ABSOLUT Vodka Brand - Case Study Example

? A CASE STUDY AND ANSWERS TO THE QUESTIONS A Case Study and Answers to the Questions Part Absolut Vodka Business This is a case study about Absolut Vodka, which is now trading as ‘The Absolut Company.’ Absolut Vodka entered the US market in 1979 with its brand known as premier vodka, which is one of the best-selling imported vodkas in the US (Mooney and Dool 2010, p.1). Since its entry into the US market, Absolut Vodka became a global brand icon, which draws international recognition across the globe (Mooney and Dool 2010, p.1). The Absolut Company produces Absolut Vodka in Ahus, Skane in southern Sweden (Mooney and Dool 2010, p.2). By 2005, Absolut Vodka was synonymous in the global market where it deals with premium vodka as the third largest spirits brand across the globe. The spirits that Absolut Vodka sells includes all distilled alcohol beverages (Mooney and Dool 2010, p.2). Over the years, the company recorded immense success in its line of business where it is now the world’s number one premium vodka brand. Absolut Vodka Product Category Ideally, product category defines the mode of organizing products in the store by the type of products on sale. Indeed, customers of Absolut Vodka find the products that they want to buy through the company’s product categories. Most specifically, Absolut Vodka product category includes flavored vodka products, which are vodkas infused with flavors like Vanilla, lemon, different types of berries or pepper (Mooney and Dool 2010, p.4). It also includes unflavored vodka and spirits, which includes all distilled alcohol beverages (Mooney and Dool 2010, p.2). More so, the product category of Absolut Vodka entails pure vodka “Absolut Renat Brannvin” (Mooney and Dool 2010, p.2). Absolut Vodka Type of Product The Absolut Company deals with products in the global especially the US market (Mooney and Dool 2010, p. 2). Most assuredly, Absolut Company deals with spirits and premium vodka. Business-to-business (B2B), Durable Ideally, Business-to-business (B2B) defines commercial transactions between enterprises such as between a manufacturer and a distributor or between a distributor and a retailer. Absolut Vodka adopts a Business-to-business scenario. Notably, the Absolut Company, which manufactures the Absolut Vodka brands, has been selling its products to the distributor through Future Brands since ABSOLUT brand separated from Seagram and became ABSOLUT Spirits Company (ASCI) in the U.S (Mooney and Dool 2010, p. 7). Future Brands is an association between ASCI and Beam Global, which is a larger spirits manufacturer (Mooney and Dool 2010, p. 7). Moreover, Absolut Vodka sells durable products, which include premium vodka, and all distilled alcohol beverages. Water and winter wheat produces Absolut premium Vodka through a continuous distillation process that guarantees a durable and high quality product (Mooney and Dool 2010, p. 8). Absolut Vodka Product Stage There are four stages in a product life cycle, which include the introduction stage, growth stage, maturity stage, and decline stage where each stage has distinct characteristics. Notably, Absolut Vodka is in the maturity stage where there is saturation in the distribution of premium vodka brand in the U.S market. Indeed, various distribution channels exist in the market where premium vodka brand enjoys market acceptance and the growth of Absolut Vodka is on a decline. Indeed, after 2004, the market share of Absolut premium vodka fell after 2004 despite its international recognition Mooney and Dool 2010, p. 9). This is because of the introduction of many vodka brands in the US market. In fact, despite its success, Absolut premium vodka is experiencing significant pressure from significant vodka brands like Grey Goose, Smirnoff, Ketel One, and Belvedere which overcrowd the market since 2006 (Mooney and Dool 2010, p. 1-4). Because of the competition pressure, Absolut Vodka has been trying to regain its market position since 2006 by launching a massive advertising campaign to woo young drinkers (Mooney and Dool 2010, p. 6-7). Indeed, the company launched its ad campaign in the television in 2006 and continued their association with celebrity musician, Lenny Kravitz who was to interpret the Absolut bottle (Mooney and Dool 2010, p. 6-7). BCG Portfolio Analysis Notably, Absolut Vodka is part of a portfolio. A business portfolio refers to a collection of products and services that Absolut Vodka provides in the market. Business portfolio analysis is significant in Absolut Vodka, as it will serve as a strategic plan that will categorize Absolut Vodka products with respect to market competition and sales growth rate. This will help in assessing the company’s competitive position and market performance. Ideally, business portfolio analysis will help the management of Absolut Vodka to optimize their investments and