Whisky, vodka's new chaser
Vodka, however, is not the only issue. Strange though it may seem, at a time when Poland's national drink is enjoying global popularity, international spirits concerns are unified in predicting a contrary - and fast growing - thirst for whisky in this country.
According to international spirits concerns, EU entry will bring a sea-change to the current structure of the domestic vodka market, currently pigeonholed into four broad categories: economy vodkas; popular mid-price; local premium; and imported premium. At one end of the market, the category of imported vodka now dominated by two EU producers, will disappear, together with the customs duties, and be absorbed into the current premium category. At the other end, economy products may be forced out of the market, strengthening the popular mid-price. In addition, a whole new super-exclusive category, brought over from the USA, may appear. All this, meanwhile, will happen on an EU stage, where marketing strategies are no longer confined within country borders, and only brands that can stand the international pressure will survive.
For the two vodka brands, Finlandia and Absolut which, with respective shares of around 70 percent and 25 percent, almost entirely control the one to two percent of the vodka market currently held by imports, high customs duties have, until recently, significantly influenced local marketing strategies, which have relentlessly insisted on their unique, premium and luxury status. But for a year and a half, Finlandia, for one, has been taking advantage of a current cocktail renaissance to subtly adapt the vodka's image, and price, to new realities. From a symbol of purist exclusivity, Finlandia has become a classy nightclub-mixer, while simultaneously cutting its price with the aim of gaining market share from rivals in the current local premium category as well as securing customer loyalty against potential newcomers.
According to Bibianna Konieczna, marketing director at Finlandia Polska, the strategy has seen Finlandia's sales increase by 150 percent, with no remittance even after Absolut brought their prices down below those of Finlandia at the beginning of March. In her view, this shows that "sales for EU-imports altogether are expanding."
Local premium brands, meanwhile, have been hatching their own plans to deal with the oncoming invasions into the category. And as EU class imports go local, local brands - especially those at the lower end of the premium class - are increasingly seeking fame and fortune abroad.
Vodka exports from Poland to the EU are growing fast, largely because, in the view of Edwin Atkins, president of the British Gin and Vodka Association, although tariffs have remained on spirits entering Poland, exports can already enter the EU tariff-free. Exports to Britain rose by as much as 122 percent last year, and the trend is expected to continue. "The domestic market now represents only 50 percent of our sales," says Isabelle Lurie, marketing director for Wyborowa SA, which has been controlled by French concern Pernod Ricard since 2002.
"We knew Wyborowa had the potential to grow outside Poland," she goes on to say, "that's why we secured the rights to the brand."
It's not just Wyborowa. Other brands at the lower end of premium are experiencing similar success abroad, where, as Konieczna points out, they are often more highly rated.
"Luksusowa has found considerable popularity in Britain, while Wyborowa is doing particularly well in France as well. [French-owned] Sobieski, meanwhile, is expanding in Hungary and Bulgaria," she says.
Paradoxically, considering the vodka-soaked roots of this country, success abroad, even if developed in countries with no historic tradition in vodka whatsoever, quite apart from being an end in itself, might also soon become the key to success back home. Restrictive limitations on marketing in this country will mean that brands that can market themselves elsewhere will have a clear advantage, according to Janusz Grabowski, area Director for CEEME at Swedish owned Absolut. Given increasing freedom of movement between Polish and EU markets, perceptions of domestic vodka brands prevailing within the EU may increasingly bounce back home. The situation, he adds, means that success on the domestic market will be favorable for internationally established brands, and more problematic for those which have yet to achieve a European reputation.
Meanwhile, a whole new class of ultra-snob vodkas will soon come in at the very top of the pile. In what must be a paradigm for the limitless power of marketing, two internationally-owned domestic vodkas, Belvedere and Chopin, despite having made few waves on the domestic market, have, together with Grey Goose, a vodka produced in - of all places - France, managed to create a whole new super-premium category of their own in the USA.
