Why Imported Whisky Is Booming
Lost beneath the hubbub about the boom in American whiskey are some exceptional numbers in the U.S. for the rest of the world’s whiskies. For example, while the spirits industry has grown accustomed to year-on-year growth from single malt Scotches, last year blended Scotch bottled in Scotland also saw a remarkable turnaround, growing more than 5% in volume.
Similarly, Irish whiskey, long driven by the strength of Jameson, has also continued to grow apace, with new brands and line extensions broadening the flavors, ages and price points available in the category. This is preparing the ground for brands on the way from the 20 or so new Irish distilleries in the process, at one stage or another, of producing whiskey.
And the Japanese whisky phenomenon, while small in volume, can’t be ignored – as soon as shipments arrive on these shores, they disappear – mostly to on-premise accounts, but with many specialty retailers grabbing their share as quickly as they can.
Overall, what’s happening as the American whiskey boom spreads internationally has important resonance for all producers. “The widespread boom in the bourbon and rye market has created opportunities for whiskey brands to attract a diverse set of consumers with new and innovative products, including different finishing methods,” says Sona Bajaria, VP, Marketing, The Glenlivet and High End Irish Whiskey for Pernod Ricard.
“The growth in this market has sparked recruitment and consumer interest that has allowed new drinkers to explore diverse and innovative options,” Bajaria adds. “However, this does present a unique challenge, in that differentiating the offering becomes of most importance.”
Northern Strength
Even Canadian whisky has started to see a change. Long a powerhouse category without much cachet, its volume (15.8M cases in 2015) far outpaces Scotch (9.1M) and Irish (2.9M), although much of that comes from lower-priced brands which have not participated as much in the premium and super-premium brown spirit resurgence (the category increased by 2.2 percent in 2015).
For Canadian, one of the main – if not THE most significant – growth drivers was the excellent year enjoyed by the category’s lead producer, Crown Royal. The Diageo brand grew more than 13 percent in 2015. Its importance is hard to overstate: Since 2010, Canadian has increased by 400,000 cases, even though it lost ground in the more value-priced U.S. bottled variants. At the same time, Crown Royal added 800,000 cases, offsetting all the losses within the category.
Some of that growth has been due to new and differentiated offerings under the Crown Royal brand: Regal Apple and Northern Harvest Rye, especially.
“We have a large footprint as one of the top five brands in the U.S., with consumers coming from different generations across the country,” says Jim Ruane, Brand Director for Crown Royal at Diageo. “That gives us a massive opportunity to bring education and new product knowledge to consumers who already know us.”
Crown Royal’s newer variants, including the recently introduced Crown Royal Vanilla, have been able to build on the surge in flavored American whiskeys. With different recipes – like Crown Royal Black, Crown Royal Select Barrel Coffey Rye, as well as flavored Canadians – the brand has taken trends already strong in American whiskey and made them its own. Gender and demographic lines have been blurred as flavor- and rye-inclined young consumers, especially women, migrate from vodka to brown spirits.
“Our recent success with the award-winning Northern Harvest Rye has been amazing, but we’re equally proud of our success in flavored whiskey,” Ruane says. “We believe consumers want quality whiskey products whatever the type, and the notion that the flavored whiskies are for the inexperienced drinker are incorrect. We’ve found whiskey drinkers, new or experienced with the category, are enjoying both.”
Second-largest import Canadian Club, from Beam Suntory, has recently added its own 100-percent rye iteration, and the distiller has found that its Alberta Rye Dark is also participating in the American whiskey-driven rye boom, says Nathalie Phillips, Marketing Director, Beam Suntory World Whiskies (Ironically, many of the so-called craft rye brands bottled in the U.S. are all Canadian).
As rye has grown in importance with the younger American consumer due to the cocktail renaissance, the massive amounts of so-called flavoring rye whiskies (popular Canadian brands commonly are blended, consisting mostly of light corn whiskey with Canadian rye and sometimes Bourbon added) are being bottled and presented as an alternative to the smooth and mellow style that Canadian whisky is otherwise known for.
“Alberta Rye Dark has been a real hit with the bartending community because of the rye Bourbon and sherry components, and they love to use that as a base,” Phillips says.
To double down on the growth and popularity of rye among American whiskey fans, Beam Suntory is directing salespeople to recommend to retailers that Canadian Club 100% Rye and Alberta Dark be shelved in the rye, rather than Canadian, sections of store.
