How the flavorless, colorless, odorless spirit became a billion-dollar business
Aug 15, 2011, Vol. 16, No. 45 • By VICTORINO MATUS
Unemployment once again has crept past 9 percent. GDP growth fell below 2 percent this last quarter. Inflation is up. Home values are down. There’s talk of a double-dip recession. According to one market analyst, “We’re on the verge of a great, great depression.” But through it all, there is one constant, a commodity that has not only survived during these harsh economic times, but even thrived.
Alexander Tamargo / Getty Images for Belvedere Vodka
The next time you visit a bar, see if you can count on one hand the number of vodkas on the shelf. Chances are you’ll need both hands, and possibly feet. The bar at the original Pizzeria Uno in downtown Chicago contains 13 different vodkas: one bottle of Skyy, one bottle of Smirnoff, four flavors of Stolichnaya, five flavors of Absolut, one Ketel One, and one Grey Goose. At the T.G.I. Friday’s in Reagan National Airport outside Washington, two shelves are devoted to 14 varieties of vodka. Meanwhile, Boston’s übertrendy 28 Degrees restaurant boasts an astounding 22 bottles (13 brands, 15 flavors).
According to the Distilled Spirits Council of the United States, there are currently about a thousand different brands of vodka in existence. Keep in mind that the Alcohol and Tobacco Tax and Trade Bureau defines vodka as “neutral spirits [alcohol produced from any material at or above 190 degrees proof] so distilled, or so treated after distillation with charcoal or other materials, as to be without distinctive character, aroma, taste, or color.” Which means that a brand must often go to absurd lengths to distinguish itself from the rest of the pack. Consider Crystal Head Vodka, co-created by actor Dan Aykroyd, dispensed from a crystal skull and based on a mystical legend. Nostalgic for the Roaring Twenties? Pour yourself a glass of Tommy Guns Vodka, straight out of a bottle in the shape of a Thompson submachine gun. (Just ignore the fact that few Americans actually drank vodka in the 1920s.) Devotion Vodka contains a protein called casein, which contributes to a better “mouthfeel.” More important, it’s received the endorsement of Jersey Shore’s Mike “The Situation” Sorrentino. And of course, there’s the quintuple-distilled Trump Vodka: As its website proclaims, “Finally, a vodka worthy of the Trump name.”
It all sounds unsustainable, but as Jason Wilson, the author of Boozehound: On the Trail of the Rare, the Obscure, and the Overrated in Spirits (Ten Speed, 240 pp., $22.99) points out, “The largest liquor companies in the world haven’t launched more than five hundred flavored vodkas because no one wanted to drink them.” To wit, on your next trip to the bar, will you order a cocktail whose main ingredient is vodka? There’s about a one-in-three chance it will be. If so, will you order a generic vodka tonic, or provide a preference? These days, as any bartender will tell you, most customers specify.
Of course, it wasn’t always this way. Thirty years ago most people weren’t ordering vodkas by name, let alone brand-specific concoctions such as a Grey Goose Cosmo or, as a friend of mine unashamedly orders, Stoli Raz and Sprite. So how did we get here? For 200 years the United States was a brown-spirits nation, and our culture was dominated by whiskey and bourbon (think of Kentucky’s famed Bourbon Trail, Jack Daniel’s, the Whiskey Rebellion of the early 1790s). This is not to say that Americans were completely ignorant of vodka’s existence: One of the earliest mentions of it in the New York Times dates back to 1871 (a profile of a Russian prince written by a Times correspondent in St. Petersburg), and Russia’s legendary vodka maker Pyotr Smirnov sent his bottles to both the 1876 Centennial Exhibition in Philadelphia and the 1893 Chicago World’s Fair, where it won medals. But, writes Linda Himelstein in The King of Vodka: The Story of Pyotr Smirnov and the Upheaval of an Empire (Harper, 416 pp., $29.99), “When it came to hard liquor . . . Americans preferred bourbon whiskey. Vodka was still mysterious, a drink yet to be discovered.”
