativity of the only company willing to distribute the product, Carillon Importers, Ltd (Absolutad). The company grew at such a rate, it became one of the top ten most purchased liquors in 1994 worldwide. The company was later acquired by the French company Pernod Ricard in 2008, which controls the distribution of several liquors. Pernod Ricard purchased Absolut for the price of $8.3 billion, and it has been a large contributor towards the company’s overall income since then.
This has not always remained consistently the case. In 2015, Pernod’s profits were on the rise globally, as a weakened Euro and significant sales abroad drove revenue higher. However, Absolut lost about $350 million in profit, bringing profit to roughly $974 million USD (Landauro & Chow, 2015). Absolut makes up roughly 25% of Pernod’s sales, and vodka sales in the US are currently declining, as increased competition from other liquors drives down demand and increasing the possibility of future decreased revenue. While Absolut sales slightly declined in 2015, the potential for a reversal of the company’s fortunes is not only possible, it is expected. Absolut Vodka is relatively strong on the balance sheets, and its marketing imaging and branding is among the strongest in the world.
The relative strength of Absolut is absolutely apparent in its marketing campaigns. The company has managed to display itself as the predominant choice for the younger, more millennial demographic, which is the largest group of alcohol purveyors around the globe. Absolut has accomplished this through very specific marketing and branding campaigns. The company has taken great strides to partner with musicians and artists to give the brand a hip, trendy feel. In America, Absolut achieved popularity by attaching itself to Studio 54, one of the most famous nightclubs in the city, and also in the world (Greenfield, 2014). This helped increase Absolut’s reputation as a party drink, and helped increase the brand’s popularity in the 1980’s.
Absolut’s greatest strength has been its appeal to the youthful, trendy generation. Absolut’s greatest launching point was probably when famous American artist Andy Warhol created a painting depicting the company’s signature bottle, sparking what would eventually become a trend the company would follow (Americans & Arts, 2016). Absolut has teamed up with many famous artists over the years to contribute to the Absolut Art Collection, and the media acclaim it receives as a result help cement it as one of the hippest hard liquors available on the market today, which helps define the drinking culture of the company in the minds of the consumers of hard liquors and spirits.
More recently, the brand has maintained its longstanding tradition of artistic imagine by partnering with an electric band to help launch its “Absolut Greyhound” line of products (Greenfield, 2014). The resulting music video achieved over 40 million views on YouTube, and while it has been heralded as a somewhat successful marketing drive, it demonstrates the company’s ability to specifically target its audience and consumer base.
Absolut has partnered with many artists since Andy Warhol, but their most groundbreaking agreement was with Lady Gaga in 2014. The brand achieved high visibility by being incorporated into Lady Gaga’s shows, and the partnership went further than that. The company and the musician did joint press releases and social media posts, helping increase the vodka brand’s visibility to a much larger audience. It was estimated that Absolut’s program reached an audience of nearly 96 million people across the world.
The company has remained dynamic in its approach to developing relationships with bars as well. The Absolut Invite is a competition where bars can compete against each other in various skill based events and increase their reputations. Events like this help increase the image of Absolut, making it one of the strongest spirit companies in the business. In fact, whereas some spirits gain their appeal through upscale imaging and the sort, Absolut has achieved its powerful reputation on the international market by connecting to millennial groups on average better than its many competitors on the market today.
While it may seem strange to consider, the company has also used the design of its many types of bottles to define its brand. These have won over 350 awards in the past, and have helped further define Absolut (Lyoen, 2014). The bottle design has helped ensure the products are instantly recognizable to consumers.
Absolut also has the advantage of having many different types of vodka to sell. The company branched out into the flavored vodka world when it became apparent that the market was leaning that direction, which allowed it to compete with competitors like Finlandia and Smirnoff. While traditional vodka brands trend towards having one or two side flavors, Absolut excelled in finding a niche. The company offers many unique flavors, such as hibiscus and ginger/red apple. Thus, for any consumer seeking to try something other than the rubbing alcohol taste of vodka, they can supplement their cravings with a variety not offered by any other vodka brand. This fact helps supplement the idea that Absolut vodka is the vodka of choice for those seeking to be trendy, further enhancing the image of the company and displaying clearly how the vodka giant uses marketing as its greatest strength.