“We’ve found it is the younger consumer looking for spicier or bolder spirits who is going right to the rye section and the way to reach these younger consumers is to make sure they can find it,” Phillips says. “Every store has its own footprint, but we ask our sales people to focus on the rye section – especially the larger stores, or more sophisticated stores in smaller markets.”
Suggesting retailers create an international rye category meshes with the cocktail strategies driving both these brands. “These newer consumers are coming into the category by different occasions, selecting what they drink based on who they’re with and their mood,” she says.
Pernod-Ricard, with Wiser’s, Lot No. 40 and Pike Creek, has both mass market and more niche Canadian brands, and their presence in the market helps broaden the entire international whisky category as well, with different levels of rye and finishes.
“We believe Canadian whisky is the last great frontier within the various whisky categories that is yet to premiumize,” says Ross Hendry, Brand Director, Craft Canadian Whisky & International for Pernod Ricard. “The category is perfectly poised with a growing number of brands and indeed new offerings from established brands ready to grow on the back of global recognition of the category through recent awards and accolades and growing consumer interest.
He believes the fundamental points of difference of Canadian whisky position it perfectly to attract the exploratory new whisky consumer. “We are proud of our Canadian whisky portfolio, which includes Canadian Whisky of the Year two years running, Lot 40. We single-grain distill. We have flexibility in the barrel types we use. We consider blending an art form. It’s a great time for Canadian whisky,” he concludes.
Bullish On Scotch
With today’s consumers considered more adventurous and less brand- and category-conscious, Scotch makers, who were accustomed to being the brown spirit that many drinkers discovered after starting with lighter and less flavorful types, are seeing drinkers come to them sooner.
Most of the leading premium and super-premium blended Scotch whisky brands grew in 2015. Bacardi’s Dewar’s and Diageo’s Johnnie Walker saw gains in the low-single digits, Diageo’s Buchanan boomed more than 20 percent to 520,000 cases, and the Edrington-owned Famous Grouse grew 13 percent to 173,000 cases. Gains in single malt were even more impressive, with the subcategory up nearly 13 percent, and most of the top 20 single malt brands seeing double-digit growth; (up 12.4 percent for The Macallan, 10.6 percent for Glenfiddich, 16 percent for Glenmorangie, and more than 27 percent for Laphroaig).
“We’re very bullish about Scotch and the opportunities ahead,” says Alex Tomlin, Senior Vice President, Marketing, Reserve and Scotch Brands for Diageo. The ongoing whisky renaissance means consumers are coming to brown spirits earlier, and booms in American whiskey have historically been followed by similar booms in Scotch. “We’re definitely seeing it in our consumer tracking data where we see penetration growing among the 21-40 year old, a critical demographic for super-premium, as well as a rapid acceleration among Hispanic consumers.”
A critical factor is increasing the number of drinkers in the category, he says, and trends among younger LDA consumers for more flavorful spirits, bodes well for Scotch. Much of the growth of the Buchanan brand has come organically as its Latin American reputation helped create a market here. Now, Diageo has ramped up Spanish language advertising to spur the boomlet.
But younger consumers and Hispanics aren’t the only areas of growth. “We’re seeing a greater interest in Scotch by all demographics, as consumers look for more authentic products and naturally gravitate to brown spirits,” says Andrew Nash, VP of Whiskies for William Grant and Sons. “We do a lot of work in outreach education and training because we find younger consumers understand that there’s a flavor in Scotch for everyone when you can educate them and show them the breadth and depth of flavor.”
Millennials are more interested in exploring the category than previous generations at their age, Nash says. “We’re seeing them expanding occasions and ways of drinking beyond just one category, and the rules about how to drink Scotch – just something you enjoy neat or on the rocks – are being broken, specifically with regards to cocktails. We’re also seeing a blurring of gender lines, which is good for a category that traditionally appeals to a higher percentage of males than females.”
Just like with Canadian, cocktail strategies are all the rage in bringing younger American whiskey drinkers, used to Bourbon and rye-based drinks, to Scotch. Grant’s blended Monkey Shoulder has devoted energy to challenging the perception of Scotch as an acquired taste by getting on-premise customers to try it in cocktails. Marketers behind Beam Suntory’s single malts, Laphroaig and Auchentoshan, also are devoting energy to a cocktail strategy.