That wouldn’t happen until after Prohibition. In 1934 the first American vodka distillery was established in Bethel, Connecticut. Businessman Rudolph P. Kunett secured the rights to the (now Westernized) Smirnoff brand from Pyotr Smirnov’s son Vladimir, who managed to escape the Bolsheviks and was living in France. In the early years, however, Smirnoff vodka, which sold for $1.75 per bottle ($29.48 today), didn’t catch on. Kunett sold a mere 1,200 cases the first year and was able to boost output to 5,000 cases in 1939, which, Himelstein reports, “accounted for the total amount of vodka produced in America, but it was not nearly enough. . . . Kunett was on the brink of bankruptcy.”
Another distributor, G. F. Heublein & Bros., based in Hartford, purchased Smirnoff from Kunett in 1939 for $14,000. But as noted in The King of Vodka, “Heublein was also struggling, relying on its one notable food product, A-1 steak sauce, for most of its revenue.” It wasn’t until after World War II that Smirnoff’s (and vodka’s) prospects began to improve. In a story told many times over, Heublein’s chief, John Martin, and the owner of the Cock ’n’ Bull bar in Los Angeles, Jack Morgan, came up with a drink called the Moscow Mule—vodka, ginger beer, lime—in 1946. By the 1950s the drink was a hit, and more and more Americans began downing vodka.
Not everyone was pleased with this trend. In Between Meals (1959) A.J. Liebling recalled that
And in a 1958 revision of his bestselling The Fine Art of Mixing Drinks, David Embury described vodka as “a wholly characterless, dilute grain alcohol that has streaked across the firmament of mixed drinks like Halley’s Comet. . . . It is hard to conceive of any worse cocktail monstrosity than the Vodka Martini, the Vodka Old-Fashioned, or Vodka on Rocks.” Never-theless, Embury noted, “In the last half of 1950, the first period for which figures were published by the federal government, there were less than 387,000 gallons of vodka bottled in the United States. For the year 1955, that figure had jumped to almost seven million gallons.” Last year, according to the Distilled Spirits Council, Americans spent more than $19 billion on vodka, which translates to 59.4 million cases or 141 million gallons.
Part of the reason for vodka’s popularity is precisely its flavorless, odorless nature. Reprinted in the King of Vodka is a 1934 letter from Vladimir Smirnov to his importer in which Smirnov assures his associate that vodka is “the ideal base . . . because of its clarity and freedom from artificial flavor, it blends harmoniously with the Vermouths, Grenadines, bitters, fruit juices, and other ingredients.” As one craft distiller told me, “Vodka is just plain, simple, very easy to make, very easy to use at home, very easy to use in the bar. And that is essentially the success of vodka, because people, all they had time for, was grab some orange juice, grab some vodka, and pour it in, half and half, done.”
The other component was marketing. David Embury concedes:
Smirnoff also garnered celebrity endorsements from the likes of Woody Allen, Eva Gabor, and Groucho Marx.
But perhaps the greatest marketing coup for Heublein was a product placement in the first James Bond movie, Dr. No (1962). Dr. No serves Agent 007 a vodka martini, famously “shaken, not stirred,” and the vodka of preference is Smirnoff. It’s a strange way to make the cocktail, according to Jason Wilson, drinks columnist for the Washington Post: “A martini should always be stirred,” he writes. “That’s the only way you can achieve that silky smooth texture and dry martini clearness . . . a shaken martini is a weaker drink.” And don’t get him started on vodka substituting for gin: “There simply is no such thing as a vodka martini. The martini is certainly more of a broad concept than a specific recipe, but the one constant must be gin and vermouth. Beyond correctness, vodka and vermouth is just a terrible match.”
