Absolut Vodka by Pernod Ricard focuses on establishing brand loyalty in a crowded vodka marketplace. Absolut targets young innovators aged 25-35 and positions itself as an aspirational premium brand. Its iconic bottle design and innovative print ads featuring artists like Andy Warhol are major points of differentiation. Absolut also launches flavored extensions to encourage sampling and appeal to variety-seeking consumers. Through non-traditional marketing like sponsorships and brand extensions, Absolut navigates regulations banning alcohol advertising to build its image and loyalty.

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2. Absolut Vodka by Pernod Ricard- Establishing Brand Loyalty
ABSTRACT:
With several hundred different choices of flavoured/non-flavoured, domestic/imported, and
super-/ultra-premium Vodkas out in the marketplace, the need to develop strong brand loyalty
becomes vital to the survival of these brands. The focus of this paper is to evaluate the marketing
strategies of Absolut vodka, a product of Pernod Ricard. Our analysis on Absolut vodka will
concentrate on possible means to develop high brand commitment towards Absolut.
INTRODUCTION
Vodka accounts for nearly one-quarter of all distilled spirit sales, and continues to show growth
despite the assertion by many marketers that it is in the mature phase of its life cycle. Vodka can be
classified into 3 groups: premium, super premium and ultra premium. Standard vodkas all have one
element in common: they all are 80-100 proof, or have 40-50% alcoholic content by volume . The
voluntary ban of hard liquor advertisements on television has made mass marketing difficult for
vodka companies. As a result, vodka companies have sought innovative avenues of marketing in
order to effectively promote their products. One of the world’s most successful vodka brands is
Absolut by Pernod Ricard.
ABOUT PERNOD RICARD
Pernod Ricard holds one of the most comprehensive and premium portfolios in the industry. Some
of their key products include ABSOLUT, Ricard anise and Scotch whiskies led by Chivas Regal,
Ballantine’s, The Glenlivet, Havana Club rum, Beefeater gin, Kahlúa and Malibu liqueurs, Jacob’s
Creek, Brancott and Graffigna wines. Pernod Ricard has made up scaling its brands and creating
more premium categories its strategic priority. The Pernod Ricard organisation is made up of Brand
Companies and Market Companies representing more than 18,000 employees in 70 countries.
PERNOD RICARD IN INDIA
For Pernod Ricard, as the world’s second-largest spirits maker, India has now emerged as the fifthlargest market for the company by value and profit. The country could soon move past Spain to
become the fourth-largest after the US, China and France. The French giant's domestic operation,
which had volume sales of just 1.5 million cases in 2001, is reporting annual volume sales of over 20
million cases almost a decade after starting operations in India. The robust growth of Pernod Ricard
in the past one decade has boosted the confidence of international spirits firms that have struggled
to shake off Vijay Mallya-led United Spirits' dominance in the domestic market
Three local whiskies- Royal Stag (10.6), Imperial Blue (7) and Blender's Pride (2.6)-are Pernod
Ricard's mainstay. International blended scotch whiskies Chivas Regal 12-Year-Old, Ballantine's and
Absolut Vodka, besides locally bottled scotch whisky 100 Pipers, are the other key products for
Pernod Ricard India.
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3. With 20 million cases now, Pernod Ricard is just one-sixth of its domestic leader United Spirits by
volume but reported a higher profit before tax in FY10. The local unit's operating margin, estimated
at 24%, is way ahead of its domestic rivals USL and Radico Khaitan, as it continues to build
distribution clout focused on the profitable segments of India's spirits market
EXTERNAL ENVIROMENT of PERNOD RICARD
Threat of competition – Moderate and growing
United Breweries is the market leader with 43% market share ( volumes) with second best Pernod
Ricard India Pvt Ltd (previously Seagram India Ltd), which had an 8% volume share of spirits in 2010.
wine in the mid-to-high price range compete on the basis of quality and branding.The quality with
respect to the taste of the wine is a basis of competition for individual brands, winemakers and
enterprises. By volume, industry sales are dominated by bulk wine, which compete primarily on the
basis of price. Given the importance of price, economies of scale and scope, the size of the wine
manufacturing enterprise plays an increasingly important role in competition.
