Sleeping Giant

With Diageo’s recent purchase of Bushmills, the Irish whiskey market – dominated for years by Jameson – now has three international brands competing for market share. Patrick Schmitt reports

One can trace Irish whiskey’s history back to the 6th century, and the branded stuff back to 1608, when Bushmills became the world’s first licensed distillery. But let’s start at 1900, a time when Irish whiskey shifted 10 million cases, while Scotch was selling 22m. The reason for beginning at this date is because it represents something of a turning point; it was Irish whiskey’s best year ever. However, in the 1920s through to the 1930s, prohibition killed off its US market while economic war blocked its shipments to the British Empire. By the 1960s the category had almost collapsed.

Why the history lesson? Because it explains the near monopolistic position which emerged in Irish whiskey’s relatively recent history. With only the domestic market to sell to, the few surviving Irish whiskey producers got together to form Irish distillers in 1966, which was then acquired by Pernod Ricard in 1988. Not until the 1990s did the company’s hold on the sector start to weaken.

The first major brand to break away from Pernod’s Irish whiskey collection was Tullamore Dew, bought by the C&C Group in 1994. Then, of course, this year Diageo gained Bushmills, in a sale by Pernod to raise much-needed money for its Allied takeover. The upshot is that today the three leading global Irish whiskey brands are all receiving proper attention. Together they will boost a growing market while, individually, each owner hopes these whiskies will emerge as powerful spirit brands in their own right. Before this fragmentation, however, in certain key markets Pernod’s efforts focused on Jameson at the expense of the other whiskies, which explains why this one brand is still the category leader by some margin.

And, to focus on Jameson, it wants to grow further. Lauching this month is the brand’s biggest ever investment in marketing; some £3.5m is being poured into TV, cinema and print advertising, as well as other forms of promotion. Called Beyond the Obvious, the campaign is designed to “challenge assumptions about people in everyday life, in the same way that Jameson challenges consumers’ perceptions of whiskey”, a spokesman for the brand explains. The brand owners have also come up with a new signature drink for the spirit, Jameson and ginger ale.

Currently the whiskey sells some 1.75m case equivalents worldwide with sales growing at 12%. In the UK alone, Jameson accounts for a little over 200,000 cases, but is experiencing 9% volume growth, and is currently the second biggest imported whiskey in the UK 55 market, behind Jack Daniel’s. And it doesn’t necessarily see other whiskies as its competition, but other branded spirits. Hence Pernod is focusing on the premium mainstream spirit (PMS) category for Jameson. This includes the likes of Bacardi Carta Blanca, Smirnoff Red, Jack Daniel’s, Gordon’s and Bombay Sapphire, all drinks that are in growth, drunk mixed as a long drink, and by both sexes. Jameson wants to join them.

Also currently pushing its brand through advertising is C&C with Tullamore Dew. Aired from September this year in Europe, although not in the UK, has been the Rough Country, Smooth Whiskey commercial as part of a €3m media campaign. The aim is to bring the brand more centre stage, but also to associate it with the Irish people and countryside. The message is slightly different in Germany, Brian Walsh, MD at C&C, says, “Because this is a mature market for Tullamore, where it is the number-one Irish whiskey brand and number-five whisk(e)y label.” Interestingly, Tullamore is the biggest selling whisk(e)y overall in Bulgaria and Latvia.

Enormous potential

With the marketing in place, Walsh is expecting the brand to hit 400,000 cases this year, and suggests Tullamore has suffered historically from Irish Distillers’ decision to withdraw it from a lot of markets, for example, the US, when the company was concentrating on Jameson. He also sees a healthy future for the Irish whiskey category as a whole, which he describes as “hugely underdeveloped”, citing its lack of significant share in places like the Far East, the US, South America, Spain and the former USSR.

Apparently, Irish whiskey has only just over 1% of the whisk(e)y market in the US (Jameson with 500,000 cases, Bushmills around 150,000 and Tullamore Dew 45,000) and not even 1% of the whisk(e)y sector in Spain.

However, Walsh believes the entry of Diageo into the market, through its acquisition of Bushmills “will make the US a very lively place for Irish whiskey”. Pernod, and Tullamore Dew in certain markets have, according to Walsh, “demonstrated there is a bit of an open door for Irish whiskey”. For instance, Jameson is currently the fastest-selling whisk(e)y brand in the US.

But to return to Bushmills, a 500,000 case brand for which Diageo paid £200m. Why? Well, it always seemed slightly ironic that Guiness-owners Diageo didn’t have an Irish whiskey, and certainly Isabelle Thomas, head of corporate media relations, Diageo, admits the company “wanted an entry into what is a fast growing category, and Bushmills met our strict investment criteria”. As for Diageo’s plans for the brand, these are not being publicised just yet, although Walsh wonders if, with Bushmills’ history, Diageo might “go the heritage route”. But it should be noted that Bushmills has some way to go to catch up with Jameson which, as noted, is pushing hard to increase its share of the global spirits market.

Overall, however, three certainly seems to be company in this category. “There is massive potential for Irish whiskey,” says Walsh. “And now with three significant players, the sector could add 1m cases in five years.”

As for where the growth will occur, Diageo’s entry to the market might provide some clues, as it’s likely to build on its current areas of strength, meaning that the UK, the US and possibly France might see sales of Irish whiskey increasing, driven by Bushmills.