Dive Brief:
- Diageo hopes to turn around lagging overall sales in the U.S. by revamping Smirnoff, which accounts for 56% of sales for vodka, a category that commands 12% of the company's total net sales.
- Diageo's plan involves reducing the number of Smirnoff flavored varieties, mainly in the U.S., where flavors — which have not always appealed to consumers — comprise about 25% of Smirnoff products versus about 10% in other markets.
- The company also plans to ignite sales among millennials, the brand's primary customer base, by aligning with the electronic dance music community, including a Live Nation partnership with Smirnoff's sponsorship of 26 electronic music festivals worldwide.
Dive Insight:
Smirnoff hasn't lost its top spot as leader of the U.S. vodka market, with more than nine million cases sold each year, but the brand has seen its pieces of its market share snapped up by rival brands, such as Tito's Handmade Vodka, which reported 82% sales growth last year. Even Diageo's own Ciroc premium brand is competing with Smirnoff these days, as premium spirits become more popular in the U.S. Vodka also finds itself in direct competition with whiskey and tequila, which have usurped the U.S. market.
Diageo has made mistakes with Smirnoff in the past, most notably being consistently raising prices to boost profit margins, assuming that competitors would do the same. When they did not, Smirnoff's U.S. sales tumbled 4% in the year leading up to June 30. Diageo aims to correct this error not by lowering prices, which protects the company's revenue, but by offering rebates to consumers, a person versed in Diageo's U.S. pricing strategies told The Wall Street Journal.
Smirnoff had also released 42 flavors, several of which did not generate much interest, and that overload coincided with a drawback from flavored vodka altogether.
Through its alignment with the electronic dance music and LGBT communities, Matt Bruhn, Smirnoff's global brand director, aims to have 40% of consumers ages 21 to 34 worldwide drinking Smirnoff regularly. In the U.S., that number sits at around 11% for consumers who drank Smirnoff in the four weeks leading up to being surveyed.
"Brands must contribute to culture, not advertise to people," Bruhn told The Wall Street Journal.