subsequently enhance effective allocation of resources towards regaining and asserting its market position in the overcrowded market. This relates to the BCG model, which analyses the company’s growth share in the market. Where Absolut Vodka is facing immense competition from significant vodka companies, a BCG analysis is essential, as it will define Absolut Vodka’s brand portfolio. Ideally, the BCG product portfolio analysis will help the management to establish long-term strategic planning that will enhance the consideration of growth opportunities and the most effective investments for the company. Geographic Scope and International or Cross Cultural Issues The production of Absolut Vodka takes place in Ahus, Skane in southern Sweden and trades in Europe especially in US. However, Absolut Vodka enjoys international recognition where it offers one of the world’s premier vodka brands. Indeed, Absolut premium vodka is a global brand icon that attracts recognition in various countries across the globe. Notably, until recently, the Swedish government owned the Absolut premium vodka (Mooney and Dool 2010, p. 3). Moreover, international or cross-cultural issues influence the business aspect of Absolut premium vodka. For instance, many global markets are now adopting the cocktail culture, which leads to reduced sales of vodka in Eastern Europe since the popularity of vodkas is on a decline. Conversely, in Western Europe, the popularity of vodkas is still high as the culture of mixing strong brands persists. Initially, there were cultural and international concerns on whether Absolut vodka, a Swedish vodka can sell in US market which was overcrowded with Russian-sounding brands (Mooney and Dool 2010, p. 2). Competition The introduction of many vodka brands in the US market brought significant competitors in the market. Indeed, despite its success, Absolut premium vodka is experiencing significant pressure from significant vodka brands like Grey Goose, Smirnoff, Ketel One, and Belvedere which overcrowd the market since 2006 (Mooney and Dool 2010, p. 1-4). These vodka brands offer competition in terms of price, product quality, taste, and purity. Positioning and Pricing Of the Brand and Its Competitors The US experienced an entry of many vodka brands, which led to overcrowding. The new brands had a good taste and were purer and hence the consumers were ready to pay high prices for them. Grey Goose, a super-premium vodka brand charged higher process than ABSOLUT Vodka thus creating a “super premium vodka” market (Mooney and Dool 2010, p. 1). This led to the loss of loyalty, brand health measures, and image at ABSOLUT (Mooney and Dool 2010, p. 1). In 2004, the company assessed their business and planned on how to survive in the new competitive market. ABSOLUT created higher point products by establishing a premium vodka segment of $ 15-24 per bottle (Mooney and Dool 2010, p. 3). However, ABSOLUT faced immense competition on the premium price category where small brands like Skyy Vodka and Ketel One joined the same price category (Mooney and Dool 2010, p. 3). Smirnoff also offered immense competition through its low price category. Nevertheless, the most significant competition came from above where Grey Goose, & Belvedere, creates a super-premium market in form of a higher price category of above $ 25 per bottle (Mooney and Dool 2010, p. 3). This competition category recorded immense success. However, ABSOLUT Vodka created an exclusive image through advertising and packaging design, which made it an iconic bland across the globe. PEST Analysis PEST analysis involves market analysis on political, economic, social, and technological factors that relate to any company including ABSOLUT Vodka with relation to the US vodka market. The political factors that relate to ABSOLUT Vodka in the US vodka market include the increasing regulations from national governments (Mooney and Dool 2010, p. 7-8). The US government is also contemplating how to curb promotional options available to vodka companies like ABSOLUT Vodka. Moreover, the government is also thinking on how to instill heavier excise duties on vodka brands. The economic factors that relate to ABSOLUT Vodka in the US vodka market include the rise of the cocktail culture that disregards vodkas and the increasing demand for fashionable and prestigious brands. The demand for Western premium alcoholic drinks rather than local alternatives and the launching of own brand equivalents to gain market advantage are economic factors affecting ABSOLUT Vodka in the US vodka market. Furthermore, the number of employees, the stable US growth rate, and increasing market competition influence ABSOLUT Vodka in the US vodka market (Mooney and Dool 2010, p. 2-8). Social factors include the new trend where more customers are adopting the cocktail culture as others adopt the culture of mixing strong brands (Mooney and Dool 