Nevertheless, the drink caught on, and by 1967, vodka had overtaken gin as the most popular white spirit in America. Keep in mind that, through the 1970s, 99 percent of all vodka consumed in America was also distilled here. The only imports were Stolichnaya from the Soviet Union and Finlandia. Stolichnaya dominated as an import thanks to an agreement struck between Pepsi-Cola and the Soviet Union in 1972 in which, in lieu of payment, the Soviets gave Pepsi import rights for Stoli in return for Pepsi. But outside of Stolichnaya, Finlandia, and Smirnoff, the vodka scene was bleak.
Michael Roper, owner of Chicago’s Hopleaf bar and restaurant, recalls what bartending was like in the early seventies. While Smirnoff was considered top shelf, he remembers lesser varieties such as Nikolai, Arrow, Wolfschmidt, and another brand that was then ubiquitous called Mohawk. “Mohawk was cheap, cheap, cheap,” Roper remembers. “Mohawk had a factory just outside Detroit along the expressway and . . . all their products were made there. It’s almost like they turned a switch—whiskey, vodka, gin. And it was all junk.” Still, by 1976, vodka had surpassed bourbon and whiskey as the most popular spirit in America. Roper attributes vodka’s rise partially to women, who started drinking more spirits and ordering them on their own: “Women were not going to like Scotch—that was for cigar-smoking burly men,” he speculates. “And . . . it was unladylike to drink Kentucky whiskey. But it was considered somewhat ladylike to have a fancy cocktail with an olive in it.” He also remembers when a salesman first brought Miller Lite into his bar, explaining “it’s for women.” In a similar vein, Roper considers vodka a low-calorie option with “a less challenging flavor.”
Others look to countercultural factors. “You don’t drink an Old-Fashioned if your dad drank an Old-Fashioned, because you’re a hippie,” one bartender has observed. “You can’t see a hippie going, ‘I’ll take an Old-Fashioned.’ It just doesn’t even make sense.” The industry received another jolt in 1979 when a small New York company, Carillon Importers, introduced a new vodka to the market. Initially, it received a cold reception: Prior to Carillon, the distillers had been rejected by all the major distributors, such as Hiram Walker, Seagram, and Brown-Forman. Bartenders complained that the bottles were difficult to handle because their necks were too small. Worst of all, the vodka was not Russian but Swedish—and what do Swedes know about vodka? Even the name seemed misspelled: Absolut without the “e.”
Of course, the Swedes know a lot about vodka. Absolut had been distilled since 1879; and in fact, its inventor Lars Olsson Smith, whose image graces each bottle, came up with the process of rectification, which removed many of vodka’s impurities. But as pure as Absolut was, it needed to be exported in order to survive. Not only did it have the good fortune of landing Carillon as its importer but, eventually, TBWA as its ad agency. In Absolut Book: The Absolut Vodka Advertising Story (Journey Editions, 288 pp., $34.95), TBWA’s Richard Lewis, who handled advertising for the Swedish vodka, remembers the challenge of designing an ad for his client: “Somehow they had to establish that Absolut was the best vodka on the market, without actually saying that in an ad,” he writes. “That kind of advertising claim—‘This is the best [whatever] that money can buy’—is both boring and unpersuasive.”
Lewis explains how it finally came about:
It took a few years, but the advertisements caught on. One of the tricks was photographing the bottle not with a typical black background but with a matte Plexiglas, giving the bottle a luminous glow. Still, by the end of 1984, Hayes and Turner worried that they were running out of superlatives and came up with an alternative image: a series of light bulbs in the shape of the bottle and the words ABSOLUT STARDOM. The concept allowed them to branch out—they no longer relied on an actual glass bottle but crafted images in the shape of their product, such as ABSOLUT PEAK (a ski trail) and ABSOLUT 19TH (a hole on a golf course). Each image, however, had to be carefully chosen: “They had to possess or reflect either a high value, such as gold, or an upscale activity, such as skiing or golf,” says Lewis. “It may not have been obvious to the reader, but we perennially strove to build upon Absolut’s premium image.” The agency’s other stroke of genius (aside from commissioning Andy Warhol to create ABSOLUT WARHOL) was to incorporate cities into the ads, beginning with Los Angeles in 1988 (a swimming pool in the shape of the bottle).
