CASE STUDY IN INTERNATIONAL MARKETING:

CASE STUDY IN INTERNATIONAL MARKETING: ABSOLUT VODKA - DEFENDING AND ATTACKING FOR A BETTER POSITION IN THE GLOBAL VODKA MARKET GROUP MEMBERS: ANE CECILIE EKERN, JULIEN GIL, KIRSTEN GLENNUNG AND MARIUS ANDRE SVEE SOLBERG

LARS OLSSON SMITH VIN & SPRIT AB Famous entrepreneur and father of Absolut Vodka Applied a new method of distillation using rectification 1879: Absolut Vodka was introduced in Sweden as "Absolut rent branvin" (Absolut Pure Vodka) Swedish government monopoly Vin & Sprit AB was created in 1917 The goal: take away the ability of privately controlled companies to profit from liquor 1970s: new positioning for the new Absolut Vodka 1979: Absolut launched internationally

THE ABSOLUT BOTTLE The brands most distinguishing feature Inspired by the classic Swedish medicin bottle of the 18th and 19th centuries. THE ABSOLUT MARKETING broadcast advertising of alcohol was not permitted The idea: Print ads featuring picture of the bottle with a witty, two-word caption Absolut artworks: commissioned over 300 painters and leading artists in all fields broke advertising records year after year the longest uninterrupted ad campaign with over 1500 separate ads discontinued in 2007 and replaced with another campaign called In an absolut world

1. HISTORY 2. COMPANY PROFILE 3. SWOT ANALYSIS 4. CASE 5. SUMMARY

1917 Vin & Sprit AB was founded 2008 V&S was acquired by Pernod Ricard 2011 The name was changed to The Absolut Company AB THE ABSOLUT COMPANY Accounts for half of Pernod s sales in USA Over 680 employees Over 150 markets Consists of 6 brands THE ABSOLUT VODKA BRAND 4th largest international spirit brand in the world The Premium vodka market leader Produced in Åhus, Sweden 100,000,000 litres sold every year

Premium category vodka Unique shape of the bottle The Absolut website Ice bars Variety of flavors Worldwide brand recognition Sponsorships Controversial marketing campaigns in the past have dented the image to some extent The dominant competitor Smirnoff has about 2.5 times bigger market share No longer as cool as it used to be Growth in existing markets o Increasing demand of alcoholic beverages in emerging countries Entering new markets o The FAB market Mature stage of the product life cycle à market volume is fairly stabilized Consumer shift from vodka to "brown spirits Consumer health concerns Increase in government taxes and regulation of alcohol

A. What was the main motive for Ricard Pernod s acquisition of V&S in 2008? B. Which alternative marketing strategies does V&S Absolut Spirits have to increase its market share for: o Absolut Vodka in the USA? o Absolut Vodka in Europe (including Eastern Europe)? o Absolut Vodka in other parts of the world? C. In which region of the world would you recommend V&S Absolut Spirits to allocate more marketing resources? D. Did Absolut Vodka have the right competences for achieving international success for its Absolut Cut? E. Should Absolut Vodka relaunch a mixer product in the global FAB market?

So, why Absolut? In 2008 Pernod Ricard bought Vin&Sprit AB for 8,34 billion dollars Main target of acquisition was Absolut Vodka Before acquisituin, PR was in the top 20 for vodka sales After acquiring Absolut, PR became number two in the world Market leader or among top 3 in many regions Excellent fit with existing portfolio Little to no cannibalisation of own products

North America: Absolut market share: 10,3 % Low volume and medium value in % of total vodka sales Brand is well known and established, even saturated Western Europe: Absolut market share: 3,3% Low volume and medium value in % of total vodka sales Brand is well known and established, even saturated Eastern Europe: Absolut market share: 1,3 % High volume and high value in % of total vodka sales Customers concerned with quality, many small competitors. Rest of the world: Absolut market share: between 2,4% and 10,9 % Very low volume and value in % of total vodka sales Negligible market share, butemerging middle class could represent a new and interesting target group. Source: adapted from case information 1. HISTORY 2. COMPANY ANALYSIS 3. SWOT ANALYSIS 4. CASE 5. SUMMARY

Marketing mix North America Western Europe Eastern Europe Rest of the world Product Standardization Standardization Standardization Standardization Price Super- premium category Super- premium category Super- premium category Super- premium category Place High intensity coverage High intensity coverage High intensity/selected coverage selective coverage Promotion High frequency marketing: Television and online advertising Product placement in movies etc and celebrity endorsements High frequency marketing Viral marketing based on brand awareness High reach and frequency in marketing cut through the noice of competitors. Mass marketing through TV and cinema Alternative 1: High reach marketing Reach out to as many customers as possible. Television/radio. Alternative 2:Focused marketing. Target upper middle class trendsetters. Ads in magazines.

