Reasons to be cheerful – Part 2

Minimum Pricing

The issue of imposing a fixed cost per unit of alcohol as a way to eradicate “binge drinking” is currently exercising UK politicians. I’d guess that some form of minimum pricing will happen in the near future. I know it will punish sensible drinkers and hit the already depressed pub trade, but while it makes no sense to solve the problem in such a crude fashion, the campaign now has momentum. While firms will moan about it, they only have themselves to blame as it is they who helped cause the problem in the first place by kow-towing to the demands of supermarkets, thereby creating a cheap booze culture.

Goodbye UK – How important is the UK to Scotch whisky firms? Answer, see above. The cheap booze culture has reduced margins and profits and as a result seen advertising and promotional spends cut. The consequence is that, with a few exceptions, whisky firms have operated a maintenance strategy for their UK business. Taiwan, Brazil etc., are more exciting and when money is tight you go to where you see business opportunities. There’s less education for the UK trade and therefore less understanding about whisky. Result? We remain woeful at selling and promoting our national product at a time when tourist numbers are increasing. Will it change? I hope so, but don’t hold your breath.

Takeovers and mergers

Expect the Diageo/LVMH deal to take place. It gives Diageo Hennessy, plus entry into premium wine business, but what of the ramifications for whisky? Glenmorangie would be an interesting fit, but Ardbeg? Methinks not. Also, keep your eyes peeled for news about Burn Stewart whose parent company was effectively nationalised by the Trinidadian government last year.

Growing importance of craft distilling

While some micros may simply be moonshiners working out of their garages there is a growing band of small-scale quality-oriented whisky distillers. Expect the UK to pick up on this movement and also watch for major distillers internationally picking up on some of the genuine innovations from the micro world and adopting them.

Chancer alert!

The downside of the craft distilling renaissance is the continued presence of chancers trying to make a fast buck by getting the gullible to invest money in something which doesn’t exist. AVOID.

Wood quality

Though the recent rise in overall production has been scaled back there is still an overall shortage of quality wood in the Scotch industry. As a result there is a worrying trend for some firms (and I stress some) to fill into whatever is around. This is storing up problems in the long term.

Non-chill filtering/bottling at 46%

In the medium-term I think that this will become the norm for single malt bottlings. If we are selling flavour, then give the consumer the full hit.

No Age Statements (NAS)

There will be more as distillers try to use their stock more wisely and flexibly. Which leads me to ...

Creeping homogenisation

Much depends on how malt whisky is managed in the medium-term. If it continues to grow, putting pressure on distillery capacity, will we see more blended malts? Maybe. More importantly, will distillers chase the mass-market in malt or see it as a premium/luxury category? If it’s the former, then there could be a chase for the mass-market palate, another stimulus for NAS brands and a potential for homogenisation of flavour.

Growth of specialists

An intriguing phenomenon in the book and music industries has been the resilience of specialist stores. I see the same happening within whisky.

Japanese whisky breakthrough

Yamazaki is currently the 8th biggest selling single malt in the world and that’s just with domestic sales. Expect it to break into the Top 3 in five years and other Japanese single malts to break into the top 10. Scotch may dominate blends, but the single malt category is going to be internationalised.

Long term? Reasons to be cheerful actually!