Scotch weathers the storm

Primed for Expansion, Scotch Producers Tap Subtle Variations for Significant Growth

By Jack Robertiello

t would be reasonable to assume that as the economy continues to stagnate, a spirit category dependent on Ilow price resistance would be in trouble. But that’s not the case with Scotch in the U.S. Driven by continuing innovation, more expensive line extensions and an international demand for high-quality products, ’s distillers are weathering the storm and resisting the age-old pattern of cutting prices—and quality—in the wake of economic turbulence.

Glenfiddich Distillery (left); Glenmorangie Casks (right) SCOTCHROCKS

In fact, Scotland is on a growth spurt a level of innovation is possible,” he that promises a steady supply of the fabled notes, “but without contravening any of amber drams. Wood aside, distillers the strict definitions for , While blended Scotch were enjoy only a few areas and most importantly, maintaining the down slightly overall (-1.4%) in 2010, wonderful image that Scotch whisky has according to results supplied by the of exploration, with earned globally.” Distilled Spirits Council of the United extended aging, Glenmorangie has been at the fore- States (Discus), the most expensive super- front of the wood-finish revolution, and premium blended brands skyrocketed cask-strength and Lumsden, who frequently visits Missouri (+26.3%) and high-end premiums grew forests to select stands of interesting oaks, by a healthy 5.5%. Single malts showed vintage bottlings being says they intend to continue to explore better overall—up 11.7%, and at the the main options “some tried and trusted aspects of innova- super-premium level they grew 16.8%. tion (such as extra maturation, a.k.a. wood Except for Irish whisky, single malts finishing), along with some rather more showed the best gross revenue growth had focused in the last two decades on de- alternative aspects of whisky production. among all spirits in the U.S. last year. veloping a market for expensive brand ex- There are still some exciting taste experi- (Discus defines super-premium Scotches tensions and limited releases, more atten- ences to be discovered, both in terms of the as those priced in line with The Macallan tion is now being paid to improving the previous liquid which the casks have held, 10-Year-Old, 18 and Johnnie middle tier, says William Grant & Sons and also the pedigree of the oak wood the Walker Blue, while high-end premiums USA Category Director Caspar MacRae: casks are constructed with.” include Black, Chivas “In the past there has been a lot of inno- Other companies continue to explore Regal, Dewar’s 12 and Glenlivet 12.) vation in this top-end area as many brands the possibilities inherent in wood quality. Not only U.S. results have buoyed pro- competed to establish their premium cre- Morrison Bowmore Distillers, owners of ducers, who are currently increasing pro- dentials, with some very conspicuous of- the repackaged and repositioned Glenga- duction capacity as the category expects ferings. Today the consumer and trade are rioch, Auchentoshen and Bowmore, con- healthy growth, particularly in emerging still prepared to purchase expensive items, tinue to invest much time and money into Asian markets, for years to come. Capac- but the value proposition has to be much selection of the right casks, says Hannah ity jumped more than 25 percent from more considered. Meanwhile, we are see- Fisher, brand manager for Auchentoshan, 2005 to 2010, according to UK research ing more innovation at more accessible with a dedicated team that selects casks group Euromonitor, as key players opti- price points.” an investigates other maturation possibili- mistically ramped up. Grant’s malts, and ties, including different finishes. Balvenie, have both continued releasing According to Jim Brennan—whose foresight required new expressions: Glenfiddich with a VP role at Remy Cointreau includes over- for growth limited edition Snow Phoenix and seeing single malts The Macallan and The three- to eight-plus years needed to Balvenie with a 14-Year-Old Caribbean Highland Park and the blend Famous develop a substantial supply of market- Cask. The latter is an example of the Grouse—innovation is now built into the worthy whisky means producers must direction many whisky makers have taken: Scotch whisky mentality. “The economic think decades in advance, and these days, employing a variety of barrels used to age difficulties have not changed the Scotch the thought is continued expansion. Dia- and other spirits to add a twist to or single malt categories significantly,” he geo, for example, last October opened a brand’s central flavor profile. Wood and says. “Innovation continues to play a role. their largest malt distillery yet, Roseisle. wood finishes aside, distillers have only That said, most of the growth is coming Pernod and William Grant & a few areas of exploration open to them, from core products and especially so for Sons, two major producers, also increased with extended aging, cask-strength and The Macallan.” capacity in 2010 by significant volumes: vintage bottlings being the main options. Distillers with large stores of older by more than 10%, while spirit continue to supply new iterations William Grant raised capacity 30%. options limited but to keep customers engaged. “Interest for Five other small distilleries have been creativity encouraged new products is very prevalent in Scotch,” built since 2005, including Kilchoman on While limited by strict laws about what says Adam Rosen, Director of Scotch, Islay and William Grant’s Ailsa Bay at can be done to tweak their whiskies, the NA. Diageo’s range—the various Girvan. Distilling capacity has also been Scotch rulemakers have made things Johnnie Walkers, plus single malts Caol increased at Glenlivet and The Macallan, somewhat easier, says Dr. Bill Lumsden, Ila, Lagavulin, Talisker, Oban, Cardhu and Glenmorangie has recently finished head of distilling and whisky creation and many others—gives them credibility efforts to increase output by 50%. for Glenmorangie. “The Scotch Whis- among consumers to offer new extensions With all that capacity, changes can be ky Association has made a big effort to using rare expressions or different casking expected at every level. While producers work with member companies such that methods, he says. SCOTCHROCKS

