Vodka Industry

Introduction

As the #1 domestically made US vodka, Skyy Vodka’s mission is to provide a premium vodka with the purest, smoothest taste with less impurities than any other vodka. Skyy Vodka is the number one choice of bartenders for the ultimate mix of style and taste. While Smirnoff and Absolut continue to lead in market share, we want to differentiate Skyy among these competitors by emphasizing both of these attributes. We plan to reposition the brand as a “step up” from all other vodka. We aim to highlight the smooth, stylish, and sophisticated features of Skyy Vodka and make it the spirit-of-choice among young professionals.

In its distinctive blue bottle, Skyy comes in six different vodka flavors, offering a taste to satisfy every vodka drinker. With this all-embracing product line, we will introduce Skyy as the vodka-of-choice for martini drinkers. Our goal is to change the consumer’s perception of the brand by repositioning it as a “step up” for the young professional. We aim to increase trial among this new target market, and increase purchase intent through product differentiation. We ultimately strive to increase sales and awareness and gain market share in the vodka category.

Situational Analysis

I. Environment Analysis

1. Economic forces

Overall the amount of disposable income has been increasing over past couple years. According to Bureau of Economic Analysis, Real Personal Disposable Income per Capita is generally increasing since 2005. On August 2005, the income per capita was little over $26,750 and on September 2007 the number reached $28,750, more than $2000 increase in two years. Personal Income and Personal Consumption Expenditure has also increased over last several months in 2007, average of .4 points increase each month.

2. Legal and Regulatory forces

Due to the rising criticism on advertising exposure of Alcohol Beverages to underage, Federal Trade Commission (FTC) has set ALCOHOL INDUSTRY ADVERTISING CODES. The codes are set so that alcohol beverage companies are responsible for placements and contents of their brand advertising and marketing promotions, such as that all marketing materials are intended for adults of legal purchase age of beverage alcohol, and that at least fifty percent of the audience is expected to be above legal drinking age of beverage alcohol. There are also other restrictions such as that the codes “prohibit the use of certain characters or people in alcohol ads: actors under 25 (Beer(21)); children (Spirits(22)); Santa Claus (Beer and Spirits(23)); actors who appear to be under 21 (Beer and Spirits(24)); actors who appear to be under 25 (Wine(25)); and sports celebrities or вЂ?current or traditional heroes of the young’ (Wine(26)).” FTC also has conducted a series of studies on Alcohol Advertising and Marketing. The study focuses on self-regulation practices in alcohol industry. Two studies has been released in past (1999 and 2003), and currently FTC is working on the third study.

Distilled Spirits Council of the United States (DISCUS) also set Codes of Responsible Practices for Beverage Alcohol Advertising and Marketing. The codes are developed by DISCUS member companies (including SKYY Spirits Inc.) in order to “provide guidance to all those involved in the promotion of their respective brands” DISCUS releases Code Report twice a year. Even though there are minor differences between the codes set by DISCUS and FTC (such that DISCUS expects seventy percentage of the audience to be legal purchasing age), those follow similar regulatory principles; mainly focus on Advertising Placement and Content.

3. Cultural forces

According to the poll conducted by Monmouth University Polling Institute in 2007, 87% out of 801 samples think that alcohol is a major factor of youth violence.

II. Product Analysis

1. Overview

Founded in 1992, Skyy Spirits has the top domestically made US vodka. Skyy employs the technology of quadruple distillation and triple filtration in order to achieve “ultimate smoothness” (www.shopping.com). Skyy Spirits claims that “the distilling process eliminates toxins, results in cleaner vodka that makes the morning after less painful.”

2. Product Line

Skyy offers a different taste for every vodka drinker. There are six vodka flavors including the original Skyy Vodka, Skyy Melon, Skyy Citrus, Skyy Vanilla, Skyy Orange, Skyy 90, and Skyy Berry. For a blend of lemon, lime, and all-things citrus, the refreshing Skyy Citrus Vodka is perfect for crisp and delicious cocktails. Skyy Vanilla adds a perfect touch of spiciness and sweetness for a more exotic cocktail. Or, there is Skyy Berry for a scrumptious blend of berry flavors. For a light flavor, Skyy Melon has a unique mix of mouthwatering sweetness. Skyy Orange gives a burst of succulent flavor. Skyy90 is an exceptionally luxurious, using the finest ingredients to deliver superior taste in the most modern design.

3. Pricing & Distribution

A 375ML bottle of Skyy Vodka usually averages between $15 to $25 in the United States. Company distributes Skyy Vodka nationally and in more than 100 markets outside of the United States. Skyy Spirits also distributes outside brands. Skyy is the exclusive US importer for Campari, Cutty Sark Scotch Whisky, Cinzano vermouths, and other spirits. As of May 20, 2007, Skyy Vodka sales reached 61.2 million dollars, about 6.4 points increase from prior year.

III. Industry Analysis

The Alcohol Industry has been a thriving part of global culture for decades, vital to this nation’s economy and a significant part of its history. Currently, Skyy Vodka’s direct industry вЂ" distilled and blended liquors вЂ" is valued at approximately $95 billion. Furthermore, the industry continues to grow in America, as seen in the 3.1% increased consumption between 2003 and 2004. Vodka sales rose 4% over the year as well. Unfortunately, global sales appear to be falling at a very similar rate, with Tequila being the only category to rise in the last 10 years. Vodka has been the most stable, losing only 0.7% of sales over the 10-year period.

The Alcoholic Beverage industry is currently dominated by a few very large companies, which in turn branch off and offer a variety of