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  • Topic: Absolut Vodka, Pernod Ricard, Vodkas
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CASE STUDY IV.1
Absolut Vodka: defending and attacking for a better position in the global vodka market

On a lovely day in March 2009 the CEO of V&S Absolut Spirits, Ketil Eriksen, packs his suitcase for the third time in the month for a business trip to the subsidiary in New York. In March 2008 France’s Pernod Ricard won the battle to buy the maker of Absolut vodka in a costly 35.63 billion (US$8.9 billion) deal that brings it nearly level in sales with global spirits leader Diageo. Pernod’s Richard’s main gain with the acquisition of V&S Absolut Spirits was V&S’s Absolut Vodka. It is the world’s second-largest vodka brand, and the world’s leading premium vodka. Before the acquisition Penod Richard had a limited vodka portfolio and was only among the world’s leading 20 vodka manufacturers. After the acquisition Pernod Ricard becomes the second-largest vodka producer, behind Diageo. Now Pernod has also a total annual volume of 91 million 9-litre cases of spirits (in 2009), up from 75 million before, putting it just behind Diageo’s total of 93 million. While packing he thinks of how hard the company must fight to keep and increase its market share for Absolut Vodka in the United States and other markets. In the last five years Absolut Vodka has increased its world market share, but can it continue? Absolut accounts for more than half of all imported vodka sales in the United States: it is the third-largest international premium spirit and is available in 130 markets. Among premium vodkas Absolut Vodka is no. 2 worldwide, after Smirnoff. When Ketil gets on the plane at Stockholm’s airport bound for New York, there are two things that worry him: Apparently the market share of Absolut Vodka in the United States has reached saturation point. Has V&S Absolut Spirits reached its maximum market share in that country or is it time for a frontal attack on the number one brand, Smirnoff? Until now, the market share for Absolut Vodka in Europe (especially in Eastern Europe) has been a lot smaller. This can be a problem, as 80 per cent of the world’s vodka is consumed in Russia and the other countries of Eastern Europe (see Table 1). Marketing of Pernod’s Absolut Vodka is primarily dealt with from the (subsidiary) head office in Stockholm and

via the subsidiary company The Absolut Spirits Company, Inc. in the United States. Worldwide marketing control is heavily centralized to guarantee consistency and focus, as well as responsibility for the content. In agreements with co-owned and independent distribution organizations, V&S has ensured that responsibility for marketing lies with V&S. On his way over the Atlantic Ketil thinks back on the story and adventure of Absolut Vodka.

The history of Absolut Vodka
The Swedish state-owned Vin & Sprit AB can justly call the launch of its Absolut Vodka an absolute success. Absolut Vodka is probably the biggest success story in the world of spirits. It has become an icon.

The shape of the bottle
The shape of the bottle dates back to the mid-eighteenth century, but is based on a traditional design: in the sixteenth century, Swedish pharmacies sold a clear, distilled liquid as a cure for ailments such as colic or even the plague. The custom was to ingest it by the spoonful, not by the shot glass. Rediscovered in an antique store in Stockholm by Gunnar Broman, of the now defunct advertising agency Carlsson & Broman, the clear medicine bottle has since been fine-tuned by Absolut’s team of shrewd marketers. The neck was lengthened, curves were adjusted and labels were replaced by printed typeface. To top it off, a medallion bearing the portrait of Lars Olsson Smith, known as ‘The King of Vodka’, was stamped on each bottle. In 1879, Smith successfully broke Stockholm’s spirit monopoly by distilling and marketing Absolut Rent Bränvin (that is, Absolute Pure Vodka). His tipple was the beginning of a dynasty. The current Absolut family consists (November 2008) of the following variants/flavours:...
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