This is a competitive industry in which companies are always fiercely competing for brand
recognition and awareness.The best way to gain a competitive advantage is through brand
awareness and appeal, via marketing. Pernod Ricard has exemplified this and has positioned
itself well by marketing and developing its diverse set of brands in many markets to capitalize on
fluctuations in consumers preferences’. Threat of competition therefore is present, but not
overbearing or interfering with Pernod Ricard’s growth strategies.
Threat of new entrants – Low
The spirits industry is dominated by those companies which posses brands with high brand
equity and market presence. Brand equity and market presence require very capital intensive
oriented marketing campaigns to achieve, thus eliminating the threat of new entrants to a great
extent. Although the industry has moderate operating capital requirements, crores must be
spent on frequent marketing-related projects. The alcoholic beverage industry is highly
concentrated with only a few well-positioned companies dominating market share (there are
numerous companies in the industry, but the majority of market share is controlled by only a
few). To maintain financial stability, an industry player would do well to diversify by broadening
their geographical and categorical scope, thereby mitigating currency risk and regional financial
downturns. Therefore, companies with broad reach and economies of scale not only deter new
entrants, but they are better-positioned to acquire smaller players and avoid takeovers
themselves. The industry is also highly regulated and highly taxed due to the risk profile of the
product. All of these factors contribute to what has to be categorized as a low threat of new
entrants industry.
Threat of substitutes – Low
The alcohol industry as a whole has almost no substitutes, so the threat of substitutes should be
categorized as low. However, the fact that 73% of Ricard’s revenue comes from spirits suggests
that other alcoholic beverages, especially ones lower on the pricing scale, could be substitutes.
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4. In particular, since they are primarily premium spirits producers, lower end spirits could outgain
the premium category in sales volume. Furthermore, consumers will most likely not substitute
premium and midstream spirits for lower-end brands due to the importance of brand
recognition. Finally, the alcoholic beverage industry is generally characterized as selling a
primarily inelastic product, so the industry should not expect consumers to begin favouring nonalcoholic beverages. Therefore, threat of substitutes are at a low level.
Power of suppliers – Low
Input costs to alcohol-producing companies come from agricultural products (wheat, grain,
grapes, etc.). Farm suppliers are geographically-diverse with much competition, their prices
dictated by supply and demand. Ultimately, suppliers have hardly any pricing power. Rising
commodity prices certainly hurt spirits producers’ margins, but the recent relaxation in such
prices have eased such concerns. Additionally, many spirits have to be fermented as much as a
decade in advance of end user consumption. This time lapse delays any immediate financial
stress and allows for smoothing across financial statements. As a hedge, companies can buy
more when agricultural prices are low, and buy less when agricultural prices are high. Due to
such opportunities and the limited influence of agricultural producers, the power of suppliers is
low.
Power of buyer’s – Moderate
Similar to the threat of substitutes, aggregate alcoholic beverage demand is mostly a staple
product and fairly inelastic relative to its price. The power of buyers to set prices is low and
producers such as Pernod Ricard certainly have pricing power. However, if prices rise in one
beverage category (beer, wine, spirits), it would not be unusual to see consumers shift their
preference to a less expensive alcoholic beverage category. Additionally, since the company’s
immediate customers are primarily wholesalers, they may have to rely on promotional
discounts and favourable payment terms in order to maintain steady revenues. While many
consumers’ preference will not change, the frequency with which they purchase spirits could
decline. Premium-plus brands suffer most from decreased consumption at restaurants and bars,
where consumers opt for cheaper brands, or they frequent such venues less and less. Still,
Pernod Ricard products have among the highest brand equity, and their premium brand pricing
strategy borders midstream, or average, prices. Thus, there is only moderate concern in the
current economic downturn, and the power of buyers remains as such.
PEST ANALYSIS of PERNOD RICARD
Political/Legal Environment
The Indian Constitution: Promoting prohibition of alcohol consumption- In Indian constitution
under Section 47 it is written that “the State shall endeavour to bring about prohibition of the
consumption except for medicinal purposes of intoxicating drinks and of drugs which are
injurious to health.