Diageo will soon be shipping the an- nual Classic Malts Distiller’s Editions, half a dozen or so older single malts and a limited number of natural cask-strength single malt whiskies dubbed Special Re- leases. This year the company also intends to introduce a special expression of the Gabe Cardarella, Dewar’s Pernod Ricard Colin Scott (left) and Stephen Webster, blend Buchanan’s. National Brand Ambassador creative director for Garrard with the $200K jewel-encrusted In a fairly unorthodox move, Balblair, one of the oldest distilleries in Scotland, ing that interest alive recently led mar- range. “Scotch is a sophisticated spirit. decided to switch over exclusively to vin- ket leader Dewar’s to redesign packaging It’s one that is traditionally introduced to tage bottlings. Instead of age statements, along their whole range—White Label, consumers through mentor relationships all of Balblair’s single malts are vintage- Dewar’s 12, Dewar’s 18 and Signature. often through a friend, a boss, or a family dated. Distillery Manager John MacDon- “Consumers may be drinking less but they member,” Rosen says. ald tastes each cask as it develops; they are trading up to more quality expressions In addition to wood finishes, distillers are bottled and released when he believes and we have that portfolio for anyone at have found favor among customers with the character of the whisky is just right, any budget,” says Gabe Cardarella, De- powerful cask strength iterations and non- not in any chronological order. For ex- war’s national brand ambassador. chill-filtered expressions, which are usually ample, the first to hit the U.S. market two Dewar’s is one of the few Scotch hazier in appearance but are admired by years ago were the 1991 and 1997; the makers promoting cocktails—in their some for their depth of flavor. (Chill-filter- 2000 and 1989 debuted last year and the case the Dewar’s Smash, served during ing reduces the temperature of the whisky 1969 will hit shelves in limited quantities hosted “Dewar’s Discovery” tasting events to around freezing and filters out some of in January. held around the country, where the focus the oils that will otherwise cloud the liq- is showing newcomers how mixable the uid when served cold.) Pernod Ricard will Blends get better blend is. At these tastings, guests get the soon be releasing a non-chill-filtered Ab- Buchanan’s is a good example of a once opportunity to taste the blend side by erlour expression as part of a limited cam- popular blend resurrected by demo- side with a version before it’s barreled paign to increase awareness of the brand graphic changes without much attention a final time, a process Dewar’s calls through PR and social media. from brand owners. Tremendously popu- “double aging.” lar in Mexico, it’s developing “explosive Diageo’s main focus in blends contin- bringing in new customers growth” among Mexican-Americans, ues to be on the various Johnnie Walk- Though there are many options for Scotch Rosen says. Pernod Ricard’s Ballantine’s ers—Red, Black, Gold, Green and Blue— whisky buyers, not all innovations have is another blended brand that has de- with current emphasis on recruiting new addressed customer interests, according to veloped popularity organically, not only users into the blended whisky franchise JC Iglesias, marketing director of Scotch among Latins but significantly with the through mentorship programs. Their and for Pernod Ricard USA. Asian-American market. House of Walker continues to tour the “A lot of what passes for innovation is a The growth of both brands shows country with events and tasting sessions distiller or blender trying something new there’s still life in blended Scotch. Keep- to introduce new whisky drinkers to the and we then present it to the consumer,” scotch whisky a selection of Scotch SCOTCHROCKS