Market Country North America Latin America Asia Pacific Eastern Europe Western Europe Vodka consumption per capita (liter/year) Inhabitants (million) Total vodka consumption (liter/million) Purchase power (USD dollar) USA 2,0 328 657 (2) 54 630 Canada 1,4 35 49 (9) 44 089 Brazil 0,3 200 60 (8) 15 838 Mexico 0,1 122 15 (11) 16 950 Argentina 0,1 41,5 5 (16) 18 600 Chile 0,3 18 5 (17) 22 346 China 0,2 1357 267 (4) 13 217 India 0,1 1252 127 (6) 5 708 Singapore 0,1 5,4 1 (19) 82 763 Russia 9,2 143,5 1320 (1) 25 636 Poland 7,3 38 277 (3) 24 882 Ukraine 5,3 45,5 241 (5) 8 666 Bulgaria 2,8 7,2 20 (10) 16 324 Slovakia 2,2 5,4 12 (12) 27 585 Ireland 1,8 6,4 12 (13) 47 804 Finland 1,7 5,4 9 (14) 39 755 UK 1,6 64 103 (7) 39 137 Austria 0,9 8,5 8 (15) 46 165 Norway 0,9 5 4 (18) 64 893

Western Europe and North America: Absolut market share: 10,3 % (WE) and 3,3 % (NA) Low volume and medium value in % of total vodka sales (2008) Market is at its saturationpoint Enforcement here would mean a direct waron market share with Smirnoff Eastern Europe: Absolut market share: 1,3 % High volume and high value in % of total vodka sales (2008) Highest vodka consumption in the world But consumers are loyalto local brands Latin American market: Absolut market share: 7 % Low volume and low value in % of total vodka sales (2008) BUT growing economies and growing middle class Willingness to pay for premium vodka in Brazil Asia Pacific: Absolut market share: 6 % Very low volume and value in % of total vodka sales (2008) The largest market (measuredby inhabitants) Growing alcohol consume in the middle class Consumers drink less in general, but high population Especially Brazil Especially China

Latin America à Brasil: The growing middle class has a huge potential They arewilling to pay the price The consume is increasing Vodka continues to present the highest growth within white spirits, posting an 8% increase in total volume sales in 2014 Already flavours made for brazil Possible bridge to other LA countries Asia Pacificà China: growing middle class Growing rate of female alcohol consumers Drink less pr capita, but huge population Expanding pub culture in urban areas + growing demand for premium products here as well Preferences for flavoured vodka vodka constitues less than 1% of spirits consumed, but its increasing

Wrong consumer segment o Targeted mature consumers o FAB drinks are popular among consumers within the 18-30 age group Unsuccesfull promotion o the TV-campaign «Cut the crap» failed o https://www.youtube.com/watch?v=7moldzhq7 1g Failed to satisfy the trend of individuality in consumption o Bottles look the same o 3 Absolut Cut flavours, but all with citrus taste

Growing consumption of RTD Predicted 19 % growth between 2015-2019 Competitors: Many small producers Biggest world market share: Diageo (smirnoff) 10% world wide

Absolut Cut in 2008 Absolut Cut in 2015 Target group Mature customers Consumers within the 18-30 age group Product Only citrus taste, low sugar content 7 % alcohol Boring design Focus on the most popular flavours of Absolut Vodka and make it sweeter Lower the alcohol content from 7 % to 4,7 % Make the bottle stand out à focus on individuality trend Promotion cut the crap campagin innovative product placement, e.g. use popular tv shows festivals partnerships with bars and clubs

A. The main motive for Ricard Pernod s acquisition of V&S in 2008 B. Which alternative marketing strategies does V&S Absolut Spirits have to increase its market share for: o in the USA? o in Europe (including Eastern Europe)? o in other parts of the world? C. In which region of the world would you recommend V&S Absolut Spirits to allocate more marketing resources? D. Did Absolut Vodka have the right competences for achieving international success for its Absolut Cut? E. Should Absolut Vodka relaunch a mixer product in the global FAB market?

Shimp, T. A. and Andrews, J.C. (2013). Advertising Promotion and Other Aspects of Integrated Marketing Communications (page 265). 9th edition. http://www.absolutad.com/absolut_about/history/facts/ http://www.theabsolutcompany.com/the- absolut- company http://absolutgraduates.com/en/brands/absolut/ http://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapi d=4455528 http://absolutgraduates.com/en/company/ http://pernod- ricard.com/525/brands/see- all- brands/strategic- brands/absolut- vodka http://www.thespiritsbusiness.com/2015/01/demand- rises- for- premium- spirits- in- latin- america/ http://www.vinexpo.com/en/news/news/vodka- asian- market/

http://www.reuters.com/article/2014/05/20/research- and- markets- idusnbw205923a+100+bsw20140520 http://www.business- standard.com/article/international/while- you- weren- t- looking- absolut- vodka- lost- its- cool- 115082900723_1.html http://www.authority7.com/absolut- vodka- marketing- analysis/ http://www.responsability.com/investing/en/1075/latin- American- Middle- class- purchasing- power- goes- from- strength- to- strength.htm?article=22395 http://blog.euromonitor.com/2014/05/from- the- bottom- of- the- pyramid- to- emerging- middle- classes- in- latin- america.html http://www.foodanddrinkeurope.com/products- Marketing/Next- generation- RTD- from- Vin- Sprit

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