There have been more than 2,000 Absolut ads using, in Lewis’s words, the “bottle plus two-word headline” format, each one costing as much as $100,000 and involving elaborate scale models (ABSOLUT MIAMI—a miniature art deco hotel on South Beach—may be the most impressive), but it was well worth the cost, as Absolut eventually overtook Stolichnaya in U.S. sales. By the 1990s it also became the most expensive vodka on the market, priced around $15. That would change, however, in 1997 when the late importer and marketing genius Sidney Frank unveiled a new vodka distilled in France and costing twice as much as Absolut. Frank told New York magazine that he called his associate early one Sunday morning in the summer of 1996, telling him, “I figured out the name! It’s Grey Goose!” New York’s Seth Stevenson picks up the story:
And it was quite a story. As Frank explained to Inc. magazine, “I said, France has the best of everything. I asked the distiller there whether they could make a vodka. They said sure.” Then in 1998 the Beverage Testing Institute awarded Grey Goose the title “World’s Best Tasting Vodka,” a moniker that would find its way (along with “Distilled and Bottled in France”) onto each bottle.
“It was a case of almost perfect aspirational marketing,” says John Frank, Sidney’s nephew and current vice chairman of the Sidney Frank Importing Company. “We wanted to provide consumers with affordable luxury and knew that the product had to be of the highest quality with exquisite packaging but also that the timing had to be right.” In short, “Grey Goose was the right product for the right time, but it was also the culmination of 25 years of building brands and a strong sales and distribution organization.”
By 2004 Grey Goose was churning out 1.5 million cases annually (ahead of Absolut but behind Smirnoff). The product also received a boost when the characters on Sex and the City began ordering not just Cosmopolitans but Grey Goose Cosmos (Grey Goose L’ Orange, Cointreau, cranberry juice, lime, orange twist). In 2004 Bacardi acquired the vodka for $2.3 billion and, at 85, Sidney Frank finally achieved his goal of becoming a self-made billionaire.
Vodka was no longer viewed as a mere mixer; it had become a status symbol. As Noah Rothbaum, author of The Business of Spirits: How Savvy Marketers, Innovative Distillers, and Entrepreneurs Changed How We Drink (Kaplan, 189 pp., $24.95) says, such successful branding is “not an easy thing to do, considering there is nothing romantic about how vodka is made. But consumers were convinced by slick marketing and high prices that vodka was particularly exotic and valuable. The vodka companies then bolstered their appeal by using flavorings, which made the spirit more palatable and attracted new drinkers.”
Not that every distiller is on the make. When Robert and Sonat Birnecker left their comfortable jobs in Washington three years ago to open Koval, Chicago’s first boutique distillery, vodka was not exactly on their minds: “We had a very good idea in terms of fruit distillation, what we wanted to produce, but unfortunately we had missed fruit season,” says Robert, a native of Austria. “So we said we can’t wait a year and sit around and do nothing. We have to start with grains. And then we said, okay, we’ll do white whiskeys, vodka, and liqueurs”—all of which proved popular.
“We got lucky,” he adds. Koval now sells roughly 5,000 cases a year, and only about 400 of those are vodka. Robert stresses that, as artisans, he and his staff of seven do not envision producing a million-plus cases a year like Grey Goose, but something closer to 15,000-20,000. “You can go up to a certain amount of people working for you, and a certain amount of production, to still make sure everything stays at the same quality,” says Robert. “But once everything turns into a more industrial process, you lose that quality aspect, unfortunately.” Good thing the Birneckers have no intention of challenging the giants, for such a task would be nearly impossible. “Here’s the problem with the vodka market,” explains Robert.