he notes. “Going forward, we are going pricier products. “We have seen a sig- to try to understand what the consumer nificant shift towards high end, spe- needs a little more.” New types of cial release, limited edition releases,” packaging, especially those that address says David Robertson, director of different, perhaps more casual, drinking rare whisky for Dalmore. “Our suc- occasions, are among the ideas PRUSA cess has been with rare releases rang- is researching with consumers. ing in price from $150 to $150,000. New Whiskies on the Horizon Most of all, he says, it’s important Clients continue to demand the rar- for leaders like top-selling U.S. single est, the best, the most interesting, cotch producers seem constantly poised to malt Glenlivet, which underwent attractive and evocative releases. a packaging makeover recently, to Small boutique releases are selling out issue new brand extensions and one-offs, get more people into the category, incredibly quickly.” widely awaited by fans. Some limited se- S and one of the PRUSA approaches With the continuing wave of in- lections only reach a few retail shelves they are so is to try to demystify Scotch. “The terest among U.S. drinkers for rare tightly allocated. But some of the priciest iterations industry has overcomplicated things whiskies, even smaller brands like are rolled out for the long haul: Pernod Ricard USA a bit, giving people tasting notes that Glenrothes have an advantage these has returned attention to the once popular Royal can scare them off, as they once were days, says Nathalie Phillips, senior Salute with the intro of a $200K jewel-encrusted scared off by . We want to unlock brand manager: “The Glenrothes posi- bottling called Tribute to Honor. For the slightly less the mystery and not be precious about tions itself as the preeminent vintage well-heeled collector, October of this year brings it,” he explains. whisky. We are one their latest intro to the U.S. market, 62 Gun Salute, For Glenlivet, they’ll continue their of the only single malts that release a 40-year-old blended to retail at $4,000. PRUSA popular mentoring programs, with a whisky based on maturity, not age.” will also try to ramp up interest in single malt Aber- simpler approach for malt-ready novices The difference from vintage to vin- lour with a non-chill-filtered 12-year-old soon. not active in the category. The biggest, tage is based on cask selection and the William Grant & Sons has seen some success The Glenlivet Guardians, is a global length of time matured, and like the among younger consumers new to the whisky program designed to engage the novice, other limited editions, generally gets world in the UK and Europe with their Monkey mid-level and connoisseur at their levels allocated and disappears soon. Shoulder blend; Grant’s Caspar MacRae says the of comfort. The company will focus on It’s the popularity of whiskies like company looks forward to introducing the brand in four other brands—Chivas Regal, Royal these, once used almost entirely in the U.S. soon. Salute, Ballantine’s and Aberlour—in blends, that has inspired producers to One of Grant’s recent promotions promises the near future. For Chivas, the company expand and build new facilities. Some another new whisky, involving the Glenfiddich Cask this fall launches The 1801 House, whiskies disappear from the U.S. as of Dreams. “We rolled 11 casks through key US a series of invitation pop-up bars in their popularity grows elsewhere, and cities, allowing consumers to inscribe their aspira- different cities that Iglesias compares to there’s only so much old stuff for both tions and dreams on the barrels, in memory of our a trendy hotel bar, with entertainment blends and small bottlings. But that’s founder achieving his dream—creating Glenfid- and guided tastings. a luxury problem—one both producers Some distillers find that the road and retailers can look forward to dich. Those new oak casks have now returned to to innovation continues to mean continue enjoying. n Scotland, where they are finishing a special whisky for 2012,” says MacRae. Similarly, The Balvenie will roll out later this year a whisky—Tun 1401—made from six differ- scotch whisky a selection of Scotch ent barrels of varying ages, named after the mar- rying tun into which the barrels were emptied and aged for a few months, before being returned to barrels and then bottled. Next year, says MacRae, Balvenie is set “to unleash a treasure trove of ex- ceptional new whiskies at a range of price points.” Blend producers have been focusing on brand extensions, but Cutty Sark owners have plans for the near future to reinvigorate the brand, which continues to decline in the US. Glenrothes is currently shipping for the fall two Vintage bottlings, 1995 and 1988, as the popular 1994 and 1985 become extinct.