Ketel One Finally Hits the Bottle

The Dutch vodka brand known for mysterious ads unveils a campaign that shows the bottle for the first time as it seeks to break out globally

In the pages of the April issues of Esquire and Food & Wine magazines, a Ketel One vodka ad sports the headline "Dear Ketel One Drinker—One Thousand Words." If it weren't for the unexpected image of the Dutch vodka's bottle, the first time in the five-year-old campaign that the bottle has been shown in ads, the ad copy would be as puzzling as so many other Ketel One ads that have beguiled and confounded readers.

It's a long way from one of those bottleless ads, which drew catcalls and howls in the advertising blogosphere: "Dear Ketel One Drinker—Can we just say, you looked great the other night." Eighty-five percent of that ad was white space, yet it cost, by some estimates, about $140,000 to place in Sports Illustrated.

Ketel One's first bottle sighting in its ads this month comes an astonishing 15 years after it launched in the U.S. The cryptic creative strategy from ad agency M&C Saatchi (SAA.L), while an affront to some business-school ad professors for all the "wasted" white space, has nevertheless helped propel a 47% sales increase since 2003 to 1.9 million cases sold last year. But Ketel One, owned by the Dutch Nolet family since the 1600s, is now embarking on a worldwide expansion with a new distribution partner, British drinks giant Diageo (DEO), which appears likely to make the brand a bit less mysterious in the next few years. The challenge confronting the Nolets is finding a way to retain the mystique that comes from not being understood by everyone while striving to double sales in the next five years with Diageo's help.

Diageo is rolling the dice that Ketel One's growth will return more and faster profit than it could have generated by paying up for Absolut's 10 million-plus cases a year. Diageo, which also owns the lower-priced Smirnoff vodka, ceded the recent auction of Absolut to Pernod Ricard (PERP.PA) for $8.9 billion. Instead of waiting to snap up rights to the premium Russian vodka Stolichnaya, which competes head to head with Absolut (Pernod is forced to divest its distribution rights to Stoli after buying Absolut), Diageo paid $900 million for half the global distribution rights to Ketel One. Ketel One is generally priced between $25 and $30, about 20% above Absolut, and is considered a superpremium vodka. "The business has gotten to the point where it's awfully hard for independent companies to play globally," says Bill Eldien, CEO of Nolet Spirits USA, about the reason for the hookup with Diageo.

Discovering the Brand

The Nolets' deal leaves control over Ketel One advertising with them. Despite being in 24 countries, Ketel One still only advertises in the U.S. In overseas cities such as London and Paris, the brand is in limited bar and liquor store distribution by design, just as it was in the U.S. for a decade before launching its first ad campaign. When Carl Nolet Jr. built up the business in the U.S., he would get 25 of the top bars in cities such as New York and Miami to carry it, enlist bartenders to push it to customers, and then move on to another city. He calls it "discovery marketing."

Now, advertising is going to play a bigger role overseas, as it has in the U.S. where the Nolets have been spending around $10 million to $15 million a year on print ads. Is the U.S. campaign, lambasted once by blogger as "cultural puke," exportable? M&C Saatchi's North American CEO Huw Griffith says it's still an unresolved issue. "The campaign has been polarizing, and when you are in a small niche, as we are, that has been an effective strategy," he says. But, he says, the issue of how to advertise overseas has not yet been decided.

Some experienced ad executives believe the campaign will work well adapted to other cultures.

Rick Boyko, director at the Virginia Commonwealth University Brand Center and former chief creative officer at Ogilvy & Mather, says it would be a mistake not to extend the campaign internationally. "The attitude in the ads, which does a great job of inviting the consumer into the brand rather than selling it, can translate into any language."

But just how effective has the often enigmatic advertising been in the U.S.? Between 2003 and 2006, Ketel One grew 41% in the U.S., according to Adams Liquor Handbook. That compares with 91% for category juggernaut Grey Goose. But it handily beat the 13% growth for Stolichnaya and 8% for Absolut, and at a time when more than a dozen new or recently established superpremium vodkas were fighting for shelf space. "Ketel One has done an interesting job of standing out in a category where there has been a dizzying amount of new product activity," says David Ozgo, senior vice-president of economic and strategic analysis at the Distilled Spirits Council, the liquor industry's trade group.

