The Spirit of Scotland

The Spirit of Scotland

An overview of the Scotch whisky industry today

Production | 17 Jul 2015 | Issue 129 | By Joel Harrison

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The UK is always going to be a focus for analysts when it comes to whisky. Being the home of the distilled spirit, particularly in Scotland, it is always interesting to see how the home market embraces one of its own products.

Of course there is a major focus by much of the industry in far-flung countries such as Taiwan, North America, Vietnam, Russia (when allowed) and Hong Kong, mainly due to the higher margins and lower taxation in these softer, often 'emerging' markets.

However, according to sales data compiled by The IWSR, the news isn't great for the global Scotch market, with a fall in sales in 2013 of 0.8 per cent, taking total case sale down to 96 million, and 14 of the top 25 markets showing themselves to be in decline.

Both globally and in the UK, the major player in the market is Diageo, who have a large and wide portfolio of spirits with a specific focus on Scotch whisky. However, even within the Scotch category, many of its brands wouldn't be recognisable to a UK consumer, being available only in certain markets. For example the Royal Household brand of blended Scotch whisky is not available outside of Japan, but still maintains an important profile brand for the owners, who are also the guardians of the Johnnie Walker brand, the world's biggest selling Scotch.

Other brands of blended Scotch whisky such as William Lawson's (owned by The Glenmorangie Company/ LVMH) and Label 5 (by French company La Martiniquaise) don't really have any footprint here in the UK, despite being in the top 10 best selling Scotch whiskies around the world.

In fact, of the top 10 best selling Scotch whiskies globally, not one is single malt and it is still blended Scotch which leads the way when it comes to overall sales, with up to 90% of the market taken by blends.

It is facts such as this, which puts the worldwide whisky market into perspective and gives us a reality-check about the demands of the consumer, the 'blends vs. single malts' debate and the fact that the majority of noise made both on and off-line about whisky tends to be made around single malts, despite their relatively low ranking in the sales charts.

When it comes to single malts, the biggest selling brands in the UK are those which you might expect to see in your local supermarket, with the current number one spot taken by Glenfiddich, which overtook Glenmorangie in 2008. Closely following are The Glenlivet, Laphroaig, Highland Park and Aberlour, as well as Glen Moray, Jura, and Talisker.

It is these brands, in the single malts segment of the market who are pushing the whole industry forward. This is seen by growth in 2013 where volumes were up by just under 20 per cent to 400,000 cases; great news for the whisky industry both at home and abroad.


Company FocI



Bacardi

Another family owned company, Bacardi is home to one of the biggest selling Scotch brands in the world, Dewar's which it purchased from Diageo in 1998. It has consolidated its place in the market and is now the number one selling Scotch in the USA. Recently it has launched The Last Great Malts, a collection of single malts from some of their key distilleries including Aultmore, Craigellachie, Royal Brackla and Aberfeldy and just a few months ago acquired a stake in boutique blending house, Compass Box.

Chivas Brothers

Chivas Brothers is the distilled Scotch whisky arm of French owned company Pernod Ricard, who also own Irish Distillers, the producers of Jameson, Red Breast and Green Spot.

When it comes to Scotch whisky sales, Chivas Brothers sit second in the league table to Diageo, with a blended whisky portfolio that includes Chivas Regal, Ballantine's, Passport and Royal Salute, the first two being in the top 10 selling Scotch whiskies in the world.

With single malts, their focus is on the more honeyed malts of the Speyside region, with the world's second biggest selling single malt Scotch (and the biggest in the key market of North American) The Glenlivet as their focus, with the sister distillery of Aberlour maintaining it's position as the biggest selling single malt in the world's biggest Scotch market, France. Other single malts in the range include Strathisla, Longmorn and the often forgotten Scapa distillery in the remote Orkney islands.


Diageo

Diageo is the major player in the premium distilled drinks sector, and own a number of global brands such as Smirnoff vodka and Gordon's Gin, as well as beers such as Red Stripe and Guinness. When it comes to Scotch whisky, they excel with the world's leading brand of Scotch, Johnnie Walker in their stable. Being the owners of Johnnie Walker doesn't stop them having a portfolio of other blended Scotch whiskies, with J&B and Bell's both doing well for the company.