(Koval Vodka costs $39; Svedka runs about $16.)
There’s an earnestness to the operation, which I recently toured. Their 3,000-square-foot facility in the Ravenswood-Andersonville neighborhood north of downtown Chicago will soon encompass a second building. In the same room as the vats of mash and the enormous still imported from Germany you will find a long wooden table cluttered with papers and laptops that serves as Koval’s office. A little plastic table and chair belonging to the Birneckers’ toddler son Lion are propped next to it. “It’s his office,” jokes Robert, who also points out that the space currently housing the gift shop was once Lion’s playroom: “People thought we had day care at the distillery.” One of Koval’s most popular products is an organic whiskey called Lion’s Pride, and the Birneckers’ second son is Rye—the grain they use to distill a variety of whiskey and all of their vodka.
Michael Roper, the owner of Hopleaf, says there’s a homespun quality to Koval. He remembers when, several years ago, Sonat Birnecker entered his establishment, pushing Lion in a stroller. “She went up and down Clark Street with the baby carriage, and there were bottles underneath, where most people put their diapers and stuff,” he recalls. “It’s like someone coming in saying, ‘You want to try some of our applesauce?’ but instead, ‘You want to try our vodka?’ We’re only a couple of blocks away, so they sold it to us as a kind of neighborhood thing and it was fun.”
There is a certain intimacy within the craft distilling community. During my visit, a distiller from another state had mailed Robert a mason jar of white whiskey hoping he could figure out what was wrong with his batch: Much like the early California wine growers, the craft distillers often share tips and secrets with each other. Three times a year the Birneckers hold seminars on distilling, each consisting of about 35 attendees from across the country. According to the American Distilling Institute, the number of craft outfits has grown from 50 in 2002 to 240 today.
But for those strictly focused on the vodka business—what Dan Aykroyd calls “only the most challenging arena in the legal recreational consumables industry”—it takes more than just a good story to move your product. “One of the lessons the industry learned from Grey Goose,” writes Noah Rothbaum, “was that consumers are impressed by reverse labels, frosted glass, and distinctive bottle shapes.” But how far does one go? A vodka contained in a glass skull or dispensed from a replica tommy gun? Wyborowa commissioned Frank Gehry to design a new bottle for its single-rye vodka.
And then there are the endorsements. Whereas Smirnoff once touted people like Groucho Marx and Woody Allen, Stolichnaya runs commercials now featuring Hugh Hefner and Julia Stiles. Americana Vodka, an upstart from Scobey-ville, New Jersey (produced at Laird’s, the oldest family distillery in the nation), has quarterback Dan Marino on its side. Even value brands can garner endorsements: Sobieski, found in the well at Hopleaf, has Bruce Willis as its spokesman. But knowing just how lucrative the vodka business can be, some celebrities won’t simply endorse; they want to be partners. Ciroc, a French vodka distilled from grapes and owned by liquor giant Diageo, negotiated a partnership deal worth more than $100 million with Sean “P. Diddy” Combs, who explained at the time, “I’m not just a celebrity endorser. I’m a brand builder.”
Laugh all you want, but he really is: According to a 2010 report in the Financial Times, “In the first six months of 2007, before Mr. Combs signed on, Diageo sold 60,000 cases of Ciroc. The following year, sales grew to approximately 169,000. In the full year ended June 2009, volume spiked to 400,000 cases. Sales rose another 48 percent in fiscal 2010, according to Diageo’s earnings statements.” (None of this is new, of course. Pyotr Smirnov spent years trying to earn the czar’s blessing, finally gaining Alexander III’s endorsement in 1886. “The very next day,” writes Linda Himelstein, “Smirnov ordered that all his labels be changed to carry the new distinction.”)