“Millennials are drinking spirits earlier than previous generations, but they are very interested in flavor,” Phillips says. “However, experiencing spirits first in cocktails is not about all that flavor all at once, so cocktails will continue to be a way to target new consumers, both Millennials and others who are new to whiskey. We’ve definitely seen that from the Bourbon boom – consumers move from cocktails, to on the rocks to sipping neat.”
As demand outstripped supply, the recent disappearance of some aged single malt expressions has changed the landscape. Says Dr. Nicholas Morgan, head of whisky outreach at Diageo, “If you look at overall volumes of Scotch, blends and single malts, something like 75 to 80 percent do not have an age statement.”
Many distillers have no choice but to make non-age statement malts part of their portfolio.
“I don’t think our industry has helped itself historically by attaching so much importance on age,” says Dr. Bill Lumsden, head of distilling and whisky creation at the Glenmorangie Company. “The change is good news in the respect that it gives us distillers a lot more flexibility. I do find the conversation about age statements particularly fascinating, because I’ve been doing non-age since Ardbeg Uigeadail in 2001, and I don’t very often get asked its age.”
Distillers are now looking to create consistent flavor profiles in the new iterations, bottling some lively expressions like Highland Park Dark Origins, Oban Little Bay, Talisker Storm, Pulteney Navigator, among many others. Macallan recently announced the second release in its collectible Macallan series, The Macallan Edition No. 2, co-created by the Roca Brothers (co-founders of El Celler de can Roca, twice named best restaurant in the world). The edition series will be released annually, for which a unique selection of oak casks will be identified to yield a new Macallan expression each year.
A prime example of a brand making the connection with Bourbon was Dewar’s Scratch Cask, an effort that helped turn the brand up more than three percent last year.
“Our Dewar’s Scratched Cask expression was a release which was largely created to appeal to consumers who tend towards Bourbon as their go-to whisky,” says Dewar’s global brand ambassador, Fraser Campbell. “We will always endeavor with our innovative approach to blending whisky by experimenting with different casks and techniques, whilst listening to the feedback and comments from our consumers.” Similarly, Johnnie Walker has done well with Double Black, a smokier version introduced a few years ago, and last year offered the first in the Select Cask series, Rye Cask Finish.
More choices and innovation, for the retailer and the consumer, is broadly seen as the way forward now for Scotch. “When it comes to retail, if you’re offering compelling ideas for the consumer, the retailer will get on board and find space for them,” says Nash. Glenfiddich has its Bourbon Barrell Reserve 14-year-Old, and recently launched a new experimental series, starting with Glenfiddich IPA Experiment (finished for three months in casks that had held an Indian Pale Ale made in Speyside), and Project XX, created with input from 20 international whisky experts from 16 countries and matured in everything from port pipes to virgin Bourbon barrels.
“We’re seeing great pull for the Glenfiddich Experimental Series,” Nash says. “With space getting tighter, retailers have to rationalize what to put on their shelves. Realistically, only very-well-thought-out brands of whiskey that truly resonate with consumers will get space. They want to be sure that something they put on the shelf sells.”
At Pernod Ricard, new iterations are building on the new range of flavors that consumers want in their whiskies, wherever their origin, Bajaria says.
“The Glenlivet Founder’s Reserve, launched last year, is an unexpected medley of approachability and versatility for the category. Aged in American first-fill oak casks, Founder’s Reserve is a contemporary twist to Single Malt Scotch. The newly launched Chivas Ultis, a premium blended Scotch, incorporates a combination of five single malts: Tormore, Longmorn, Strathisla, Allt A’Bhainne and Braeval. Creating inventive and engaging products continue to be the aim across our brands which provide opportunity areas,” Bajaria adds.
Tomlin of Diageo says there will be further innovations, blurring the lines between categories. That’s part of the reason for the recent Whiskey Five initiative, a marketing plan at retail for whiskeys from different regions – Scotland, the U.S. and Canada – in a cross-category method focusing on flavor profile: spicy, bold, sweet, smoky and smooth.
“This encourages cross-category exploration, and we’re seeing a huge growth in exploration in Scotch through this,” Tomlin adds.
Irish Revival
Irish whiskey’s growth has long been driven by the monolith that is Jameson, but with more brands coming, more activity from various suppliers and new iterations pushing their way into the market, Irish is poised to be a leader in appealing to Bourbon and rye consumers.