When it comes to single malts, Diageo revolutionised the market when, in 1988 they launched their Classic Malts range of six whiskies, covering one expression from each region of Scotland. It was these diverse and accessible single malts, the Lowland Glenkinchie, Talisker from Skye, Lagavulin from Islay, Cragganmore from Speyside, as well as the two highlanders of Dalwhinnie and Oban which provided the consumer with a short but important journey around the flavours of single malt whisky.

Of course, Diageo's portfolio of single malts is wider than just these six, and also includes Caol Ila and Mortlach, as well as closed distilleries such as the legendary Port Ellen. Once a year, special limited editions of their single malt distilleries are launched under their 'Special Releases' programme.

Alongside their blends and single malts, Diageo have made a foray into the world of grain whisky with the launch last year of Haig Club.


The Edrington Group

A charitable trust, the Edrington Group is home to two of the most powerful brands in Scotch: The Macallan and The Famous Grouse. For many years, The Famous Grouse has held the top spot as the biggest selling whisky in Scotland, making it the nation's top tipple in the category.

The Macallan has been revolutionary in pushing forward the premium and ultra premium end of the single malt market, especially in the Far East and North America, opening up for the likes of Mortlach and Dalmore to try and emulate their success.

Alongside these two brands, Edrington is also home to the blended Scotch Cutty Sark and much loved, delicately peated single malt from Orkney, Highland Park.


Inver House Distillers

Founded in 1964 and within its portfolio there are five distilleries - Pulteney, Balblair, Knockdhu, Speyburn and Balmenach - each producing its own distinctive, individual single malt whisky.

Inver House is also highly active in the warehousing and blending of Scotch whisky, with its main warehousing and head office being centrally located in Airdrie. This is perfectly placed to service the international marketplace with warehousing for 500,000 barrels of whisky plus state of the art blending and laboratory facilities.


LVMH

Owners of two of most famous names in whisky namely Glenmorangie and Ardbeg. Glenmorangie single malt sold 5.5 million bottles in 2014 and was very successful in USA where it has been the fastest growing single malt for five years in a row. Since 2009 the brand has grown 160 per cent. Ardbeg is celebrating its 200th anniversary this year and in 2014 sold over one million bottles. They release a special bottling every year to tie in with the Islay Festival and in 2015 it was Ardbeg Perpetuum which is a blend of old and young whisky, matured in both Bourbon and sherry casks, delivering the classic Ardbeg note of cured meats, smoke and sea spray.

Having owned the Scotch Malt Whisky Society for just over ten years, the Society has recently been sold to a group of private investors for an undisclosed sum.


William Grant & Sons

WGS, as they are often referred to, are still owned by the same family (the Grant-Gordon family), decendants of William Grant himself, who first set the company up in 1887 by building the Glenfiddich Distillery in Dufftown, Speyside. Now established as the world's biggest selling single malt whisky, it was pioneering in as much as being the first to really market itself as 'single malt'.

The company grew and now has three distilleries on its Dufftown site (Glenfiddich, The Balvenie and Kininvie) as well as a large grain distillery in the Lowland, Girvan which was first to market with a permanent range of single grain whiskies in 2013. At the same site is another single malt distillery opened in 2007, Ailsa Bay which has the potential production capacity of over 12,000,000 litres per year, making it one of Scotland's largest malt distilleries. It is however, their blended whisky of Grant's which underpins their whisky portfolio, maintaining its position as one of the world's top ten selling Scotch brands. In 2013 it increased turnover to £1.12 billion, up 5.2 per cent on the previous year, with turnover on the company's core brands increasing by 12.5% year on year. The company delivered a group operating profit of £138.0 million for 2013, up 10.6 per cent from £124.8 million in 2012.

In addition, Glenfiddich continued to maintain its position as the world's number one and The Balvenie single malt Scotch whisky continues to grow rapidly all around the world.

Tullamore DEW Irish whiskey, which was acquired in 2010, continued to exceed expectations with the company committing to a €35million investment in a brand new distillery which opened in 2015.
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