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5. State authority over alcohol production, distribution and sale – Under Section 47 of the
Directive principles of the Indian Constitution; selling, distribution and production of alcoholic
beverages belongs to state governments. It means in some of the states PernodRicard cannot
sell or distribute if the State does not allows. Also, the company has to target each States
differently depending on the laws in the State.
Shaky TV Commercial Ban – Alcohol companies in India cannot advertise directly about alcohol
consumption in India. So, the companies have to advertise indirectly which can result in
miscommunication to the customers about the product.
Concern of drunk driving – Rise in drunk driving numbers recently has forced the government to
enforce stricter laws regarding alcohol consumption. A frequent check by the police for drunk
drivers has made the consumers drink judiciously.
Economic Environment
Rising Indian Tiger – India is a trillion dollar economy with a large population of 1.1 billion
people. Indian economy is expanding and the average personal wealth is increasing. The
country has the highest GDP growth rate among the developing countries with a large pool of
youth. Along with this overall progress and increase in economic activity, the spirit market in
India is on the rise. Consumption, product availability, disposable income, and education are all
up. This is a good sign for PernodRicard as it provides a large market which is growing
economically.
International Trade Liberalization – Increasingly countries around the world have become more
economically interdependent. India is one of the favourite destinations in the emerging markets
for the foreign companies. As more foreign professionals are coming to India they are bringing
the culture and knowledge of the drinks also. Also many of the Indians have international
experiences and lifestyles (either through studies, travel or work) that they have brought back to
the country. These changing tastes and preferences, coupled with high disposable income
provides an opportunity for a foreign company like PernodRicard in India.
Social Environment
Changing social values –In the past, according to traditional Indian values and culture
consumption of alcohol was strictly not encouraged. But in modern times with the world
becoming a global village, this trend is slowly changing. Nowadays socially drinking is becoming
acceptable. The presence and mixture of foreign cultures is attributing to this factor.
Evolution of family structure – The traditional joint family structure is becoming less noticeable
in India. Youth are becoming more autonomous and they take active participation in family
decisions. Many women are more independent economically. This change in the family structure
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6. KEY PRODUCT LINES
Strategic groups:
The Various strategic groups within Pernod Ricard are
Global Icons
Premium spirit brands
Prestige spirits and champagne brands
Premium wine brand
Key local brands
The 2 brands viz. Chivas Regal and Absolut have been identified as ‘Global Icons’ and hence are of
highest priority in the brand building across all markets.
The next level contains the 7 Strategic Premium Spirits Brands and the 5 Strategic Prestige
Champagne Brands. These 12 brands are tagged as brands with international standing.
The lowest level of the pyramid is formed by the 18 Key Local Brands. These brands are the brands
that are given first rate standing in the distribution networks thus enabling Pernod Ricard to devote
more time and energy to building the global brands viz. Chivas Regal and Absolut. These 18 brands
are local leaders in their markets.
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8. PRODUCT IN REVIEW: ABSOLUT VODKA
ABOUT ABSOLUT VODKA
Absolut Vodka is a brand of vodka, produced in southern Sweden owned by the French firm Pernod
Ricard since July. Absolut is the third largest brand of alcoholic spirits in the world
after Bacardi and Smirnoff, and is sold in 126 countries
ABSOLUT POSITIONING AND SEGMENTATION
FRAME OF REFERENCE OF ABSOLUT
Target
Targets the profile of the target consumers for Absolut has been the same the world over. The
Swede vodka brand talks to young people in the age bracket of 25-35 years. These young people are
the trend setting lot who have a high average disposable income.
Absolut’s presence in events related to arts, fashion and music is a step to catch its consumers in the
areas of their interest and aligning the brand’s image with that of other activities that this consumer
segment indulges in.
VALS model: Innovators
Taking a cue from the VALS model, the target audience for Absolut can be described as innovators –
people who are successful, active, and like to take charge of their life. These people, through their
choice of product, often reflect cultivated tastes for relatively upscale and niche oriented products
and services.
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9. What is the nature of competition?