“We’ve seen quite a surge in whiskey growth in the U.S., specifically Irish whiskey. However, this has been a global trend as well,” says Bajaria, who includes Redbreast, Midleton, Green Spot and Yellow Spot in her portfolio. “Last year alone, Irish whiskey grew 6.5 percent internationally, and the U.S. is responsible for 40 percent of that global growth. Currently, Jameson boasts 81 percent of the Irish whiskey sold in the U.S., which is a true testament to the support of the bartender.”
Jameson hasn’t rested on its laurels; in addition to the relatively new Jameson Black Barrel, it recently introduced Jameson Caskmates and Jameson Cooper’s Croze Midleton Dair.
Pernod also recently released the new Redbreast Lustau Edition, finished in first-fill sherry butts from the Bodegas Lustau in Jerez, Spain which has worked with the distiller for years to supply casks for aging. This expression offers a new experience within the Single Pot Still category, and “it allows our Irish whiskey drinkers to experience something new within the Redbreast franchise,” she says.
Green Spot Château Léoville Barton, created in partnership with winemaker Léoville Barton, was the first single pot still Irish whiskey to be finished in Bordeaux casks, and Jameson Cooper’s Croze Midleton Dair Ghaleach is the result of a six-year exploration by the Midleton Distillery into using native oak to mature Irish whiskey.
“I think with more than 25 or so new distilleries coming online in five years that Irish will become known more for innovation,” says Phillips, who oversees Kilbeggan, 2 Gingers, peated Connemara, grain Greenore and single malt Tyrconnell in her portfolio. “A lot of those brands don’t have history or heritage to lean on, so there will be absolutely a lot of innovation.”
At William Grant’s Tullamore Dew, long a brand of Irish dependent on others for supply, the creation of a new distillery with a large capacity and new expressions has ramped up sales – the brand increased more than 25 percent last year to 178,000 cases.
“It has helped as we apply some of the knowledge we have acquired over the many years producing Scotch whisky to Irish whiskey, in terms of cask selection and how we blend and finish our whiskies,” Nash says. However, while those different flavors and expressions are interesting, the vast majority of what they sell is the core brand, unique in that it has all three types of traditional Irish whiskey – single pot still, single malt and single grain.
“Since buying the brand, we’ve invested heavily in repackaging, and in the new distillery being built, so that we own our own future,” Nash adds.
Eastern Risings
Even Japanese whisky has benefited from the boom, although much education will be needed if the category is to become more than a cultish on-premise fad. For Phillips, who oversees Yamazaki and Hakushu Single Malt, Hibiki blended and the recently released Suntory Toki, creating a lasting impression is the goal.
Suntory isn’t alone in the market, as both small companies and larger ones like Nikka are focusing on the U.S. Earlier this year, the Nikka Whisky Distilling Company and U.S. importer Anchor Distilling Company introduced two new expressions: Yoichi Single Malt and Miyagikyo Single Malt, both non-age statement whiskies. Nikka now sends single malt, blended malt and grain whiskies to the U.S.
“Our higher-end and limited release Japanese whiskies do get scooped up at retail very quickly, and the single malts and Hibiki are mostly a whiskey connoisseur’s product. With the launch of Toki, we’re definitely trying to expand the market, to tell the market that Japanese whiskey is a segment not just for connoisseurs,” Phillips says. Toki is receiving much more of a retail push, meant to be enjoyed in highballs and refreshing cocktails rather than sipped and savored, she says – an everyday, rather than a “special occasion,” whisky.
“We’re making our own category and spend a lot of time and effort on education. From a retail perspective, we aim to get its own section and we are targeting more sophisticated whiskey stores, where we can educate the staff that it’s not Scotch that comes from Japan,” she says.
Nash of William Grant neatly sums up the opportunities and challenges facing international whisky makers and retailers these days.
“What you’ll find is there’s a tremendous amount of choice out there, with people coming in to one type of whiskey and drinking around. It’s not as clear cut as finding one expression and moving up. The more we can give consumers broader expressions of taste, price point and interesting elements, the more they will come to it. Whiskey drinkers have a huge variety in front of them and it’s only getting larger – our job is to make sure we are coming up with expressions that make sense to consumers.”
Jack Robertiello is the former editor of Cheers magazine and writes about beer, wine, spirits and all things liquid for numerous publications. More of his work can be found at www.jackrobertiello.com.
The post Why Imported Whisky Is Booming first appeared on Beverage Dynamics.