As might be expected, America’s obsession with vodka has led to a certain pushback within the drinking community. The return of classic cocktails and the rise of craft bartending has meant a rejection of vodka and rediscovery of whiskey, gin, tequila, even absinthe. At the speakeasy lounge PX in Alexandria, Virginia, patrons are encouraged to try exotic concoctions such as Smoker’s Delight (tobacco-infused tea, honey, bourbon, lemon juice, water) and other libations involving house-made bitters. Tucked inside The Passenger bar in Washington is another, more exclusive, watering hole called the Columbia Room, considered by GQ to be one of the best cocktail bars in the country. It is run by “master mixologist” Derek Brown who, also according to GQ, makes one of the best martinis in America. A few months ago, on a Saturday afternoon, I sat with Derek in the Columbia Room and asked his thoughts on vodka.
“To us,” he replied, “the important thing is that we make a great drink. And vodka is capable of that. But it is the chicken breast of cocktails. It is the most boring, least thoughtful, sort of one that you can mix with. For a craft bartender—someone who believes in humanity—this stuff is just a joke and will fade away.” Derek is respectful of customers who order vodka drinks—his bar carries only one brand, which he refused to reveal—but will find ways to steer them toward alternatives such as gin which, he says, “is just flavored vodka. It just happens to be a very good flavor of vodka.”
And while Derek Brown considers many of the new vodkas to be scams—“Essentially charlatans are making some of the crappiest vodkas that exist, and they’re putting them in different shaped bottles with really nice looking labels”—he is hopeful about the impact of craft distillers: “They’re changing the way people look at vodka. You have High West Whiskey or Oat Whiskey, which is in some ways a vodka. I mean, they call it a whiskey, it’s barrel-aged, but it’s a neutral spirit. . . . You see people who are producing flavorful vodkas. That doesn’t meet the Tax & Trade Bureau’s assessment of what a vodka should be, but it certainly is what a vodka can be.”
“So you want to do a vodka tasting?” he asked me. A few minutes later he returned from the next-door Passenger bar with two sets of four tall shot glasses, each filled with room-temperature vodka. “You do best to expectorate,” he suggested, meaning that I should swish it around but not ingest. And he would know: Derek regularly serves as a judge on spirit tastings and estimates that, over the last three months, he’s sampled at least 60 different vodkas.
One shot at a time, we compared notes about a vodka’s purity, clean mouthfeel, hints of oat, banana, or citrus. There were differences between the shots, and once I arranged them in order of preference, he revealed their identities. My favorite (which I found to be sweet, citrusy, and with only a slight burn) was Skyy, a vodka I actually do enjoy. Second was Stolichnaya (almost minty). Third was an artisanal vodka called Smooth Ambler (which has those hints of aforementioned banana but felt a little rough around the edges). Much to my surprise, my least favorite turned out to be Ketel One, a vodka I would normally choose over Stolichnaya. But perhaps this shouldn’t have come as a surprise. In 2005 the New York Times conducted its own tasting of 21 super premium and craft vodkas. The coordinator, Bernard Kirsch, however, had secretly inserted Smirnoff into the mix.
Take a guess which vodka was judged the favorite.
At the turn of the last century, the Russian government commissioned the Central Chemical Laboratory, under the direction of the Ministry of Finance, to investigate the vodka industry. The report, noted in The King of Vodka, revealed that “the product’s reputation doesn’t always depend on the quality. . . . Very often, the product’s reputation depends on its harmonious name, bottle’s shape, colorful label, or just a more expensive price of the product.” The Russians were on to the vodka game, but there wasn’t much they could do about it.
A century later we’re still playing the same game—and there still isn’t much we can do about it. At the Columbia Room I joked with Derek Brown about the one vodka his bar carries. “I take it that it isn’t Crystal Head Vodka,” I said. “No,” he chuckled, “although I did get the Crystal Head the other day. And what’s funny is that I was on the panel at the San Francisco World Spirits Competition, and I think it got a gold medal.”
Actually, it won Double Gold.
Victorino Matus is a senior editor at The Weekly Standard.
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