WHISKY: Scotch school

Whisky is in the ascendancy worldwide, thanks in large measure to emerging-market predilections. But the industry realises that for this positive trend to continue, more work is needed to further educate consumers, reports Alan Lodge.

Recent global volume figures from across the whisky category show that after a slight hiccup in 2009 – when the world’s major economies were on their knees – 2010 has witnessed a welcome return to growth.

For 10 years now, Scotch whisky has steadily grown in popularity as new regions, markets and consumers opened themselves up to the delights of the dram.

It all makes for great reading for the single malt industry, which is seeking to recover volumes from the blended end of the market.

“Consumers globally are increasingly trading to single malt from the 80 million-case blended Scotch market,” says Paul Skipworth, chief operating officer at The Glenmorangie Company. “This has been a long-term trend, that, if anything, is expected to accelerate, as the major malt brands continue to invest in educating consumers.

“The investment in the single malt market is also encouraging the growth of the peaty (Islay) category as consumers discover their distinctive whiskies.”

Over the last decade, bottled malt Scotch whisky exports have increased from £233m in 2000 to £490m in 2009. Last year, the US was the largest export market for bottled malts (£104m in shipment value), followed by France (£80m), Taiwan (£54m), Germany (£35m) and Singapore (£28m).   

Skipworth notes: “Single malts are growing at significantly faster rates than blended malts in these markets, albeit off a small base. The prospects are excellent as these new consumers yearn to demonstrate their growing discernment, and express this through their brand choice.”

Dean Callan, newly appointed brand ambassador for Monkey Shoulder, has first-hand experience of the growth of whisky in new markets.

“Emerging markets are already playing a massive role in the growth of Scotch whisky,” he confirms. “I’ve just come from a few years living in China where whisky is hugely popular – the sheer volume of people drinking whisky there is amazing. China’s not alone, either – places like India or Brazil are developing a taste for whisky, too.”

The success in Taiwan and Singapore, in particular, is indicative of how single malt Scotch is increasingly looking to emerging markets to grow volumes while domestic and other mature markets stagnate or operate with slower rates of growth.

Yet the rise in popularity of single malt Scotch in regions such as Asia is not necessarily due to an appreciation of quality whiskies, but is in fact a result of the comparative ignorance of consumers in the region when measured against those in the US, the UK and Europe.

That’s the view of Michael Cockram, senior director for whisky at Beam Global. According to Cockram, consumers in Asia base their purchasing decisions on what they see and the impact it could have on their “status”, rather than on flavour profile.

“In Asia they are not really sure what a single malt whisky is,” he says. “However, they see the price, the colours and design on the packaging and all those other visual indicators and automatically think the product is a step up and will aid their own personal status among their peers.

“This can pose problems for some brands who perhaps do not have such bold, stand-out packaging. Laphroig is misunderstood in Asia because the packaging is not as glitzy as others. However, if we keep hold of our position towards the top of the malt tree then, over time, consumers will start to come to us as they develop a greater understanding of whisky.”

Age before beauty

This dependence on visual stimulants to push sales is not, however, limited to the Asian markets. Recent research from Chivas Brothers yielded some interesting results. A global survey of more than 2,000 whisky drinkers was conducted to gauge attitudes towards, and knowledge of, luxury aged whisky across nine countries.

Respondents were asked to evaluate a set of statements relating to quality, price and age statements which have been the basis of differentiation for the category. The stand-out finding was that the massive majority of consumers across the globe look for an age statement as an indicator of quality.

A huge 94% of consumers questioned said they feel an age statement serves as an indicator of quality, with 93% believing that older whiskies are better quality than their younger cousins and 89% actively look for an age statement when making a decision to purchase.

However, the results highlighted a global lack of knowledge about what the age statement actually means. Only 10% understand that it refers to the youngest whisky in the bottle, nearly half (48%) believe an age statement refers to the average age and 35% believe it signifies the oldest whisky present. The Scotch Whisky Regulations (2009) make clear what an age statement means – the age of the youngest whisky in the bottle.

The emphatic results prompted the company to embark on a new “Age Matters” marketing scheme, which will manifest itself through standalone activity as well as through integration across the company’s aged whisky portfolio, which includes Ballantine’s, Chivas Regal, The Glenlivet and Royal Salute brands.