Another strength to consider for the company can also be a weakness. All of the ingredients for the production of the many different types of vodka are grown in a small Swedish town, making the product completely unique and tasteful. This of course appeals to Absolut’s preferred brand imaging, as it strikes a chord with drinkers who consider themselves ecologically aware, or those that support the concept of helping smaller level economies. Whatever the consumer’s preference, studies and past experiences have taught companies that it is in their best interests to come off as friendly and true to their foundations.
Therefore, Absolut’s greatest strength lies in its brand imaging. The ingredients that each bottle of Absolut consist of are among the finest in the world, without a doubt; however, few are able to directly identify which vodka is better than the other due to the high liquor content anyway. Therefore, like most spirit brands, Absolut requires marketing campaigns and imaging as its primary driver in sales. In the past, these efforts have been largely successful, though they were only needed once Absolut attempted to enter the international alcohol market, permanently changing the way the company would conduct business.
Absolut, while one of the top vodka sellers in the world, has several drawbacks. Its specific vodka type causes it to fall in the middle, between upscale spirits and cheap vodka. While no one enjoys cheap vodka, price sensitive customers will always seek out cheaper options, while higher end customers will not necessarily mind purchasing more expensive liquors for their better taste. This ‘averageness’ might continue to pull from the company’s revenues, especially in a world today where the company is losing revenues and profits from higher end products.
As previously mentioned, Absolut vodka is produced in one region of the world, and only from Swedish winter wheat. While this gives the vodka its unique taste, this can also be catastrophic to the business. For example, what will happen when a crop is bad, or agricultural costs rise? The benefit of Absolut being produced in Sweden is that the company has access to farmers that are subsidized to produce, as the European Union has always sought to avoid famine and other agricultural dependencies. This being said, being too reliant can be dangerous, though it is a factor every alcoholic company must face, regardless of the base ingredient. Absolut made this factor much more significant by choosing only one local ingredient.
Absolut is also heavily susceptible to competition as a result of the naure of the business environment it operates in. Because it is a vodka company, it must compete against other vodka companies, and liquor/spirits. Moonshine is becoming increasingly popular on the American markets, demonstrating how vulnerable the company is not only to competition from current companies, but susceptibility
Opportunities:
Several opportunities are available to the company, especially due to its location. As Absolut is located within the EU, the company enjoys all of the benefits EU membership provides; essentially, because the countries practice free trade with each other, tariffs are not imposed upon export to member countries.
The world market is the greatest opportunity Absolut has open. Its superior marketing strategies can be coupled with rigorous expansion into newer markets that have never been sufficiently penetrated before by spirits and liquors. The world market is infinitely bigger than just the US market, and Absolut must attempt to spread in order to reverse the declining growth and sales that competition is bringing on.
Threats:
Several threats exist to Absolut’s continued success and performance. More expensive, higher up brands like Grey Goose are becoming trendy, and Absolut faces significant competition from its competitors (USA TODAY, 2008). In 2008 alone, the sale of higher end spirits and liquors grew by eleven percent, statistically marking the shift. It is important to note that Absolut sales continued to grow despite this, but not by the exponential amount it had previously.
The threat of increased competition is prevalent in the United States, where increased hard liquor sales of other name brands, and traditional American liquors, have done much to increase the level of competition that Absolut faces. This will damage the revenue of the company in the long run on the US market, especially when the company is heavily invested there but is having little to show for it. The decreased sales in America have not truly haunted the company, but they may be a harbinger of what is to come provided the company does not adapt and innovate as it has in the past.
Smirnoff is Absolut’s largest competitor, and has about 2.5 times the market share that Absolut does. Thus, Smirnoff is the biggest threat to Absolut’s continued success, and Smirnoff has already began spreading through third world countries in order to deny Absolut those markets and increase its own revenues.