Advertising on Gut and Tears

The campaign's origin speaks to how much the brand runs in the veins of the Nolet family. In 2003, M&C Saatchi pitched the campaign on a single poster, lots of white space, no bottle, and a headline written in the Gothic-looking Bradley typeface: "Dear Ketel One Drinker. Thank you." CEO Eldien says Chairman Carl Nolet Sr. is very emotional about the product that's been made by his family since the 17th century and that he actually wept. Other agencies, said Eldien, showed ads that either featured brand history or sex. "The complete simplicity grabbed all of us and hit exactly the right chord," recalls Eldien.

Diageo, with $20 billion in annual revenues, a lot of brands to look after, and nearly $1 billion invested, is not known for supporting ad campaigns off a gut check. But Phil Sawyer, senior vice-president of GfK Starch, which analyzes the effectiveness of print ads, says plenty of hard evidence suggests that Ketel One's quirky approach has helped ring the register.

An interactive, if cryptic, print ad that ran in Esquire last year, carried the headline "Dear Ketel One Drinker—There comes a time in everyone's life when they just want to stop what they're doing and…" The ad, which seemed to invite readers to write in their own idea, tear out the page, and put it up in their office, generated a 66% higher rate of readers sharing the ad with others than a level most advertisers would be happy with. A bottleless ad in Vanity Fair of the "what-the-heck?" variety, with the headline "Dear Ketel One Drinker, Hello Again" and 90% white space, scored 20% above average when readers were surveyed for remembering the ad vs. other liquor ads. An ad in Golf magazine, where readers are perhaps more practical and less whimsical, though, scored well below average. "The better they match the tone of message with the different readerships of magazines, the better [the ads] seem to do," says Sawyer.

Nolet, says Eldien, gets inquiries from ad agencies almost monthly trying to poach the business from M&C Saatchi, each making their case for why the company is wasting its ad budget. But some ad agency creative executives say M&C tapped into a smart strategy in a world increasingly with ads plastered on everything from gas pumps to elevators. "All that white space gives the reader a breather and a compelling reason to engage in the ad," says Andrew Langer, chief creative officer at Roberts & Tarlow, New York. He adds, "There is an age-old battle between art director and client over white space, with the art director wanting to use it, and the client wanting to fill it."

Still, Starch's Sawyer says that it is somewhat surprising that the approach has worked in the U.S.

"Americans don't tend to like ads that make them say, 'What the heck was that supposed to be?'" In Europe, he notes, it could do even better because British, French, and Scandinavian consumers don't like "obvious hard selling." The irony, though, is that the ads might have a tougher time standing out in that edgier ad environment.

Is adding the bottle to Ketel One's ads likely to help demystify the brand without robbing it of its mystique? Starch's Sawyer says the new April ads scored "considerably above average" when it comes to how much magazine readers noticed the ads and elevating readers' positive disposition toward the brand. "This is a level of performance that is far beyond what we had seen from Ketel One before, when it didn't show the bottle," he says.

Sticking Its Neck Out

Nolet's Eldien says that besides the decision to take the campaign global, the company has also been looking at extending it to television. Ad concepts have been created, but none approved yet. While the Nolets have retained ownership of the brand and have final say on ad plans, Diageo will have a voice as well. "They [Diageo] had a lot of questions about ad strategy," says Eldien with a laugh. Diageo executives wouldn't comment because the deal is awaiting approval by government regulators. But one executive involved in Diageo's study of the brand said, "Let's just say we were really glad to see they were finally going to show the bottle."

Pernod Ricard spent almost $9 billion for Absolut, which sold 10.2 million cases worldwide last year. If Diageo is correct and can double Ketel One to 4 million cases annually within five years, it's an $8 billion savings. Passing on Absolut will look pretty wise from a return-on-investment basis, given the enormous profit margins on superpremium vodkas.

Why did Nolet finally decide to show the bottle in ads after five years? The answer is less interesting than the ads: a new bottle design. Ketel One's new bottle is taller with a longer neck to make it easier for bartenders to grab in an increasingly crowded bar well. The Nolets, and now Diageo, are already looking for any edge they can find over Absolut, which hasn't changed its bottle design despite hearing the same complaints for 26 years.

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