The aim of the campaign is to enable consumers to understand fully the age statement and to appreciate the value of the premium product they are purchasing.

One of the greatest influences on the flavour of whisky comes from maturation. Much of the complexity of Scotch whisky comes from its time in oak casks in Scotland; with outstanding spirit and excellent wood management, it follows that the longer the maturation period, the more complex the whisky.

From 1 July, consumers have been encouraged to look for age statements on Scotch whisky, via point-of-sale materials, advertising and public relations. A logo using the phrase “Guaranteed Age Whisky” has been created for use in retail, and will be visible in the environment of Chivas Brothers brands that carry an age statement.  

Christian Porta, chairman and CEO of Chivas Brothers, says: “The revelation that so many existing whisky drinkers do not understand that the age statement refers to the youngest age of the whisky shows that there is an opportunity for us to inform them.

“In an age when consumers of luxury goods increasingly demand transparency and authenticity from brands, it is vital that we empower consumers with knowledge, so that they fully understand the value of what they are buying.”

Richard Brown, managing partner at Cognosis Consulting, understands why Chivas has decided to place so much emphasis on age statements. “Age is a marker of scarcity and rarity,” he says. “The producer has invested time to leave the whisky in the cask and the price reflects this accordingly. A lot of consumers then have this message fixed in their mind, which is vitally important.

“However, quality and value are two very different things. That said, the average consumer will always look for an age statement as an indicator of luxury.”

Though Chivas’ campaign does indeed have its roots in statistical fact, there are some in the industry who say the scheme could actually be damaging to the malt whisky category, particularly for 10- and 12-year-old malts.

“For people who don’t necessarily know an awful lot about whisky, then, yes, I would say there is very much a danger that they automatically assume that higher aged product is better,” says Richard Paterson, master blender at Whyte & Mackay.

“For whisky enthusiasts who really know their stuff, then they will know that, yes, age can make a big difference, but that in some instances they may not like that particular release as much as a 12-year-old, as the aged one is finished in a cask they don’t favour, is too strong in flavour or just quite simply doesn’t suit their palate.”

Cockram agrees that the industry needs to move away from simply using age as a statement of quality. “Age statements
are a flag that the industry has historically used in order to communicate quality and to let people know the whisky has a level of depth,” he says. “But it is the flavour that counts.

“We would love to get away from using age statements, but consumers don’t really understand otherwise. The most important thing is flavour profile, and we need to get away from instilling in the consumer the impression that age equals quality.

“Chivas might have adopted this stance in order to help clear a backlog of surplus stocks, but what happens three or four years down the line, when the stocks run out? How will they approach things then?”

Tom Wage, brand manager at Monkey Shoulder, adds: “For me, it should absolutely be about flavour. The age of a whisky often determines its taste and the occasion it is most suitable for, but it is not true that an older whisky is inherently ‘better’ than a younger one.

“It is a good thing that these days we are seeing more whiskies focus on their story, or their flavour, rather than just their age.”
Ian Weir, marketing director at Ian MacLeod Distillers, is of the opinion that while age can indeed be an essential factor in promoting the quality of whisky, this must be balanced out with informative flavour profiles to help consumers understand exactly what awaits them in the bottle.

He says: “Age is an important marker and a gauge on price and position in the range, but flavour is surely vital.

“A younger malt matured in fantastic casks in comparison to an older malt matured in poor casks and maybe even slightly woody, I know which whisky I would drink… the younger one.

“There is a danger that consumers could form a subconscious opinion that a 25-year-old whisky is ‘better’ than a 12-year-old, and this is not always the case. Similarly, single malts are not necessarily always better than blends.

“It is interesting too that many consumers think that the older the whisky the darker the colour and again this is not always
true based on casks – first fill versus refills and suchlike.”

Keep it local

So how can the industry and whisky retailers adjust their stance in order to give more emphasis to flavour over age? Scotland contains three major whisky-making regions: Speyside, the Highlands and Islay – each of which carry markedly different characteristics. Islay typically produces peat-heavy, smoky whiskies such as Ardbeg, Laphroig and Lagavullin; Speyside produces a raft of delicate, softer malts like Glenfiddich and The Glenlivet; while Highland malts tend to carry sweet and dry characteristics, such as those present in Dalmore and Glenmorangie.

There is a feeling among the industry that more could be done to classify whiskies by region rather than age, in order to educate people in the different styles of malts that come from Scotland.