2010, p. 2). More so, some customers are now in love with fashionable and prestigious brands. Ultimately, technological factors that relate to ABSOLUT Vodka in the US vodka market include the use of continuous distillation process to manufacture ABSOLUT Vodka and the batch distillation process used by its competitors (Mooney and Dool 2010, p. 8). Moreover, we have the technologies used in advertising where ABSOLUT used on-premise promotions as the competitors used cable commercials, Websites, and Online marketing (Mooney and Dool 2010, p 7). Market Analysis and Trends In the presence of the vodka competition, ABSOLUT Vodka has maintained its number position in the vodka market although its competitor’s sales were growing at a much greater rate than the ABSOLUT’s 4 % annual growth (Mooney and Dool 2010, p. 8). ABSOLUT’s flavored vodka is on a downward trend in the competitive vodka market (Mooney and Dool 2010, p 5-6). Notably, ABSOLUT Vodka was facing a business challenge as it sought to regain its market position and image by engaging in an advertising campaign to woo young drinkers between 21 and 29 years (Mooney and Dool 2010, p. 10). Currently, ABSOLUT Vodka is seeking a long-term plan to survive in the competitive vodka market. Consumer Behaviour Notably, many consumers are now adopting the cocktail culture as others adopt the culture of mixing strong brands (Mooney and Dool 2010, p. 2). Furthermore, consumers in the emerging vodka market are seeking Western premium alcoholic drinks rather than local alternatives. More so, subject to the rising affluence, financial capacity, and aspirations in the vodka market, many customers are seeking to buy prestige vodka brands. Indeed, the demand for fashionable goods is on an increase as the consumers migrate to the most fashionable drinks. At the same time, more consumers are switching from Russian-influenced offerings like Stolichnaya (Mooney and Dool 2010, p. 3).Notably, the introduction of new vodka brands led to new consumers in the vodka market leading to an increase in spirit consumption over wine and beer (Mooney and Dool 2010, p. 1). However, customers are now becoming more health conscious and thus the demand for strong alcoholic drinks such as spirits is seemingly declining as consumers migrate to less alcoholic drinks such as beer or wine. Absolut Vodka Involvement The company manifests high involvement in the vodka market. Indeed, Absolut Vodka is a dominant player in the global market where it is one of the prominent world’s premier vodka brands. The company has been in the market since its entry in the US market in 1979 (Mooney and Dool 2010, p. 1). The Absolut Company is a major player in the manufacturing, distribution, marketing, and advertising segments in the vodka market. More so, the company competes with international companies and its presence in the market defines the economy and market trends in the US vodka market. Most of all, the company has been in operation for many years where it is now an iconic brand across the globe (Mooney and Dool 2010, p. 1). Part 2 Absolut Vodka Positioning, Main Issues, and Problems ABSOLUT Vodka has maintained its number position in the vodka market although its competitor’s sales were growing at a much greater rate than the ABSOLUT’s 4 % annual growth (Mooney and Dool 2010, p. 8). ABSOLUT’s flavored vodka is on a downward trend in the competitive vodka market where two of the six flavored brands are in the top ten while four were in the top twenty-four flavored vodkas (Mooney and Dool 2010, p. 9). Indeed, all its flavors have been on a decline since 2000. Moreover, the company is experiencing significant competition from other vodka companies like Grey Goose, Smirnoff, Ketel One, and Belvedere. Notably, the company’s market share has been on a decline for a long time and the company is now facing the problem on how to recapture its image as a dominant premium product especially among the youthful consumers aged between 21 and 29 years (Mooney and Dool 2010, p. 10). The company is having issues with managing its flavored vodka offerings (Mooney and Dool 2010, p. 10). Additionally, ABSOLUT Vodka is having problems in deciding whether to introduce super-premium vodka to compete with high-end competitors like Grey Goose (Mooney and Dool 2010, p. 10). The company is also not sure on whether to change the bottle advertising campaign and thus it is seeking to establish a long-term plan to address these challenges. SWOT Analysis for ABSOLUT Vodka SWOT analysis of the ABSOLUT Vodka Company will entail the strengths, weaknesses, opportunities, and threats that relate to the operations of this company in the US Vodka market. The SWOT analysis will define the actual position of ABSOLUT Vodka Company in the competitive vodka market. Strengths The company has a global presence where it is one of the prominent world’s premium vodka brands. Moreover, the