The Future of Irish Whiskey - Bord Bia - Irish Food Board · About this report This report has been ... level trends shaping consumer behaviour and the future of the ... from 2011

The Future

of Irish

Whiskey

© 2013 Bord Bia, The Futures Company

About this report

This report has been produced in association

with The Futures Company and it will explore

the opportunities and challenges for the Irish

Whiskey category over the next two to five

years.

This report is based on our analysis of macro-, meso- and micro-

level trends shaping consumer behaviour and the future of the Irish

Whiskey category. Our understanding of these trends has been

informed by expert interviews, consumer and market data and

qualitative insight.

Futures techniques have been used to identify and explore potential

opportunities as drivers of change, and to see how they combine to

influence the whiskey category in different ways.

This report focuses on emerging opportunities for the whiskey

category and distillers in Ireland specifically. However, given the

long-term nature of the category, we have also referenced other

longer term drivers of change that may disrupt or shift the category

in the next five to 10 years.

This report will refer to ‘whiskey’ when indicating produce made in

Ireland, and ‘whisky’ for all other varieties produced outside of

Ireland, as well as when referring to the category as a whole.


Building on The Future of Alcoholic Drinks

The Future of Alcoholic Drinks, produced by The

Futures Company for Bord Bia in 2011, explored

how the alcoholic drinks industry could evolve to

2025, and emerging opportunities for Irish

manufacturers.

Eight forces of change were highlighted in this previous report, and

three of these forces are of particular relevance for the future of the

whiskey category: Competition for Provenance, Mainstreaming of

Connoisseurship and New Forces of Global Demand.

“Competition for Provenance” highlights how consumers have become

sceptical towards near identical stories of authenticity and copy-cat

provenance claims. Instead, they are looking for more local provenance rather

than national, to differentiate the local identity of products. This report will

demonstrate how a local anchoring of whiskey is crucial for developing overall

whiskey character and differentiation.

“Mainstreaming of Connoisseurship” illustrates how a more discerning

attitude towards alcoholic drinks will become mainstream. There will be an

emphasis on ingredients and production and the overall sensory profile of a

product will be much more important. This report will outline the vast range of

future opportunities within whiskey taste profiles.

“New Forces of Global Demand” outlines the future influence of emerging

markets in securing growth. It also highlights the potential for smaller

manufacturers to partner with larger players to enter new markets. This, we

will argue, will be an essential step to ensure future growth in the whiskey

category.

Competition for Provenance

New Forces of Global Demand

Mainstreaming of

Connoisseurship

Setting the scene


Spirits have continued to outpace other

alcohol categories globally, proving

resilient in the face of on-going

economic uncertainty.

The stellar success of the whisky category

sits within the context of a broader boom in

spirits.

Despite the global economic crisis, the

spirits industry has demonstrated strong

growth in terms of volume and value.

Global brandy and whisky sales increased

in volume by 7.1% and 2.8%1 respectively

from 2011 to 2012 compared to global

beer consumption increasing by less than

2%2 and wine showing no change.3

There has been a mixture of positive and

more negative stories across dark and

white spirits, which is evident in the table

below.

The success of spirits globally has been

underpinned by two key drivers. Firstly,

premiumisation, driving value as well as

volume growth and secondly, the rise of

the middle-class consumer in emerging

markets, increasing global demand for

spirits.

In mature spirits markets (and to a

lesser extent, emerging markets)

increasing consumer sophistication is

driving a trend towards premiumisation.

There is a rising trend amongst wealthier

consumers in established spirit markets to

seek out interesting and new premium

products and to trade up to drinks of a

niche variety (with high production value).

As a result the volume of the premium

spirits category increased by 5.5% from

2011 to 2012, while standard spirits only

grew by 1.4%.4

Emerging middle-class consumers, with

rising incomes and burgeoning

aspirations, are fuelling the growth in

consumption of many spirit categories.

The global economic crisis has taken its

toll on certain markets more than others.

For those experiencing a positive

economic trajectory and a rapidly growing

emerging middle-class – such as China,

Taiwan, South Korea and Vietnam – the

social transformations emerging from rising

disposable incomes are significant.