Absolut also faces the same threats the rest of the world faces: the international financial crisis that is still affecting its consumer base. Consumption spending for every country decreased dramatically, the world is still healing from the original shocks to the market. Absolut has weathered the storm fairly well, but the world is still in turmoil, and it is difficult to gauge exactly when the problem will subside. In addition to this, labor costs have risen over the past few years, due to the recession and many countries increasing their regulations and taxes in order to provide benefits for employees. This is significant because as Absolut and Pernod Ricard are European based companies, they must deal with these issues directly.
In order to improve, Absolut must uses its powerful marketing apparatus to help change consumer taste. It must appear to be finer and more distinct than the uppity vodka brands, while also appearing easily affordable for the average, everyday consumer. Absolut can do this by continuing to increase its partnerships with celebrities and artists, as it has done in the past. The company has always maintained a loyal fan base of famous consumers, from Andy Warhol to Zack Galifinakis. In order to continue this success, the company needs to expand into social media and fully integrate its information sharing. Absolut needs to develop a stronger influence and following on YouTube, as it will be critical to continuing the strength of the brand; YouTube is also increasing in relevancy, and whether the company decides to post videos or simply pay for ad space, it will reach a much larger audience by using ads to decide which viewers watch them.
The company must also must minimize its ecological impact. While the goal of preserving the environment is admirable, if Absolut were to implement some sort of ad campaign that discusses how the company is saving the planet, it will attract a lot of attention and might help drive revenues upward. This is because it is a proven trend that consumers tend to choose companies that are more in tune with climate change and the impact they have upon the environment as a whole.
Another thing I would recommend is teaming with a celebrity to follow in the footsteps of Intel. Intel launched its campaign “In Search of Incredible” with Jason Mraz to discover the greatest stories in existence that actually happened to people. Campaigns like this are the perfect place to begin to increase the authority of the vodka company.
Absolut should conduct a campaign similar to this will attempting to expand into the international market. As it continues to grow in size, Absolut must understand that the world is dynamic and is still changing; therefore, it should attempt to expand into the third world markets of Africa, Latina America, and Asia. Smirnoff is already present in some of those places, and it will not be long before the market will have sealed itself off for good; therefore, Absolut should use marketing to enter this markets, while using advertisements internationally about the work it is doing in third world countries.
Thus, Absolut’s greatest determinant in the future of hard liquor sales will be determined by increasing its niche marketing strategies. The outstanding success the company has received in the past is slowing down, largely because they have lost their brilliant targeting. Absolut needs to get back to the drawing board, redesign its earlier goals, and proceed based upon the original model. In addition, it is vital for Absolut to corner the developing world before Smirnoff does, as the company is a serious threat to the superiority of Absolut’s taste.
Works Cited:
Pernod Ricard. Retrieved June 27, 2016, from http://pernod-ricard.com/525/brands/see-all-brands/strategic-brands/absolut-vodka
Absolutad. (n.d.). The story. Retrieved June 27, 2016, from http://www.absolutad.com/absolut_about/history/story/
Landauro, I., & Chow, J. (2015, August 27). Absolut drag: Pernod writes down its vodka. Wall Street Journal. Retrieved from http://www.wsj.com/articles/pernod-ricard-hit-by-absolut-write-down-1440655094
Greenfield, R. (2014, July 9). The evolution of Absolut vodka’s advertising strategy. Most Creative People. Retrieved from http://www.fastcompany.com/3032598/most-creative-people/the-evolution-of-absolut-vodkas-advertising-strategy
Americans, & Arts, the. (2016). News. Retrieved June 28, 2016, from http://www.partnershipmovement.org/news/p/absolut-partnership/
Lyoen, A. (2014, December 11). SWOT analysis. Retrieved June 28, 2016, from http://vodka-vision.weebly.com/analysis/swot-analysis
USA TODAY (2008, March 31). Pernod Ricard buys Absolut for $8.3 billion - USATODAY.com. USA Today. Retrieved from http://usatoday30.usatoday.com/money/industries/food/2008-03-31-absolut-sold_N.htm