It's a category now picking up in the EU as well, according to Janusz Grabowski of Absolut, whose new vodka 'Level' was launched in the USA last year specifically to take advantage of the new super-luxury segment. Since Level will be available in domestic shops after May, it seems clear that Absolut, for one, believes that the super-premium bracket will appeal to consumers here as well.
Down at the other end of the market, meanwhile, the rising price of raw material is widely expected to knock out - mostly stateowned - producers of economy vodka, already struggling to cover production costs.
Such a situation, according to Janusz Grabowski, could strengthen the category of middle range vodkas, to the advantage, for example, of brands such as 'Absolvent,' produced by market leader Polmos Białystok. He is anxious to stress, however, that "this could, of course, just be rumor."
That said, it's clearly a rumor that spirits firms are building on. A new brand known as Vodka Vladimir, recently launched by Diageo-owned Smirnoff, is widely perceived as directly targeting the middle-price category, while Pernod Ricard recently repackaged its own popular Lodowa brand to focus on precisely the same bracket.
Curious though it may seem, in a market 94 percent dominated by vodka, the excitement of international firms concerns not the national drink, but whisky, particularly Scotch whisky.
"It's happened all over Europe and it's going to happen here too," says Isabelle Lurie, "Look at a traditional vodka drinking country like Sweden, where whisky makes up 44 percent of all spirits consumption."
Konieczna, meanwhile, points to Spain: "Spain was traditionally a cognac-dominated market. But when Spain joined the EU, it saw an increasing demand for whisky." General manager Tassos Evangleou of Diageo Polska, importer of Johnny Walker, is just as certain."Whisky is the popular spirit worldwide after vodka," he says, "that's why we're betting on it."
For a year and half, Finlandia Polska has been actively smoothing the way for its parent company brands, Jack Daniels and Ballantines, using the current cocktail renaissance to try and dispel social fears attached to the drink by, on the one hand, encouraging classy clubbers to experiment with whisky mixes and, on the other, pitching the snob-attraction of the distilling 'story' and connoisseurship to the middle-upper-business classes. Diageo is also pushing a similar approach.
Though all this banking on whisky seems curious in a country where the generic alcohol is a clear spirit, international players deny that the expected new craze for whisky will only be created by clever marketing.
"It's true that you can create a demand for pretty much whatever you like, given the money and the marketing skills," says Konieczna, "but with whisky there is already a consumption base to work from. With gin, for example, it would be much more difficult."
Profits in whisky, however, will once again be confined to the international spirit concerns, while state-owned producers of cheaper labels will likely get hit. EU regulations defining the term 'whisky' are much more stringent than those currently binding in Poland. Rather than riding on the back of a multinational-created whisky buzz, local producers of so-called whisky will have to change the name or find themeselves out of production.
The expected new thirst for this product is not, however, seen as likely to inflict any damage on the ever-thriving vodka market, even if, as players hope, consumption quickly doubles. "Whisky consumption makes up about one percent of the market," says Konieczna, "so even double is not going to be much of a threat."
She goes on to point out that even that extra one percent might not affect the vodka market at all. For one thing, European regulations will make sure that whisky remains a premium product, and by far the majority of the population don't usually drink premiums of any kind, including vodka.
Quite apart from that, there is the question of functionality.
"You don't drink whisky in shots, its more like an after work drink, or a cocktail drink in bars. I mean, you're not going to see whisky being drunk at Christmas, or at country weddings," she says.
And then there are social habits. "A bottle of whisky at home is something you might open every now and then, whereas in Poland, if you open a bottle of vodka, you're going to drink until you finish it."
Despite all the multinational excitement, some suspect May 1 may prove to be an empty promise. While most other accession countries began reducing customs duties on alcoholic imports from EU countries long ago, in Poland, tariffs will remain at punitively high levels right up until the very last bell. And although Poland is legally obliged to level customs barriers on EU entry, "There's a good chance, on past performance, that when it comes to the crunch, the Polish government may back off," says Edwin Atkins, president of the British Gin and Vodka association. "It could be, for example, that at 11.00 p.m. on April 30, the government suddenly says 'Poor me, it's all too difficult, I think I need a transition period.'"
