Vodka & iconic: the spirit that's made in Sweden, drunk everywhere and up for sale

For 100 years a version of Absolut vodka was produced and drunk in Sweden, barely registering in the world beyond its homeland. Yet since going global in 1979, it has become one of the biggest brands in the world, second only to Smirnoff in the premium vodka market. Its rise is largely due to a hugely successful advertising campaign, based on the simplicity of its name and distinctive bottle. Now, its owner, Vin & Sprit, is to be sold off by the Swedish government with an estimated price tag of £3bn and drinks companies are clambering over themselves for the jewel in V&S's crown. Absolut's advertising has run on the same consistent theme since 1979, making it one of the world's longest-running campaigns. Art work on the bottle by Andy Warhol ensured that it achieved iconic status.

David Wethey, of Agency Assessments International, said it was clever advertising rather than the product itself that has driven growth of the brand.

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"It is not an especially distinctive product," he says. "The marketing team hit upon a very clever and unusual form of advertising, which is a common theme that can be localised. It has translated brilliantly around the world.

"They are pioneers in the way they have taken a very big idea and let it rattle around in lots of different ways. Yet one of the reasons this model has not been repeated is that it requires an incredible amount of investment."

Yet the name Absolut has been linked with original marketing since it was first used nearly 130 years ago, by the entrepreneur Lars Olsson Smith, who became known as the King of Vodka. The origins of Swedish vodka go back even further, to the 15th century, when distilled wine, or branvin, was used widely in medicine and for making gunpowder.

In 1879, Smith began to use a distillation method called "rectification", where the spirit is passed through several purifying cylinders, and this is the method still employed today. The vodka was produced on the island of Reimersholmen, just off Stockholm, and named Absolut Renat Branvin or Absolutely Pure Vodka. Smith decided to challenge the city's liquor-marketing monopoly, by refusing to apply for a permit to sell his product there. Instead, he sold it at a lower price, just outside the city's border, even offering free boat rides to the distillery.

When the state monopoly Vins & Sprit took control of the industry in 1917, vodka continued to be sold under the name Absolut Renat Branvin, although Absolut was dropped from the title in the mid-Seventies.

However, as the vodka's centenary approached, the president of Vins & Sprit Lars Landmark decided to celebrate by creating a new premium vodka for export, which would be named Absolut. Using up-to-date distilling techniques, V&S wanted to create "a new product that was a century old". It set its sights high and decided to market Absolut to the US, which consumes 60 per cent of all vodka produced in the West - even though most of its inhabitants had never heard of Swedish vodka.

The breakthrough came when the advertising guru Gunmar Broman saw an old Swedish medicine bottle in an antique shop window and decided this recognisably Swedish item could represent the brand. Several designers were given the task to develop the design and the decision was taken to keep the bottle clear, with blue lettering.

An American firm, Carillion Importers, eventually saw the potential for the product and it went on sale in Boston in 1979, winning a prize for best packaging later that year.

But it wasn't until the international ad agency TBWA came on board that Absolut was powered into the global marketplace. It came up with the idea to base a series of ads on the bottle and its name. Absolut Purity became Absolute Perfection and a bottle with wings became Absolut Heaven and so on. The next coup was getting Andy Warhol to create a painting on the bottle in 1985. This assured Absolut worldwide attention and transformed it from a drink into a piece of pop art, the perfect beverage for aspirational consumers to show off with at dinner parties. Warhol's protégé, Keith Haring, was chosen for the second bottle painting, securing the link with the art world - to date, Absolut has commissioned more than 350 artists. Its 1,200 ads have become collectors' items and all of them feature the bottle, the distinctive seal or the word Absolut.

Neil Bennett, trends researcher at the brand consultancy The Future Laboratory, said Absolut's success was down to the way the company had sold the drink "as both a vodka brand and a lifestyle brand".

"Collaborations with brands, artists and designers are driven by campaigns that are created with similarities to fashion seasons. They simply communicate the brand's aspirations to be a brand of the creative and media generation in our ever-evolving 'knowledge society'," he said. "This further enhances their 'cool' leading image."

This creative approach to marketing, collaboration and advertising "is then successfully linked back to its iconic shaped bottle and brand heritage", he adds.

He points to Absolut's New York city "Apartment living" billboard as an example. "The billboard was in the shape of an Absolut bottle and was kitted out in real Ikea furniture to create a modern NY apartment, thus communicating both heritage and lifestyle," he says.

The drink's success is also due to the growing popularity of vodka in Western markets. Anne Nugent, head of alcoholic drinks research at Euromonitor, says vodka is "very much in vogue with young consumers" due to its use in cocktails. And the seemingly endless creation of different-flavoured vodkas only adds to its allure. It is the premium versions that are the most fashionable. In the US, there has been a slowdown in beer sales as the younger generation seek to differentiate themselves from their parents, Ms Nugent adds. Absolut's biggest markets are the United States, Canada, Greece, Germany and Spain.

Diageo's Smirnoff is the world leader with 5 per cent of global market share followed by Nemiroff, a Ukrainian standard vodka at 2.3 per cent; Absolut is third with a 2 per cent share. Every drop of Absolut consumed is made in the distilleries near Ahus, southern Sweden, where vodka has been produced for hundreds of years.

Last Friday, Sweden's centre-right government asked for formal permission to privatise V&S, following its pre-election pledge to sell off more state-owned industries. The Swedish government is the country's largest single owner of businesses. It is early days, and permission for the sale is not expected to be granted until May, but many companies have already thrown their hats in the ring. Analysts believe V&S to be worth around £2.9bn, although a company spokesman said this was a conservative estimate. V&S employs 2,500 people in 10 countries. Since 1996, its operating profits have increased 10-fold and its sales have tripled.

The head of Bacardi, Andreas Gembler, has said that Absolut would be a "jewel" for the firm and he has written to the Swedish government to express an interest. Paul Walsh, chief executive of Diageo, the world's largest drinks company, told The Independent last month that he would be interested, although some analysts have dismissed Diageo as a serious buyer on competition grounds. Other companies in the frame include the French conglomerate Pernod Ricard and Anheuser Busch.

The American giant, Fortune Brands, which owns Jim Beam bourbon, is thought to be a leading contender because it already has a distribution deal with V&S. However, a V&S spokesman said yesterday it was far from certain that a sale to another trade player was the best way forward. The company could be floated on the stock exchange or merged with another firm, he said. Private equity houses are also understood to be interested.

Meanwhile, V&S's chief executive Bengt Baron took the unusual step last month of warning the government not to rush into a sale and pointed out the firm was growing strongly as an independent company. The Absolut story is far from over yet.