Consumer expenditure on alcoholic drinks

is expected to increase from 2012-2013 by

16% in Vietnam and by 10% in both India

and China.5

Furthermore, although the consumption of

gin and vodka has decreased globally (see

table), there has been dramatic growth of

these white spirits in emerging markets,

such as China, South Korea, Indonesia

and Malaysia. Vodka and gin consumption

have grown 56% and 62%, respectively, in

South Korea from 2011 to 2012.6

The global success of spirits has continued despite the uncertain

economic times

Spirit Consumption

% Chg 2011-20121

Whisky +2.8

Gin -3.5

Vodka +0.3

Tequila +4.8

Rum -0.5

Brandy +7.1

Source: 1) IWSR Data 2013; 2) International Organisation of Vine and

Wine, 2013; 3) Canadean Consulting, 2013; 4) IWSR Data, 2013; 5)

Euromonitor International, 2013; 6) IWSR Data Volume 000s 9 LC,

2013

Global

Consumption

by product

category:

‘000s 9-litre

cases


The hugely positive global outlook for

whisky is supported by the core drivers

underpinning the broader spirits boom.

Whisky has been winning against other

players in the sprit category globally. This

is a trend that is expected to continue, as

total whisky volume growth will outpace key

dark and white spirits such as rum, tequila

and gin to 2016.1

Indeed, amidst the markets worst affected

by the recent financial crisis, whisky has

gained an almost recession-proof status.

Global consumption of whisky grew 2.8%

CAGR from 2011 to 2012, compared to

-0. 5% for rum and 0.3% for vodka (‘000s

9-litre cases).2

The same forces of change underpinning

spirits combined with the increasing

accessibility of the category, are fuelling

whisky's strong growth.

Consumers have become more engaged

with an increasingly accessible

category.

Global brands like Jameson, well-known for

their smoothness on the palette, are

becoming a gateway into the category. In

addition to this, the portrayal of whisky in

popular culture has helped shift the image

of the category away from an ‘old man’s

drink’ and opened it up to new audiences.

The category is being expanded in value

and volume terms, by premiumisation

and more sophisticated value offerings.

The category has expanded to meet the

needs of a more sophisticated and

demanding consumer. The top two

premium spirit brands, in terms of sales

value in 2012, were whiskies: Johnnie

Walker and Jack Daniels.3 New producers

from a wide variety of markets are

emerging, many from non-traditional

whisky markets, such as Wales, Croatia

and Taiwan, making whisky a truly ‘global

drink’.4

There is also an expansion of the category

at the value end of the spectrum. Own-label

offerings have improved their quality and

compete with established brands; and in

some cases perform better than them.

Aldi’s private label, Highland Earl Black

Label Scotch, was awarded Gold at the

International Wine and Spirits competition

in 2013.

The world economy is shifting to the

South and East; and with this, emerging

markets are becoming key drivers of

export growth.

Emerging consumers associate whisky with

aspirational value. The high social cachet

around Scotch single-malt has fuelled its

global demand to such an extent that

demand is now outstripping supply in some

markets.

In recent years whisky has been taking centre stage amongst spirits

globally

“It seems to me like there is almost an insatiable demand for high quality whisky and I don’t see that changing in the next 5

or 10 years” Steve Uri, US Whisky Expert

Source: 1) IWSR Database, 2011; 2) IWSR Data, 2013; 3)

Ipsos, 2013; 4) Just Drinks, 2012


A more sophisticated and demanding

consumer is emerging in mature spirit

markets, as well as in established

whisky markets.

As consumers in established whisky

drinking markets become more

knowledgeable about the category, they

are demanding more complex and

sophisticated propositions and taste

profiles. For example, 88% of consumers

now consider spirits an affordable luxury.1

This is driving producers towards more

premium and super-premium offerings.

South Korea is the world’s top consumer of

super-premium whisky (aged 17 years or

over) and it has repeatedly ranked in poll

position for 11 consecutive years.2 In the

US, super and ultra-premium whisky

brands increased Brown-Forman’s net

sales by 11% throughout the 2013 fiscal

year and future growth is predicted to

continue from the premium elements of its

portfolio.3

There has also been strong growth for

distillers who have been extending their

portfolio through super-premium varieties.

