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3- Account Details 4- The Organisation 5 - Macro Contextual Analysis 8- Industry and Competitive Analysis 16- Business Factors Relating to Brand 24- Internal Analysis 30- Internal review of Customer segmentation 33- Advertising and Promotional Review 34- Recommendations for Future Activity 36- Creative Brief
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Account Details
Company Information Head Office Website Phone Fax Sector Holding Company Pernod Ricard Related Companies V &S Group (Vintage & Spirit) Background & History The name "Absolut" was introduced in 1879 by the entrepreneur Lars Olsson Smith. Smith introduced fractional distillation that produces liquor without fusel alcohol in Sweden. In 1917 the Swedish government monopolized the alcohol industry in Sweden. Vodka was then sold nationwide under the name "Absolut Renat Brnnvin". The name was later on cropped to Absolut vodka in the year 1979. Absolut is the third largest brand of alcoholic spirits in the world after Bacardi and Smirnoff, and is sold in 126 countries. ABSOLUT used to belong to V&S Absolut Spirits within V&S Group which was owned by the Swedish Government. The Government decided to sell V&S Group to Pernod Ricard and the closing of the deal was July 24, 2008. The company is currently owned by Pernod Ricard Holding Company. Stockholm, Sweden www.absolut.com +46 8 744 70 00 +46 8 744 70 80 Alcoholic drinks manufacturing/distribution
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The Organisation
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A further important aspect of the economy that affects the business is the general price levels of the commodities that also affect the sales of the business. Costs of raw materials, paying power of people, cost of production and finally, cost of transport are some of the important components that determine the general price level and also, the sales of the product. Social Social and cultural factors influence all aspects of consumer and buyer behaviour. Social factors can affect a business as tastes and likes can change. For example, if a business that sells a lot of junk and unhealthy food and the nation is becoming more health conscious then the business will generate less revenue. It said that Vodka is a pleasure of life, but it can also be considered a dangerous sport if overdone. For example, 'Vodka eyeballing', as it is known in student circles, is the latest drinking craze to sweep through Britain's universities. Those who do it claim that it induces feelings of drunkenness at break-neck speeds, providing an instant high. Technology In the 21st century the technological developments became more rapid compared to the previous centuries particularly in the information technology enabling companies to embark business on a global scale. It also changed the nature of competition. That is the competition became dynamic than static in nature. Environmental There are various environmental factors which can impact the businesses in an economy. These environmental factors can be categorized into external and internal environment of the businesses. The internal environment of the company includes the factors which are within the company and under the control of company like product organisational culture, leadership, and manufacturing. On the other hand, the external factors are not under the control of the company and include Social environment, political conditions and suppliers, competitors of the company, government regulations and policies.
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Technology can reduce costs, improve quality and lead to innovation. These developments can benefit consumers as well as the organisations providing the products. Legal Legal factors with business include, but are not limited to, licenses & accreditation, taxes, permits & codes, liability, and Contractual. Political Factors would be affiliations with politics and/or political candidates, and dependency on political statutes and regulation. A business could flourish under one political entity, and be run out of business by another; as in additional taxes, regulations, or bans.
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After seeing exponential growth throughout the previous decade, volume sales and penetration of vodka have begun to decline as UK consumption rates fall and the pool of spirits drinkers shrinks. Vodka has responded by innovating around flavourings but there is evidence that promiscuous younger (i.e. 18-24-year-old) consumers are looking for alternatives such as white rum or even premium gin. The report shows that vodka must now rely on greater premiumisation to maximise profits as the days of accelerating volume sales are now over. However, despite being one of the plainer spirits, there is evidence of a strong desire among consumers for premium brands, meaning that if they are convinced of a brands merits they will pay more. This should play into the hands Pernod Ricards Absolut.
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Market Share Russian Standard has replaced Absolut as the third-bestselling vodka in the UK offtrade. The latter has halved in value over a tumultuous period, where its decision to maintain its price point has backfired. Diageo, Pernod Ricard main rival, has the greatest muscle in the vodka market, leading both adspend and market value sales. This demonstrates how a strong marketing campaign is instrumental in securing and maintaining value sales. If Absolut are to derail Smirnoff of their perch, relevant campaigns are needed. Budget brands appeal to the current economic climate and are already beginning to capitalise on demand for cheaper brands such as Glens. But the strong brand recognition Absolut hold, still allows them to operate in the premium vodka market, maintaining premium prices.