The nature of competition is the entire gambit of alcoholic beverages segment. The brand is not only
concerned about the presence of other vodka brands in the fray, it also has to handle the threat
from substitute products.
Category convention and image:
-
-
-
-
The world economy is expanding and the average personal wealth is increasing worldwide.
With the booming economy and increasing consumption capability, the consumers are
increasingly becoming heavy spenders, seeking better quality and experience.
Association with these brands works as a statement of the consumer’s lifestyle. Most of the
alcoholic beverages are fighting for the mind space of consumers by projecting an
aspirational brand appeal. However, in the process, the marketplace becomes extremely
crowded.
A crowded marketplace strife with too many close competitors.
High customer loyalty for vodka, but loyalty is low as far as brands are concerned. It can
easily be seen that consumers for vodka prefer the type of drink, but fail to champion a
brand while choosing a drink.
A non-conducive environment for marketing, as the government does not allow for
marketing of these products. In India there is a blanket ban on advertising of alcoholic
beverage brands, therefore most of these brands resort to sponsorships and ‘surrogate
marketing’.
Points of Parity:
-
In a regulated market like India, most of the brands take the route of advertising through
music and other forms of entertainment.
Points of Difference:
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-
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One of the biggest points of difference for Absolut, is the presence of Vodka in a medicine
bottle. Absolut’s packaging has been a major differentiator for the brand and it is one of
those points of difference which has been hard to dilute by the other brands.
Instead of going through the traditional way of surrogate advertising, the brand is known to
have built associations.
Many of the Vodka companies try and keep a low cost positioning, Absolut does not follow
the same rule and has positioned itself as a aspirational product carrying a premium price
tag.
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10. MARKETING STRATEGIES OF ABSOLUT
Although Absolut has primarily cornered the print ad market with their innovative approach to
“marketing as art”. The global brand has produced some of the finest and impacting ads representing their
proprietary bottle design.Some of the various ways absolut and its competitors have reached out to its
target are as below. Absolut, one of the manufacturer’s under analysis, has created the seventh
most successful marketing campaign in the 21st century, according to Advertising Age The print ads
used taglines like “Absolut Perfection” and had respected artists (like Andy Warhol and Keith Haring)
creatively interpret Absolut’s medicine bottle
Brand Extensions
The appeal of flavored vodkas is definitely adding considerable recognition to the family’s anchor
brand name. Absolut has started experimenting with flavours like raspberry, ruby red, pears and
many more to encourage sampling. The consideration of these “repertoire drinkers” or those who
enjoy many different types of alcohol but don’t decide what to drink until the last minute, is the
focus of their strategy. A spirits friendly environment, will encourage bars and to promote the
appeal of these flavored alcoholic beverages.
Mass Marketing Mediums
Absolut Vodka has always focused on Print innovation as a medium to target the masses. At the
focal point of their communication is their legendary medicine bottle. Absolut has introduced the
Absolut blank campaign throughout the world.
Absolut Blank:
Absolut Vodka has initiated ABSOLUT BLANK, a global initiative which is made up of 20 artist
collaborations, films, print and outdoor ads, and events aimed to inspire creativity.
In ABSOLUT BLANK, ABSOLUT has converted its iconic bottle into a blank canvas to inspire artists
throughout the world to fill it with creativity. Artist collaborators from a variety of disciplines
converted the pure white canvas into exceptional pieces of art. The result depicts how artists and
creativity are inspired through ABSOLUT
Sponsorship of Lifestyle Events
Brand managers of Absolut strategically create cross-promotional activities in order to establish a
subconscious association with regards to a specific lifestyle. Absolut aims to create an association in
the minds of the consumer that vodka is indicative of a fashion accessory. Absolut has always been
associated with fashion due to its continuous sponsorship of key Fashion Shows in New York City. A
recent cross-promotion with Revlon emphasizes this emphatically. In their Absolutely Fabulous Lip
Cream campaign, Revlon hosted a series of upscale parties in order to promote a new line of lip
colors. Using Absolut to create cocktails entitled “Absolut Temptress” and “Absolut Vixen” reflected
a marketing program that synergetically combined elements of product, indulgence and fashion
(Bittar, 2001). Vodka by definition is not a commodity product, but rather is representative of luxury
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11. items in which consumers pull the product. This notion of global standardization of a product serves
these vodka manufacturers well around the world.