Isle of Arran Distillers has promoted fast-

selling limited-edition labels from single-

cask varieties4, such as their Devil’s Punch

offering (see box), which is driving interest

into the company.

In the established vodka belt countries of

Central and Eastern Europe there has

been an emerging shift from white to dark

spirits. This is partly due to a fatigue with

white spirits and partly due to the

excitement around discovering something

new and interesting, with a more

masculine feel and distinctive flavour;

whether that be rum, cognac or whisky.

In other markets, the micro trend of craft

distilling and artisanal varieties, particularly

in the US, is driving the demand for unique

and bespoke varieties. Their local roots

and niche scale makes these products

appealing to consumers who are looking

for something nobody else has a more

premium variety (see box).

An increasingly sophisticated consumer is fuelling a long-term

premiumisation trend in established whisky markets

Source: 1) Ipsos & Neilsen 2009-Present, 2013; 2) The

Marmot’s Hole Blog, 2012; 3) Kentucky.com, 2013; 4) Just

Drinks, 2012

[Consumers] want something to show to their friends that is unique and

not available in every supermarket in the world

Euan Mitchell, Isle of Arran MD

“

”

Isle of Arran’s

second edition,

Devil’s Punch

Bowl, had already

allocated it’s 6,000

bottles a month

after release.

The Brora single

malt Scotch

distillery closed in

1983, adding to

the rarity value of

the whisky and

creating a ‘cult

status’ amongst

connoisseurs.


Emerging middle-class consumers in

the markets least affected by the

financial crisis are increasingly able to

afford more premium whisky products.

As disposable incomes continue to

increase on a relative scale not seen

before, the aspirational middle-class

segment is looking to trade up and

purchase better quality products that were

not previously affordable. This is

specifically relevant to the younger

demographic who have relatively more

income than their parents did at the same

age, especially in urban areas.1

The social cachet surrounding the heritage

and tradition of whisky, especially Scotch

single malt, is extremely strong in markets

such as China, South Korea and Taiwan. In

Latin America and Eastern Europe it is the

blended Scotch brands which are seen as a

significant trade up from local spirits.2

These aspirational perceptions are fuelled

through the exclusivity of whisky clubs and

festivals, as well as increased visibility in

specific types of on-trade venues.

Single malt Scotch dominates in emerging

markets and category dynamics are

working to increase its cachet even further.

The shortage of malt and long lead times

are causing malt producers to hold on to

stocks rather than use them in blended malt

Scotch products. This is because there is a

high value market for the single malt

Scotch. As a result, the blended malt

Scotch category has been perceived as

less premium than single malt Scotch and

the category is slowly declining. Diageo, for

example, has withdrawn its blended malt

Scotch, Johnnie Walker Green label, from

the US and Taiwan (see box).

As a result, demand exceeding supply is

actually increasing the perceptions of rarity

in certain parts of the category.

The world’s focus is still shifting to the South and East, and their

aspirational middle-class consumers continue to trade-up

Johnnie Walker

Green label is being

discontinued as the

blended malt Scotch

category is in decline.

Heavily demanded

single malts are being

prioritised over

blended malts.

Source: 1) BBC News Online, 2012; 2) Euromonitor Report,

2012

Scotch symbolises the international Western

style spirit and the whole lifestyle that goes with it.

If you ask a Chinese consumer to choose an international spirit, they

will choose Scotch Eric Benoist, Chivas Brothers MD

“

”


The whisky category has opened its

doors to new audiences, occasions and

rituals. The established stereotypes of

typical whisky drinkers are shifting.

Whisky was once nicknamed the ‘old

man’s’ drink, but a number of factors have

been disrupting this dated stereotype.

Media and popular culture have been key

influencers. Mad Men and Boardwalk

Empire have made an ‘old-fashioned’

attractive again and celebrities like Lady

Gaga have endorsed whisky brands across

all types of media globally.1

A number of whisky producers have

demonstrated dynamism through

embracing new formats, flavours and

occasions. From Japanese highballs to

cherry flavoured Bourbon, the accessibility

of the category is attracting consumer

attention. However, the premium end of the

category is likely to be wary of eroding

brand equity or quality perceptions through

these types of format.

