The view from the top

The view from the top

The premium blended Scotch market has proved to be highly resilient and has emerged from the downturn strongly. Dominic Roskrow reports

Production | 29 Oct 2010 | Issue 91 | By Dominic Roskrow

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When Diageo summoned the cream of the whisky media and blogging fraternity to its new ‘super distillery’ at Roseisle, it was keen to impart two very clear messages: one, that it was utter bunkum to suggest, as many of our blogging friends have, that two and two equals seven and because Diageo has built a distillery the size of several small ones it
follows that it’s about to close several of its smaller ones.

Two, that in actual fact it needs much more malt whisky, and any reduction in overall capacity would be ridiculous. But the company needs it not for the single malt market. It needs it for blends. Lots of it.

Indeed Diageo spent a good proportion of the day showing its assembled guests just how big the potential for blends is. From Taiwan and China to Mexico and Brazil, a burgeoning educated middle class is seeking out the finest Scotch. But while interest in single malts remains high and sales impressive, blends look set to continue to hold a market share of more than 90 per cent of Scotch sales well into the future.

But there’s another trend, too. Premium blends such as Johnnie Walker Gold, Chivas 18 Years Old, Dewar’s Signature and Ballantine’s 17 Years Old are all thriving. So much so that they’re questioning conventional thinking that holds that as a market matures it moves from home produced spirits to imported ones, then to Scotch blends, and finally to single malts.

Some markets at least are moving from blends to better and aged blends, and turning to single malts in only the rarest of circumstances.

As countries emerge at different rates from the economic downturn the whisky companies believe there is all to play for. The recession affected the various markets in different ways and the bigger whisky companies have all their attentions on where to move their limited resources to best effect. This may change the world whisky picture forever. There was little in Diageo’s Roseisle presentation about the market in the United Kingdom, for instance, where it has long been hard to make money from blends because of the suppressed prices and the baggage attached to them. Spain, probably hit harder than any other territory by the recession, may be relegated from being a leading Scotch market for a generation or more.

Candidates to replace it include the usual suspects, but also Mexico, Eastern European countries including Poland, former Soviet countries, and emerging African nations.

In a presentation showing just how buoyant the premium blended sector is, Diageo global category director David Gates said that markets across the world perceived Scottish blends as premium spirits anyway, and the move towards better blends was a natural one.

“We have a family of blended whiskies to meet different demands,” he says. “We have blends in the deluxe, super deluxe and ultra deluxe market, and with a brand such as Johnnie Walker we have a family ideally placed to capture drinkers as they trade up to more premium blends. The blended market in countries such as Brazil and Mexico, are very young and vibrant.”

Over at Ballantine’s, which along with other Pernod Ricard brands is enjoying great success in a number of emerging markets, particularly in Asia, international brands director Peter Moore argues blends don’t carry any of the negative baggage which accompanies them in their home market.

“In many of the emerging markets blended Scotch is an aspirational drink among younger consumers,” he says. “Younger drinkers want blends and in many cases when they are ready to move on it’s often not to single malts but to better blends with an age statement. This is a very important part of the market.”

The reference to age statements is a telling one. Chivas/Pernod Ricard has launched a campaign to educate drinkers in to the importance of age to a whisky. Its importance to the perception of premium blends might also explain Edrington’s enthusiasm to take control of Cutty Sark, which enjoys an international reputation and offers the same sort of progressive age ladder as Ballantine’s or Chivas.

But Diageo is more cynical. It’s more important that its premium Johnnie Walker is Gold even though it is 18 Years Old, and family head Johnnie Walker Blue Label doesn’t have an age statement at all. Neither does Dewar’s premium blend Signature.

“We think it is wrong to focus on age as a marker of quality,” says Gates. “Age is only one part of it, but it’s not that simple. Young whiskies can be of high quality and make a strong contribution to a blend. To focus just on age is misleading.”

What we’re witnessing here are the early salvos in what will undoubtedly be a fierce battle for the hearts and throats of drinkers. But more importantly for those of us who have long championed the importance of top quality premium blends, we’re talking about the sector openly and redressing some of the overwhelming bias towards single malts.

The message is clear: premium blends are the daddy. And that’s more the case now than ever before.
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