According to international spirits concerns, EU entry will bring a sea-change to the current structure of the domestic vodka market, currently pigeonholed into four broad categories: economy vodkas; popular mid-price; local premium; and imported premium. At one end of the market, the category of imported vodka now dominated by two EU producers, will disappear, together with the customs duties, and be absorbed into the current premium category. At the other end, economy products may be forced out of the market, strengthening the popular mid-price. In addition, a whole new super-exclusive category, brought over from the USA, may appear. All this, meanwhile, will happen on an EU stage, where marketing strategies are no longer confined within country borders, and only brands that can stand the international pressure will survive.
For the two vodka brands, Finlandia and Absolut which, with respective shares of around 70 percent and 25 percent, almost entirely control the one to two percent of the vodka market currently held by imports, high customs duties have, until recently, significantly influenced local marketing strategies, which have relentlessly insisted on their unique, premium and luxury status. But for a year and a half, Finlandia, for one, has been taking advantage of a current cocktail renaissance to subtly adapt the vodka's image, and price, to new realities. From a symbol of purist exclusivity, Finlandia has become a classy nightclub-mixer, while simultaneously cutting its price with the aim of gaining market share from rivals in the current local premium category as well as securing customer loyalty against potential newcomers.
According to Bibianna Konieczna, marketing director at Finlandia Polska, the strategy has seen Finlandia's sales increase by 150 percent, with no remittance even after Absolut brought their prices down below those of Finlandia at the beginning of March. In her view, this shows that "sales for EU-imports altogether are expanding."
Local premium brands, meanwhile, have been hatching their own plans to deal with the oncoming invasions into the category. And as EU class imports go local, local brands - especially those at the lower end of the premium class - are increasingly seeking fame and fortune abroad.
Vodka exports from Poland to the EU are growing fast, largely because, in the view of Edwin Atkins, president of the British Gin and Vodka Association, although tariffs have remained on spirits entering Poland, exports can already enter the EU tariff-free. Exports to Britain rose by as much as 122 percent last year, and the trend is expected to continue. "The domestic market now represents only 50 percent of our sales," says Isabelle Lurie, marketing director for Wyborowa SA, which has been controlled by French concern Pernod Ricard since 2002.
"We knew Wyborowa had the potential to grow outside Poland," she goes on to say, "that's why we secured the rights to the brand."
It's not just Wyborowa. Other brands at the lower end of premium are experiencing similar success abroad, where, as Konieczna points out, they are often more highly rated.
"Luksusowa has found considerable popularity in Britain, while Wyborowa is doing particularly well in France as well. [French-owned] Sobieski, meanwhile, is expanding in Hungary and Bulgaria," she says.
Paradoxically, considering the vodka-soaked roots of this country, success abroad, even if developed in countries with no historic tradition in vodka whatsoever, quite apart from being an end in itself, might also soon become the key to success back home. Restrictive limitations on marketing in this country will mean that brands that can market themselves elsewhere will have a clear advantage, according to Janusz Grabowski, area Director for CEEME at Swedish owned Absolut. Given increasing freedom of movement between Polish and EU markets, perceptions of domestic vodka brands prevailing within the EU may increasingly bounce back home. The situation, he adds, means that success on the domestic market will be favorable for internationally established brands, and more problematic for those which have yet to achieve a European reputation.
Meanwhile, a whole new class of ultra-snob vodkas will soon come in at the very top of the pile. In what must be a paradigm for the limitless power of marketing, two internationally-owned domestic vodkas, Belvedere and Chopin, despite having made few waves on the domestic market, have, together with Grey Goose, a vodka produced in - of all places - France, managed to create a whole new super-premium category of their own in the USA.
It's a category now picking up in the EU as well, according to Janusz Grabowski of Absolut, whose new vodka 'Level' was launched in the USA last year specifically to take advantage of the new super-luxury segment. Since Level will be available in domestic shops after May, it seems clear that Absolut, for one, believes that the super-premium bracket will appeal to consumers here as well.
