Absolut Vodka: The Spirit of a Brand

This case is used in Darden's core Marketing course and in the Pricing elective. It would work well in course modules covering the topics of branding or product line management. A teaching note is available for instructors. Soon after Pernod Ricard acquires Absolut vodka and other brands, the economic downturn results in changes in purchasing behavior away from premium to standard products. Brand managers consider whether to introduce a "basic" Absolut, promote a lower-priced alternative, or rebrand other vodkas under the Absolut brand to trade on its considerable brand equity. Excerpt UVA-M-0832 Rev. Dec. 9, 2013 ABSOLUT VODKA: The Spirit of a BRAND In July 2008, months before an economic downturn was to be identified as a recession, Pernod Ricard, owner of such premium brands of spirits as Chivas Regal, Beefeater, Glenlivet, and Jameson, purchased Vin & Sprit (V&S), adding Absolut, the top-selling premium vodka worldwide, to its portfolio. At the heart of Pernod Ricard's global brand strategy was “premiumisation,” defined by Thierry Billot, managing director of brands, as “offering the most harmonious balance between ‘substance'—an origin, a history, know-how—and ‘image'—reflecting the consumer personality.” Within months, economic pressures had led consumers to drastically change their “personality,” and the firm was paying close attention: In most countries, the consumption of wine and spirits, closely linked to the broader economic environment, tends to decline during periods of economic recession…Wine and spirit consumers also have the option of trading down to less costly product categories (“standard” as opposed to “premium” products) when the economic environment is depressed. By June 2010, across consumer categories, 51% of consumers had switched from a more expensive to a cheaper brand with no plans to switch back, and 77% said cheaper brands were “as good or better” than the products they replaced. Consumers had sought frugality and discovered value. Total vodka sales had increased, with a rise in mid-priced vodka brands such as Svedka and Sobieski, but Absolut, which had grown at a compound annual growth rate of 4.98% from 1999 to 2008, had seen a 5.9% sales decline in 2009. Pernod Ricard faced a looming challenge: how to shore up its spirits without diluting its brand. . . .