AbsolutVodka group assignment PDF

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Group assignment, kinda rough version but still has the majority of points in there...

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Executive summary This report was created to conduct a situational analysis on the Swedish brand of Vodka Absolut, in particularly focussing on their original line of plain vodka that was created in 1879. All information was obtained from various reliable resources which helped us to gain insight into the company. This analysis aims to investigate Absolut’s industry and market situation, focussing on three crucial elements these being; the industry overview, the target markets and consumer behaviour issues. The marketing mix was developed to understand what goes into each segment of marketing within Absolut and analyses the 4 P’s of product, price, place and promotion. These uncover what is valuable to Absolut and what works for them most in campaigns. The most direct competitor to Absolut is British company Smirnoff and the most indirect is Jameson whisky. Both share the same marketing techniques, like the iconic bottle and creating ranges showing their support for LGBTQ+. They are also around the same price and target the same target market of people aged 18-30. Micro factors asses’ things like the company, suppliers and publics etc, whereas the macro goes into a broader focus and analyses demographic trends like declining alcohol consumption and natural trends like COVID-19 then making consumption spike. As identified in the SWOT analysis we can see the biggest weakness in Absolut is the legal drinking age across companies. This law stops the business from accessing a whole market of consumers. Their biggest strength is how well known they are, they have created a customer loyalty through successful campaigns and the iconic pharmaceutical bottle. This report proves that Absolut is changing with the world and is constantly staying relevant. Releasing new flavours and continuing to export to new countries shows that Absolut is only going to continue to grow in the near relevant future.

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1.0 Introduction: This report aims to highlight and analyse the marketing strategies and structure of Absolut Vodka in depth. The report will focus on the Absolut brand holistically, with specific focus on their original regular line of vodka, and on the success of the employed marketing strategies in selling it. The primary market segment of 18-30 year old consumers will also make up the customer base and foundation for study, as this is the primary target market for Absolut. Absolut Vodka are owned by the Pernod Ricard company, and this report will also link back into the ownership and how it influences the success of Absolut and enforces its larger policies and aims. 2.0 Organisational/Brand Background Absolut Vodka was launched in 1879 by Lars Olsson Smith in Åhus, Sweden and is currently owned by the

french group Pernod Ricard. It’s gone on to become one of the most recognised and renowned vodka distilleries, currently placing third in the world. Now in the mature stage of growth, Absolut continues to grow and release more ranges of vodka, some of these flavours including raspberry, vanilla and citrus etc; which have helped to completely revolutionise cocktail creation. Separate to the range of vodkas, Pernod Richard also owns liquor brands Kahlua coffee liqueur, Malibu coconut flavoured rum, Beefeater gin and Jameson whisky just to name a few. Absolut’s original product and ‘star’ of the business is the traditional distilled vodka which is transparent, made from winter wheat and claims that it does not contain any sugar which makes it a pure vodka (Absolut, 2021). The traditional style vodka that comes in a pharmaceutical shaped bottle that was inspired from the times of vodka being sold as a medicine for aches and pains, lives on to this very day and will be the main product line discussed in this report.

3.0 Market and Customer Situation 3.1 Industry Overview: Whilst Absolut vodka remains a goods product; it often comes along with a service or experience because it tends to be served when out in nightclubs or bars. The experience served alongside Absolut often leaves lasting impressions of enjoyable nights spent with friends and having fun, but studies have shown that in the past couple of years there has been a rise in young people drinking- this being a factor that is benefiting the company. In 2019, 14.6% of young adults aged 18-24 consumed more than 11 standard drinks on one occasion at least monthly and the proportion of young people aged 14-17 exceeding the adult single occasion risk guidelines showed an increase between 2016 and 2019 (8% to 8.9%) (AIHW, 2021), this showing that the amount of people consuming the market that Absolut is located in is on the rise. Whilst consumption may be on the rise, Absolut still faces much competition with other premium vodka brands that are also well renowned like Grey Goose, Belvedere, Smirnoff and Chopin. 3.2 Target Market: Psychographic segmentation: High income earning; approx. $80,000 or more per year individuals that enjoy socialising with friends and show interest in fashion music and arts. Demographic segmentation: Single 18-30 year old males or females are more susceptible to Absolut’s marketing campaigns. Absolut tends to attract more females due to the fact that they are able to be mixed with sweet and sugary soda’s. Behavioural segmentation: Absolut is consumed on occasion, when socialising with friends, in bars of 200 people or night clubs of up to 1000 people. Geographic segmentation: Produced and distributed worldwide. Throughout Australia Absolut is sold more in larger cities like Sydney and Melbourne in particular; wealthy areas with trendy restaurants and bars like Darling Harbour and the CBD of Melbourne.