Down at the other end of the market, meanwhile, the rising price of raw material is widely expected to knock out - mostly stateowned - producers of economy vodka, already struggling to cover production costs.
Such a situation, according to Janusz Grabowski, could strengthen the category of middle range vodkas, to the advantage, for example, of brands such as 'Absolvent,' produced by market leader Polmos Białystok. He is anxious to stress, however, that "this could, of course, just be rumor."
That said, it's clearly a rumor that spirits firms are building on. A new brand known as Vodka Vladimir, recently launched by Diageo-owned Smirnoff, is widely perceived as directly targeting the middle-price category, while Pernod Ricard recently repackaged its own popular Lodowa brand to focus on precisely the same bracket.
Curious though it may seem, in a market 94 percent dominated by vodka, the excitement of international firms concerns not the national drink, but whisky, particularly Scotch whisky.
"It's happened all over Europe and it's going to happen here too," says Isabelle Lurie, "Look at a traditional vodka drinking country like Sweden, where whisky makes up 44 percent of all spirits consumption."
Konieczna, meanwhile, points to Spain: "Spain was traditionally a cognac-dominated market. But when Spain joined the EU, it saw an increasing demand for whisky." General manager Tassos Evangleou of Diageo Polska, importer of Johnny Walker, is just as certain."Whisky is the popular spirit worldwide after vodka," he says, "that's why we're betting on it."
For a year and half, Finlandia Polska has been actively smoothing the way for its parent company brands, Jack Daniels and Ballantines, using the current cocktail renaissance to try and dispel social fears attached to the drink by, on the one hand, encouraging classy clubbers to experiment with whisky mixes and, on the other, pitching the snob-attraction of the distilling 'story' and connoisseurship to the middle-upper-business classes. Diageo is also pushing a similar approach.
Though all this banking on whisky seems curious in a country where the generic alcohol is a clear spirit, international players deny that the expected new craze for whisky will only be created by clever marketing.
"It's true that you can create a demand for pretty much whatever you like, given the money and the marketing skills," says Konieczna, "but with whisky there is already a consumption base to work from. With gin, for example, it would be much more difficult."
Profits in whisky, however, will once again be confined to the international spirit concerns, while state-owned producers of cheaper labels will likely get hit. EU regulations defining the term 'whisky' are much more stringent than those currently binding in Poland. Rather than riding on the back of a multinational-created whisky buzz, local producers of so-called whisky will have to change the name or find themeselves out of production.
The expected new thirst for this product is not, however, seen as likely to inflict any damage on the ever-thriving vodka market, even if, as players hope, consumption quickly doubles. "Whisky consumption makes up about one percent of the market," says Konieczna, "so even double is not going to be much of a threat."
She goes on to point out that even that extra one percent might not affect the vodka market at all. For one thing, European regulations will make sure that whisky remains a premium product, and by far the majority of the population don't usually drink premiums of any kind, including vodka.
Quite apart from that, there is the question of functionality.
"You don't drink whisky in shots, its more like an after work drink, or a cocktail drink in bars. I mean, you're not going to see whisky being drunk at Christmas, or at country weddings," she says.
And then there are social habits. "A bottle of whisky at home is something you might open every now and then, whereas in Poland, if you open a bottle of vodka, you're going to drink until you finish it."
Despite all the multinational excitement, some suspect May 1 may prove to be an empty promise. While most other accession countries began reducing customs duties on alcoholic imports from EU countries long ago, in Poland, tariffs will remain at punitively high levels right up until the very last bell. And although Poland is legally obliged to level customs barriers on EU entry, "There's a good chance, on past performance, that when it comes to the crunch, the Polish government may back off," says Edwin Atkins, president of the British Gin and Vodka association. "It could be, for example, that at 11.00 p.m. on April 30, the government suddenly says 'Poor me, it's all too difficult, I think I need a transition period.'"