company has been in operation for many years where it is one of the best-sold vodkas in the world, because of its good image (Mooney and Dool 2010, p. 1). The company deals with international companies like TBWA advertising agency to advertise its products across the globe (Mooney and Dool 2010, p. 6). This enhances its image and market presence. The products of the company are homogenous and manifest high quality, purity, and good taste (Mooney and Dool 2010, p. 8). ABSOLUT premium brand offers a unique taste that derives competitive advantage. Indeed, all the production activities take place in Ahus, Sweden where the company controls all stages of production using local raw materials in central place. The company uses the continuous distillation process through one of the most modern and energy-efficient distilleries in the world (Mooney and Dool 2010, p. 8). The company produces vodkas with different flavors, which cater for the tastes and drinking needs of all consumers (Mooney and Dool 2010, p. 9). Indeed, ABSOLUT vodka has more than 20 different flavors (Mooney and Dool 2010, p. 9). The company markets its products in the internet, which reaches a larger audience across the globe. Indeed, the Absolut website and Facebook page improve the premium brand loyalty and its market presence. ABSOLUT vodka has a unique bottle whose shape attracts international recognition. The company collaborates with great companies like Future Brands, an association between ASCI and Beam Global, which is a larger spirits manufacturer (Mooney and Dool 2010, p. 7). The company also participates in sponsorships and major programs. The company collaborates with celebrities like Lenny Kravitz to market its products. The company has motivated employees, stable management, and operates in a developed environment (Mooney and Dool 2010, p. 8). Weaknesses The ABSOLUT Vodka Company has a low annual growth rate compared to other vodka companies in the US vodka market. The company engaged in controversial marketing campaigns that dented the image of the company (Mooney and Dool 2010, p 7). More so, ABSOLUT Vodka Company has large debts and faces huge challenges in trying to restore its image (Mooney and Dool 2010, p. 10). At the same time, the management takes a long time to respond to problems facing the company (Mooney and Dool 2010, p. 5-8). Opportunities The company operates in an international front whose capacity supersedes the US vodka market. At the same time, there is economic growth in US and hence most consumers have a greater purchasing power and demands for fashionable and prestigious brands. The company is able to grow since it operates in a country with a stable economic growth. More so, there are fewer trade barriers and regulations. Threats The company is facing immense competition from significant companies like Grey Goose, Smirnoff, Ketel One, and Belvedere (Mooney and Dool 2010, p. 1-4). Additionally, customers are now becoming more health conscious and thus the demand for strong alcoholic drinks such as spirits is seemingly declining as consumers migrate to less alcoholic drinks such as beer or wine (Mooney and Dool 2010, p. 1). The rise in labor, distribution, and marketing costs threatens the success of the company is on the increase. The government is instituting strict advertising regulations and the increase in excise duty will limit the progress of ABSOLUT Vodka Company. Future of ABSOLUT Vodka Company The company wants to recapture its image as a dominant premium product especially among the youthful consumers aged between 21 and 29 years (Mooney and Dool 2010, p. 10). The company is seeking to establish a mechanism of managing its flavored vodka offerings. It is also looking for the best ways to compete with its significant competitors like Grey Goose on a higher premium (Mooney and Dool 2010, p. 10). Additionally, ABSOLUT Vodka Company seeks to redefine its controversial marketing campaigns. As a result, the company is hoping to derive a long-term strategy to address its challenges in the future (Mooney and Dool 2010, p. 10). Strategic Options The company has an option to introduce super-premium vodka to compete with Grey Goose. It can also change its bottle advertising campaign to enhance its marketing strategy. Furthermore, the company can also change the flavor of its vodka brands. Recommendations The ABSOLUT Vodka Company should focus on expanding its market since the US market is almost saturated. The company should also devise a long-term strategy to address the competition, marketing, and distribution problems that limit the success of the company. Ultimately, the company should embrace technology in advertising and manufacturing its products. Works Cited Mooney, A, and Dool, R 2010, ‘ABSOLUT in 2004: the Iconic ABSOLUT Vodka Brand Faces Unprecedented Competition,’ Case Research Journal, vol. 29, no. 3, pp. 1-11. Read More