Cockram says: “We have been very, very bad as an industry at emphasising flavour profiles in a way which motivates the consumer to make a purchase. We did some research a few years back and found that it is really quite difficult to put it in a way which is clear for consumers to understand.

“We have to play a role in letting people know the differences between the regions. A couple of years back Waitrose started to display whiskies according to region, such as Islay and Speyside, in order to start up a dialogue with consumers, who would come and ask what the main points of difference were. It helps to demystify the category to a large degree.”

Cockram also believes that some whisky producers are not doing themselves many favours by repeatedly bringing out new expressions and range extensions during a time when the industry needs to educate a new generation of consumer in the basics of whisky.

“People get confused by the raft of recent range extensions,” he declares. “Some major producers see it as their duty to roll out two, maybe three totally new expressions every year, but the key to building understanding about what your brand’s key flavour profile is like is to focus on one or two core products in the range, rather than special-edition releases that are normally the reserve of connoisseurs.

“They do it the right way in Asia by focusing on flagship drinks, such as Glenfiddich 12, and Johnnie Walker benefits through its use of colours to differentiate between the range as it’s a very easy-to-understand system. There is certainly a role for range expansions to play, but we need to stick to our core products first.”

Efforts have been made in recent times to help explain the complex flavour mappings of malt whisky, but it is only a start.

Paterson acknowledges: “I think that retailers and producers are really trying to communicate information about the different regions and flavour profiles to the consumer and most recently we see this through the introduction of the Diageo single malt flavour map.

“Jura has also produced a similar map to guide consumers through the various taste profiles that its range of malts has – everything from a light whisky to a very heavily peated one.

Weir agrees: “I think we can always do more but the industry is certainly trying to educate. The key is to keep it simple and understandable.”

Weir believes that the continued education of consumers is vital if Scotch is to maintain its momentum. He also believes that, if we are to truly reach out to the largest number of consumers as possible, the industry needs to look at fresh ways to serve Scotch in a non-intimidatory fashion.

“We must continue to educate, offer choice, build brand awareness, package well and keep consistently producing great malts,” he says. “Also let consumers discover the joys of consuming single malts the way they want to – with water, ice, straight or even a mixer.

“This is something we have been working hard to do with our Smokehead Islay Single Malt by highlighting the ‘Smoke and Coke’ at high-profile events such as the recent High Voltage festival in London.”

We’re drammin’

That there is optimism around the prospects of single malt Scotch whisky is undeniable, and is demonstrated by a raft of major new investments across the industry.

Some £600m new capital investment in distilling, bottling, and warehousing has been made over the last couple of years, including the expansion of existing distilleries such as The Glenlivet, the opening of brand new facilities, and plans for several additional malt distilleries across Scotland.

The next few years look like being fairly comfortable ones for the sector, but like all other areas malt whisky could go out of fashion just as quickly as it came back in. Glenmorangie’s Skipton feels that things should just carry on as they are in order to safeguard the industry’s long-term future.

“Consumers around the world have been demonstrating their growing discernment over many years in trading up to single malt brands,” he says. “As the single malt brands continue to invest in brand awareness and consumer education while maintaining their product excellence, this trend will continue.”

However, there is a growing acceptance that the on-trade is not proving as efficient in helping grow the category as it could be.

“We need to do much much more in the on-trade,” acknowledges Brown. “It’s all to do with education. We are talking good, knowledgeable bartenders able to pass on some of the message and personality behind the brands, as well as running organised events such as ambassador programmes, where dedicated brand ambassadors spend evenings with bartenders and consumers to promote the virtues of Scotch.”

Paterson adds: “The trend (and growth) for stay-home drinking would suggest that the category should be focusing on the off-trade; however, I still think it is a necessity for brands to develop marketing initiatives for the on-trade to get people into bars and keep on-trade sector alive.

“The off-trade remains a great place to introduce new brands, products and presents the best opportunities for growth but we shouldn’t completely forget about the bars and pubs that give us a sociable place to meet our friends and enjoy a drink.”

Whether in the pub or at home, single malt Scotch is enjoying a welcome period of sustained growth. The time has now come to capitalise on it by grabbing the opportunity to educate a new generation of drinkers in the complexities, profiles and history behind the category. It’s a chance the industry can ill afford to allow to pass by.

Alan Lodge, September 2010