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Customer segment is males or females aged 18-30 years old who are from a high economic class, living in a busy city and enjoy going out.

3.3 Consumer Behaviour Issues: Consumer behaviour factors influence how and why consumers buy goods or services. The four factors that influence consumer behaviour are; cultural, social, personal and psychological. For Absolut’s target market the cultural influences include family backgrounds some of these being values and perceptions of traditions learned from a young age. Social influences are possibly one of the most important aspects for the company and consumers tend to buy this product depending on what social class they belong in and the type of people they hang out with. Because the target market is 18–30-year old’s, companies also use celebrity endorsements and social media campaigns to correctly target the group as they are heavily influenced by the internet and media. Personal influences include occupation, education and economic status; all of these refer to an individual’s characteristics that distinguish a person or a group and help to influence their buying decision. Psychological motivation refers to the processes that drive the target market to purchase the product; this could include the perception of quality of the good or how they may have learnt about the item.

The Marketing Strategy (Marketing mix 4 P’s) The marketing mix – which consist of and can be simply known as the 4 P’s – is the collection of the key factors that are necessary to be carried out by a business in order to successfully market a product or service. Effectively using the marketing mix is a crucial element in a brand’s marketing strategy, as it locates and manipulates the appropriate market segments for the brand and product. The 4 P’s of Product, Price, Place, and Promotion are fundamental for Absolut Vodka and their successful marketing strategies. 4.1 Product: - 3 levels: core benefit , actual product , augmented product · The market offering is the vodka drink itself. Absolut’s vodka has the core benefit of actual vodka, which is enjoyed by their customers and satisfies their needs for a vodka alcohol drink. Quality is achieved through the perceived quality of their drink, and the bottling of the vodka – which changes depending on which line of vodka it is. The design uses the classic Absolut Vodka bottle shape & logo which is unmistakably their own – in a similar way that the Coca Cola ribbon font is unmistakably theirs – to attract customers and to make a comfortable, reliable feeling for returning customers who feel a connection to the brand. The features of the product include the identifiable bottle shape and size, and the easy-to-remove screw on lid, as well as the lightweight glass which aims to minimize environmental impact. 4.2 Price: · Pricing is a key aspect of the marketing mix, as it greatly influences the customers final decision on whether to invest in the product or not. Customers pay around the $60 mark for a 1L bottle of Absolut Vodka in store, while online pricing comes down to as low as $55 (Dan Murphy’s, 2021). They employ the competition-based pricing strategy for their regular vodka product line to best influence the market as it is marketed as a mid-market vodka option for the widest range of the market, which has been a successful pricing strategy as proven by their global recognition as one of the leading vodka brands. Absolut Vodka set their prices based on the range of prices amongst all other vodka brands, meaning their use of competition-based pricing strategy is always in effect, in both the Australian and international market. Price elasticity affects and influences all aspects of the marketing strategy, and Absolut will adjust their prices to suit such changes in the market. Absolut’s sales have stayed consistent over the last decade, selling between 10 and 12 million 9 litre cases each year since 2009 (Statista.com, 2019). It is also important to keep in mind that different stores can charge slightly different prices on Absolut products. 3

4.3 Place: · Absolut Vodka sell their product in 126 countries globally (Expert Commentator, 2018), meaning that they have to allocate costs towards logistics in order to efficiently distribute their products around the world, ready for sale. Absolut Vodka can be purchased both online and in-store, meaning the product can be accessed with ease for all consumers. The following is a list of the in-store and online locations where the vodka can be purchased in Australia: In-Store · · · · · · · · ·

Dan Murphy’s BWS Liquorland Bottle O First Choice Cellarbrations Pubs Restaurants Nightclubs