Websites
The Absolut website is very slick and directed at the youth segment of this market. Absolut’s website
includes the aforementioned pseudo motion picture promos. A unique feature on the website
directly connecting to the drinker is being executed called “drinkspiration”. Confused drinkers can
browse through a wide variety of cocktail options on their iPhone or iPad.
THE PROBLEM: ESTABLISHING BRAND LOYALTY
Vodka drinkers are traditionally known to be shift-loyals or wandering customers and they showcase
a very low degree of brand loyalty unlike scotch and whiskey drinkers. Since much of vodka’s brand
loyalty is driven by fads and perception what are the key decisions that brand managers at Pernod
Ricard will have to take to influence and acquire loyal customers.
SUGGESTED SOLUTION
Health and Energy- Based vodkas
In order to maintain its exiting dominance, vodka companies must persevere in further fragmenting
the market in order to meet the needs of all of its consumers and build loyalty. There are visible gaps
where these focuses are not being addressed. More importantly, defining new niche segments, like
Health and Energy-based vodkas, creates segments where customers can be highly loyal to the
brand
Vodka is known as a startup drink and as the trend would follow drinkers would gradually shift to
another spirit eg. Scotch or whiskey. This trend needs to be reversed and a connection targeted to a
deeper level of the individual needs to be developed.
Targeting the younger generation
Absolut has utilized various positioning strategies to get people to drink absolute and commit to the
same brand. As the world population is growing, young consumers are considered the major
segment for all the alcoholic companies. The young generation tends to be more independent in
valuing the benefits of product consumption. Since there is a growing number of younger drinkers,
Absolut needs to utilize this to their benefit and build brand loyalty at the initial stage as vodka is
considered as a startup drink and it is easier to influence the fads and perception of the younger
generation. Most marketing programs have a definitive life cycle, and it would be prudent for
Absolut to be proactive in developing strategies that concentrate on positively influencing the fads
and perception of the targeted segment.
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12. Absolut ‘Connect’
Customising drinks that shall connect the consumer to his childhood roots or his esteem needs by a
unique proposition called “Absolut Connect”. Custom drinks that shall connect to a particular
attribute of the consumers delight need. This shall ensure high brand loyalty. This shall be divided
into
(a) Absolut “LOCATIONS” and (b) Absolut “CARS”. Locations and Cars are two factors that can
define a particular person in society
(1 )Absolut “LOCATIONS”:
Eg. ABSOLUT GOA would have goan drinkers all over the world with a high degree of affinity and
loyalty for the brand due to the deep connection with the name.
(2) Absolut “CARS”:
ABSOLUT MERCEDES would have Mercedes lovers and car lovers developing a high degree of loyalty
to the brand
Custom menus for different geographic areas/cars should ensure sampling of the same. Involving
the general public to send in their suggestion and having them involved with the drink shall ensure
positive word of mouth and shall generate goodwill amongst desired segments
CONCLUSION
Vodka has entered the mature stage of the product life cycle. It is hence necessary for Absolut to
define new niche segments like Health and Energy-based vodkas and create segments where these
weaknesses in coverage can be minimize.
Absolut must persevere to target the younger generation of the population and formulate strategies
that will connect them to their grassroot delight needs. The basic philosophy for the brand has been
consistent throughout decades.
Absolut still maintains the same business concept it held in the past: To offer the consumers a
Swedish produced vodka of highest quality with high level of communication at a premium price. But
this segment needs to be further segmented and inorder to pull customers from other loyal
segments like scotch and whiskey. Absolut should influence the fads and perception of this segment
at a deeper level via innovative activities like Absolut “Connect”.
This perception change strategy also intends to increase the proportion of vodka drinkers by
converting current non-drinkers of their products
Brand loyalty can also increase the amount of vodka consumed by the average consumers by
increasing the drinking frequency or developing varied ways to easily access to the products.
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