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In the above table it shows where Absolut operate in the market. Smirnoff red, led by Diageo, have the largest market share and have done for the 5 years. Their ability to innovate and to keep up with current market trends leads to their successes. Diageo is mounting a campaign of defence, including significant marketing investment in Smirnoff Red, highlighting its heritage in response to Russian Standards challenge. It is also targeting Absolut territory, rolling out flavour variants and re-launching Smirnoff Black.
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Critical Success Factors A lot has changed since the beginning of Absolut as a brand, but the reason why their business will continue to evolve in the future is because their key factors for success remain the same: Trust in the people who make up the company A decentralised business model A product-centred culture Marketing and sales excellence Commitment to ethics
All supported by the long-term vision vitally needed to ensure sustainable growth. Absolut first asset is undoubtedly the high quality of their teams, motivated from the start by the same values: Conviviality Simplicity Entrepreneurial spirit Integrity Commitment
The best talents and the best organisation would not get anyone anywhere without the best products. Absolut are driven by a strong product-centred culture, founded in authenticity, quality and the constant pursuit of innovation. Products are enhanced by marketing and sales excellence, which is expressed in their branding, design, packaging, advertising and marketing campaigns. Together with action on the ground, these are the true catalysts for their growth. Finally and most importantly Absolute has always maintained a strong ethical commitment to responsible drinking.
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Brand Positioning
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In todays world 90% of the product launched fails without a positioning strategy. The mind stores information like a hard drive in a relational nature. Within the brain, concepts are segmented and stored, first by category (i.e. alcoholic beverage), then by sub-category (vodka) and eventually over time by specific attribute or image (sophisticated). The mind is constantly gathering, sorting and ranking useful beneficial images or attributes. The positioning strategy also involved creative images and artwork using the Absolut bottle to entwine recognition of the beverage with its perception of quality and exclusivity associated with purchasing Absolut Vodka. The main strategy being implemented to increase the sales was its Ad campaign. Absoluts Ad campaign positioned Absolut as the absolute highest quality. The first commercial pictured on Absolut bottle with the title of Absolut Perfection was a successful campaign. Absolute vodka is a super premium vodka brand that is not just alcohol, to some it is an icon. It has a cutting edge about it, some say it is cool but playful, offering a youthful exuberance. Absolut is positioned for the upper end, sophisticated yet ferociously hip and witty crowd that are not open to snobbish attitudes. Their position dominates the market so much so that some people subconsciously actually spell the word absolute, absolut, definitely brand saturation.
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Premium brands have increased their share of total UK market volume sales to over 5% in 2008. However, premium still represents a niche market in comparison to other markets such as the US where premium accounts for over a fifth of total vodka sales. In contrast to the US market, where image and prestige are all, UK consumers favour brands with authenticity and heritage.
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Brand strategy and positioning In essence one could define Vodka as an extremely generic product. More content were added to the product as such, in order to set its weak product contents in the background. Absolut vodka was considered as invalid, market for luxury vodka, and understood the huge impact price and status have on perceived quality. They knew consumers looking for quality expected to pay a premium for it. They communicated their quality through distinctive packaging that set itself apart from the rest, and a witty ad campaign that positioned the product as art. Their customers were willing to pay the premium price for the status of belonging to a more discerning community of vodka drinkers. The Bottle The bottle is elegant, different, simple and very Swedish. In the 16th and 17th centuries vodka had been sold in pharmacies as medicine to cure everything from colic to the plague. The choice was a stroke of genius. Several designers were given the job of helping the Absolut Vodka team further develop the bottle. It had been decided that there should be no label to hide the crystal clear contents. After much discussion and several prototypes the team came to the conclusion that some kind of coloured lettering was required. Blue was decided upon as the most visible and attractive colour.