Online · · · · · ·

Dan Murphy’s BoozeBud Liquorland Kogan Ebay Bayfields Liquor Superstore

4.4 Promotion: · Absolut Vodka promote their product using artistic platforms to catch the eye of their consumer market which is a technique that stemmed from their original collaboration with Andy Warhol in 1986 (Smart Insights, 2018). Absolut frequently use advertisement posters to promote their product, and almost always display an image that includes the infamous shape of the Absolut bottle. Absolut aim at making high quality and satisfying products, and often market their product in posters and billboards as simple, yet high-end, as seen in their posters which include “Absolut Perfection” texts. Television adverts and online adverts aim at being light-hearted and fun, while sometimes sending political or social messages, such as their recent campaign, titled “Drink Responsibly, Sex Responsibly” Competitive situations As of 2016, the age group between 20 and 29 consisted of approx 3.25 million men and women. That number is significantly larger in comparison to 2001 where men and women aged 20 – 29 made up 2.56 million (profile.id.com.au,2016). Due to the recent pandemic, worldwide sales are somewhat hindered but domestic markets are bouncing back strong as restrictions ease. Benefits from the pandemic have arisen with people not working many have generally turned to drinking out of boredom or stress. Parent company 4

Pernod Ricard had been trading for $38.57 at its highest, and $26.82 at the beginning of the pandemic. Since then stock price rose to an all-time high of $44.13 on the 25th of May 2021. Peron Ricard's half-year sales report states that Absolut has been connecting authentically with consumers at culturally relevant moments. their Absolut soda and cocktail canned beverages have had rapid development in their market share progress. Absolut has been impacted by the pandemic and has seen a 12% loss in sales. Absolut's main focus is to make their product wanted by others. The value is not from a significant difference in its nature but how it is represented to be different in other aspects like appearance and company values. A competitive landscape analysis is a structured way of identifying and researching your competitors. By performing a competitive analysis landscape, you can develop a marketing strategy for your product that aligns with the direction for your business to go in the future. We will be performing a competitive landscape analysis between Absolut Vodka, a direct competitor (Smirnoff Vodka) and an indirect competitor (Jameson Whiskey). Absolut is a clear distilled Vodka made from winter wheat and has been manufactured in Sweden since 1879. It is a premium alcoholic product made for those who enjoy not just what they drink but why. Their consumers purchase Absolut vodka based on the perception that good and inclusive fun includes Absolut. In 2019, Absolut sold 11.1 million cases. In assessing the market competition, the key question is “If our customers are not drinking Absolut, what are they drinking, and why?” What other alcohol are they using in their mixed drinks or cocktails. Who are competitors to Absolut Vodka? A direct competitor to Absolut vodka is Smirnoff Vodka. Smirnoff vodka is currently produced by British company, Diageo, but originally began in a Russian distillery, and has been around for more than 150 years. Smirnoff holds the greatest market share, with 25. 8 million 9-liter cases sold in 2019. An indirect competitor to Absolute Vodka is Jameson Whiskey. Jameson Whiskey is produced by Irish Distillers and like Absolut Vodka, is a subsidiary of Pernod Ricard. Jameson Whiskey began production in 1780. Sales volumes passed 8 million cases in 2019. In contrast, McDowell’s No1 Whiskey sold over 53 million cases in 2017. Both Smirnoff and McDowell’s are owned by Diageo. Compare and contrast marketing strategies. • Iconic packaging. o All manufacturers have relied on iconic packaging to market their product. • Demographics. o Both vodka manufacturers have focused recent marketing efforts towards the younger demographic, such as aspirational females aged 18 to 35. o in contrast, Jameson whiskey focuses its marketing towards males • Broadening their product range. o Both vodka manufacturers have introduced flavoured vodkas. New flavours may be based on botanicals such as herbal or fruit flavours as well as modern twists such as salted caramel, bacon or chocolate. o Jameson have also brought out new whiskeys to meet customer demand for varieties such as Jameson Wild Seaweed which is made with the addition of herbs and wild dilisk seaweed. • Promote options that are healthier, or appear to be healthier o Absolut have the #NoSugarAdded to promote that sugar has not been added to their product Absolut Grapefruit. o Smirnoff 21 promotes that is made from non-GMO grain o Jameson Whiskey has not yet developed a marketing campaign to respond to a desire for a healthier product. • Develop campaigns that have focused on the LGBTQI community o Absolute developed the Pride bottle to celebrate the 30th anniversary of the Pride flag and have since brought out Absolut Rainbow. o Smirnoff have developed the “welcome Home” campaign to honour advancements in LGBTQI acceptance and equality. o Jameson Whiskey has not yet developed a marketing strategy to focus on the LGBTQI community. 5