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The Ads Advertising and promotion play an important role in communicating and reinforcing a brand's quality message, and the marketing mix of these brand-building activities matter a great deal. Another tool in increasing the image perception was Absoluts pricing strategy. Benchmarking on all products in a market, Absolut was priced 15 % over the most expensive brand in a market place. The irony being, that in regions, where Absolut entered the market adjusting to lower pricing levels, sales were negligible until they had increased the price even higher than described above, thus creating equity between brand perception and price. The positioning strategy involved creative images and artwork using the Absolut bottle to entwine recognition of the beverage with its perception of quality and exclusivity associated with purchasing Absolut Vodka. The main strategy being implemented to increase the sales was its Ad campaign. Absoluts Ad campaign positioned Absolut as the absolute highest quality. The first commercial pictured on Absolut bottle with the title of Absolut Perfection was a successful campaign. The concept of purest and highest quality has now been taken. The strategy was to avoid affiliating the product with one particular lifestyle and the ads were to have a timeless yet contemporary theme to them. Absolut Vodka prides its ads in crossing the line between advertising and art using different medians such as paintings, limited edition bottles, shirts, and sculpture. Many famous artists have done work for the company, including Andy Warhol and Keith Harris.
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Brand Architecture
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Absolut Vodka was first launched in New York in 1979. It soon became talk of the town, the US and eventually of the world. Absolut Vodka uses a process called continuous distillation. The water we use comes from our own deep well. Producing its vodka in one location using local raw materials gives V&S Absolut Spirits complete control of all stages of production and ensures that every drop meets the companys high quality standard. The Absolut Vodka flavors are made by blending the vodka with only natural flavors.
Absolut Vodka currently comprises the following products within the same quality framework: ABSOLUT Vodka ABSOLUT Pepper ABSOLUT Citron ABSOLUT Kurent (Blackcurrent) ABSOLUT Mandrin ABSOLUT Vanilia (Vanilla) ABSOLUT Rasberri (Rasberry) ABSOLUT Peach ABSOLUT Ruby Red ABSOLUT Pears ABSOLUT 100 ABSOLUT Mango
The taste of ABSOLUT VODKA is rich, full-bodied and complex. It is smooth and mellow with a distinct character of grain, followed by a note of dried fruit. Introduced in1979. The taste of ABSOLUT PEPPAR is hot and spicy. It has a distinct character of green bell pepper, chili pepper and jalapeo pepper. Introduced in 1986.
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The taste of ABSOLUT CITRON is smooth and mellow, with a fruity character of lemon and lime, and a note of lemon peel. Introduced in 1988. The taste of ABSOLUT KURANT is smooth and mellow, with a fruity black currant character. Introduced in 1992. The taste of ABSOLUT MANDRIN is complex, smooth and mellow. A fruity character of mandarin and orange mixed with a note of orange peel. Introduced in 1999. The taste of ABSOLUT VANILIA is rich, robust and complex. It has a distinct character of vanilla, notes of butterscotch and hints of dark chocolate. Introduced in 2003. The taste of ABSOLUT RASPBERRI is rich and intense, revealing the fresh and fruity character of ripened raspberries. Introduced in 2004. The taste of ABSOLUT APEACH is smooth and mellow, with a sophisticated and fruity character of peach. Introduced in 2005. The taste of ABSOLUT RUBY RED is smooth and fruity with a crisp and refreshing character of zesty grapefruit. Introduced in 2006. The taste of ABSOLUT PEARS is fresh and delicate, with a taste of mellow pears and a long fruity aftertaste. Introduced in 2007. The taste of ABSOLUT 100 is distinct, yet smooth and mellow, with a grainy character and notes of dried fruit. Introduced in 2007. The taste of ABSOLUT MANGO is full-bodied and juicy with a character of ripe Mango with notes of tropical fruits. Introduced in 2007.
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Deffrenciation
Differentiation is defined as set of adding few meaningful and valued differences to distinguish the companys offerings from the competitors offerings. It is a unique value proposition in terms of product features, design, services, media, communication, durability, reliability and so on. Absolut is addressing itself differently as the century old brand with strong Ad campaigns and high brand recall and recognition. They can differentiate themselves in terms of the promotions they provide. They can provide categories like drinks for women with minimal percent of alcohol with some flavoured drink to complement.
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Internal Analysis
Culture
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Ad Spend The world's biggest premium spirits brand, Smirnoff, which sells 10 bottles a second, will spend 20pc of its advertising budget this year on digital media, compared with the 10pc Diageo as a whole spent on advertising through digital channels last year. That far exceeds any of Diageo's other brands, and is part of Smirnoff's attempts to increase sales and market share in developed markets like the UK and US. Last year, Diageo as a whole spent 1.3bn on advertising and marketing. Pernod Ricard UK is investing in a second burst of creative and visionary TV advertising for ABSOLUT, the UKs No.1 premium vodka. The campaign entitled ABSOLUT MANIFESTO spells out the brands philosophy for life and drives home the belief that doing things differently leads to something exceptional. The advertising, which first appeared in cinemas last September and on TV in April, is to be aired throughout September and October during prime time shows on Channel 4 and ITV including this weekends Big Brother Final and This Is England, chosen specifically to reach the 20-35 year-old target audience.
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The success of the ABSOLUT MANIFESTO advertising campaign was recently recognised when it was nominated for a 2010 Emmy award. Mark Hamilton, Head of Vodka at Pernod Ricard UK, said In giving this creative campaign a second TV wave, we will continue to both drive awareness and reinforce the brands unique, vibrant and creative visionary credentials ahead of the Christmas period. This campaign forms part of the largest advertising spend ABSOLUT has ever undertaken in the UK, and is the latest example of the investment that Pernod Ricard UK has been making since the brand was brought into the portfolio in 2008.
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SWOT Strength Vodka is both the number one spirit and the fastest-growing spirit category in the UK in volume terms
Vodka led spirit volume sales growth over the Christmas period during 2007 and 2008 Forecast growth among 25-34-year-olds key vodka drinkers bodes well for the future because TGI data show them to be the heaviest consumers Proposals to limit EU vodka production to potatoes and wheat were rejected This leaves vodka companies free to use a wider range of base ingredients Premiumisation has boosted value, including growth in super- and ultrapremium vodka Major investment by drinks companies in premium brands, e.g. Ketel One (Diageo), Absolut (Pernod Ricard) Boosted marketing spend is clearly linked to brand growth Strong retail performance at both ends of the market: budget and premium Expertise in integrating technologies and extending its products lines High capability to explore new generation products to markets High expertise in creating distinctive advertising Consistently collaboration with famous fashion designers & artists
Weakness Spirit consumption is falling overall due to health and binge-drinking concerns Post-smoking ban and mid-recession, consumers are deserting the lucrative on-trade
A food-led focus in pubs is challenging for the vodka category because just 2% of people like the idea of vodka as an accompaniment to food Consumers lack confidence in creating cocktails and vodka/mixer combinations in the home
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Retail discounting tarnishes brand image but it does lead to increased sales Duty taxes and raw material costs are rising The industry faces increasing legislation regulating alcohol sales and labelling, adding costs and potentially reducing volume sales Growth is expected to slow down in 2009 as the recession takes hold Absolut Vodka do not have a strong link between the product and superior quality and purity of premium vodka
Opportunity Projected growth among younger drinkers, vodkas core market, bodes well for future growth, although rising numbers of mature consumers (i.e. over65s) offer little opportunity
Taste is most likely to be a turn-off for older drinkers, reflecting lack of knowledge about the different flavour profiles vodka can offer at the premium end Opportunities highlighted among thirty somethings include greater interest in premium vodkas, and brand loyalty, as well as the low-calorie angle that particularly appeals to the weight-conscious Attract increasing number of drinkers Appeal to young people and capture a new generation through modern lifestyle concept and night-spot activities Using Absolut Website to pursue a mega trend of using internet as a main communication channel Emphasize emotional connection and interactive function with consumer through Absolut Website
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Threats Number is increasing worldwide, product quality is improving and products diversity has also reach a higher level. Moreover, the Vodka market is experiencing the entry of more competitors, which compels other companies to lower their profit margins. Threat of New Entrants Nowadays More and more companies are trying to enter the Vodka market to earn high profits. In the case of Absolut Vodka, the brand dominated 80% of the Indian market for a while until Russian companies penetrated the market and gradually accomplished more market shares. This situation also happens in other eastern European countries. Thus, the threat of new entrants is quite high. Threat of Substitute The threat of substitutes in the vodka market is high since alcoholic drinks include a wide range of potential substitutes such as liquor and whisky. In the last few years in Europe, the so called Potato Vodka which is made of potato and other cheap agricultural produce spread over the market. Further, this resulted in the loss of millions of pounds in Vodka sales (BBC News 2007). Bargaining power of Buyers The bargaining power of buyers is considered high since there are so many different brands in the market and customers have lots of options to choose from. Besides, the switch cost from one brand to the other is quiet low for customers who continue to have unpredictable interests and tastes.