• Developed marketing strategies which focus on the ideas of ‘Youthful’, ‘fun’ and ‘exclusive’. o Absolut vodka has a featured the music group Swedish House Mafia to create the famous music video ‘Greyhound’ as a part of their advertising o Smirnoff Marketing has launched its first global marketing campaign in 25 years is highlighting its history, with their ‘Infamous Since 1864’ campaign which focuses on their 155-year history with a bottle that combines modernity and heritage. o Jameson whisky has similarly identified themselves with good times such as St. Patrick’s Day and have launched humorous advertisements called “Blame it on Scully” and “Coopers”. They have also released a documentary called “The Story behind the Story” which focuses on the making of the brand, and why employees and customers remain loyal. • Emerging Markets o All companies have recognized the importance of new and emerging markets such as Asia, Africa and south America and have begun to experiment with advertising that appeals to the unique characteristics of each of these markets. • New marketing trends o Absolut has recently sought to increase its customer engagement by capitalizing on the global ‘selfie’ phenomena to increase customer engagement by encouraging travellers to upload selfies and travel tips interactive. • Sustainability o Absolut has also started marketing its vodka in a recycle bottle, to recognize the increasing demand for sustainability. Neither Smirnoff nor Jameson have developed a marketing campaign the focuses on sustainability. (Forbes, 2020). All of their promotion campaigns are aimed at their primary target market, which is identified as 18-25-year old’s with particular focus on females within that age bracket. 6.2 Macro Factors: Identify macro trends or issues that are relevant to the brand. Discuss whether threats or opportunities arise from the trends and issues you identify. 100-250 for each one 6.2.1 Demographic trends – changes or trends regarding customer demographics and the impact this has on current or potential target markets Decline in consumption In the modern day it is apparent that in general, alcohol consumption is on the decline. According to the Australian Bureau of Statistics (ABS), Australians today are drinking less alcohol than at any point in the past 55 years and alcohol consumption in Australia has been on a steady decline for more than 40 years (ABS, 2020). It is also apparent that Australians are turning away from spirits like Vodka and more towards local beers and wines. This gradual decline on spirit sales is having an effect on the amount that Absolut is importing into the country as it is not selling as much as in previous years overall losing the company money. It could be argued that factors like increased education throughout Australia regarding the consequences and risks from drinking alcohol have influenced individuals to consume less. Though it is clear that external factors like COVID-19 may have an effect on sales and cause them to boost. 6.2.2 Economic trends – economic issues, economic trends and the impact this has on how and what customers spend, and its effect on sales and the organisation High Taxes

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An already struggling industry after the pandemic, Absolut continues to struggle with the economic pressure placed on their products through high taxes and tariffs. Australians pay the third-highest liquor taxes in the world with about 57 per cent of the retail price on a bottle of whisky or gin a tax and alcohol tax on beer and spirits in Australia rise automatically in line with inflation every February and August (SMH, 2021). If a bottle of vodka is charged at $53, an individual pays around $22.05 on tax for the product. This consistently rising price often forces consumer to turn to cheaper, lower quality products or no alcohol at all, lowering Absolut’s sales. 6.2.3 Natural trends – natural forces/disasters, shortages of raw materials, impact of company on the environment Covid-19 While the world still tries to deal with the repercussions of COVID and what it has left in its wake, several industries; this including the alcohol industry remain affected. Whilst the majority of clubs and pubs have had to shut their doors for an extended period of time throughout the pandemic, people feeling psychologically stressed and are often turning towards the consumption of alcohol to help deal with the pressures of the pandemic. From viewing Commonwealth Bank data, it is clear there is an overall contracti...