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Attitude and Motivation Despite alcohol consumption being in decline since 2004, almost half of consumers are drinking alcohol once a week or at least twice per week or more, demonstrating how ingrained drinking alcohol is as part of British culture. As consumers are going out less often but spending more when they do, the ontrade needs to exploit the experiential nature of pub visiting. The off-trade has prospered as consumers have shifted to drinking at home more often, with wine and spirits the big winners. Alcohol has traditionally been used as a stress reliever by many adults, being a suitable way to relax and unwind after a hard days work, which has particularly been the case during the recession:
I think for a lot of people, having a drink at the end of the day is a way to relax and wind down, forget your worries, and perhaps with the recession people have had more reason to have a drink!
20-24-year-old ABC1 female The social dimension is important when drinking alcohol, with over half of consumers drinking when catching up with friends. This is a universal factor of why people drink, being a key reason for over half of men and women and typically most important to 18-34-year-olds There is hope for manufacturers, pubs and retailers, however, as younger consumers aged 18-24 are the most willing to try new drinks as they are still experimenting with new types and flavours, especially when out of home:
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If I'm out on the town I will have a bit of everything I really like alcopops but I only tend to drink these when at nightclubs. Also, when out on the town we tend to buy jugs of cocktails and even if we've not had a particular one before we will get a jug and try it.
20-24-year-old ABC1 female
TGI Analysis
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Absolute Vodka can differentiate themselves in terms of the promotions they provide. They can provide categories like drinks for women with minimal percent of alcohol with some flavoured drink to complement.
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Absolut celebrates human kindness at a time when consumers are seeking exactly that.
Premiumisation Experience looks set to be a key driver for the future of the vodka market, and it will be driven by premiumisation. There seems to be a shift from shots and cheap mixers to more sophisticated cocktails and high-quality long serves. Perhaps Absolute could consider more closely the relationship between spirits and food. Recent years have seen a concentrated effort by the beer industry to muscle in on wines dominance of this affiliation, but why should spirits be excluded from the mix?
Mintel shows that only 10% of consumers drink distilled spirits at restaurants,
compared to 25% drinking wine and 27% drinking beer. Dining out is one of the key experiential markets worldwide, and if Absolut Vodka can tie-in more closely with food and restaurants, it could prove a valuable area of growth for some time to come.
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Creative Brief
Client
Absolut Vodka
Project Advertising Campaign Absolut Drinking Prepared by MORR Advertising Agency Background Focusing on the bottle design, Absolut Vodka launched their world famous advertising campaign, using the distinct differences combined with humour to reach out to their clients. Through time Absolut Vodka achieved the status of a lifestyle product, to the extent that it became a brand statement as such, with people ordering Absolut and Tonic. The Promise One of the other issues Absolut Vodka face are the aggressive competitors entering in market with innovative drinks gaining the attention of many other consumers hence declining the market share of Absolut. Absolut can see consumers as being continually assaulted with superiority claims, which will eventually grow boring and unpersuasive to the target audience. What Absolut want to do is to show they are the best premium vodka available without saying they are the best premium vodka available.
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Target Audience 18-35 female ABC1 According to extensive research this target is growing in numbers so bodes well for the future. Brand loyalty is what we want to achieve. A quirky, light humoured ad that can be placed in London on buses and the underground and also in between prime time comedy television. Also a feminine new flavour and design for the historic bottle that would look attractive in a backlit bar and in a pub. The ads should express something complimentary about the product, and the intelligence of the consumer should never be underestimated. Emotional Response Absolut vodka can win hearts, minds and market share Drink me! Im fun! Sexy advertisements tease the femininity
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