The competitive set is also widening and

although new varieties are still niche, they

are beginning to challenge the premium

offerings of established global brands. New

whisky producers are emerging all over the

world in Japan, Croatia, Spain, Sweden,

Taiwan, Romania, New Zealand and China.

These new competitors are also stretching

the value spectrum. As a result, the

increasing number of varieties are

appealing to a wider range of palettes (see

box).

The appeal and accessibility of whisky is expanding its reach

Source: 1) Euromonitor Report, 2012

[We] have seen a democratisation of whisky – it has had an image shift from being seen as an ‘old

man’s drink and it has recruited many younger

drinkers. Implicit sophistication, which was once off-putting, is now

quite appealing Brendan Buckley, Innovation and Category

Development, Pernod Ricard

“

”

Swedish Mackmyra

whisky casks are

saturated with

cloudberry wine,

appealing to different

palettes.

Long-term trends


Despite the overwhelmingly positive

outlook for whisky globally, there are a

number of emerging social,

environmental and political macro

forces which could influence the

category over the next five to 10 years.

Given the forward-facing nature of the

category and the need to make decisions

today that will impact production in the next

10 to 15 years, it is important to bear in

mind these shifts when taking a longer term

view.

Despite a positive outlook, there are some long-term trends that may

impact the ability to realise new opportunities

It's the foresight of my great-grandfather, grandfather and father that means we can now sell a 70-year-old malt… At the time,

everyone else thought it was absurd. But it does feel odd to think that some of what we're

doing now may not see the light of day until after I've retired

Neil Urquhart, Gordon & MacPhail, Whisky Specialist

“

”


Although pure alcohol consumption

levels have remained stable worldwide,

in some markets consumers are

choosing to drink less, mainly for health

reasons.

Increased health concerns mean that

consumers are more conscious about their

drinking behaviours. The long-term trend

will focus on both governments and

consumers increasingly clamping down on

the health and social impacts of excessive

alcohol consumption. There may also be a

renewed interest on the part of consumers

to pair food with whisky in order to reduce

the negative effects of alcohol.

There is increasing awareness of the social

costs of alcohol misuse to individuals,

communities and governments. These

include costs for healthcare associated with

binge drinking, associated social work,

public safety (fire and rescue), motor

accidents, criminal justice and employment

absenteeism. The Irish Department of

Health estimated the cost of alcohol-related

harm to society at €3.7 billion annually.1

Alcohol control policy is firmly on the WHO

agenda.

New legislation is restricting alcohol

consumption in order to negate the

negative impacts of excessive alcohol

consumption in certain markets. In Russia

the government is raising taxes on beer

and making efforts to limit venues where it

can be sold3 and minimum alcohol pricing4

has been set in Scotland.

Another key concern for governments is the

rising cost of lifestyle diseases, such as

obesity. There is an increasing focus on

legislation around calorie labelling on food

and drink and the Irish government recently

took a decision to prepare legislation

requiring the inclusion of calorie content on

alcohol labels.

Long-term health concerns could impact alcohol consumption and

accessibility

People are lobbying around alcohol globally because of health risks associated

with it… It will become more of an issue with regards to labelling and taxing on spirits. It has to be concern for our 40%

bottle of whisky or full fat cream liquor. It will definitely be more of an issue in the

next 5, 10, 20+ years

Jack Teeling, The Teeling Whiskey Company

“

”

Source: 1)

http://www.dohc.ie/publications/pdf/Steering_Group_Report_NSMS.pdf?dir

ect=1


The BRIC markets are beginning to

experience a slow down in their

economies. Home to a large population

of aspiring middle-class consumers,

lower GDP growth could lead to a

reduction in the export demand for

whisky from these nations.

The economies of Brazil, Russia, India and

China have started to slow down. This has

been driven by high inflation, particularly in

India1 and Brazil,2 and the impact of a

slowing global economy overall.3

China’s government in particular is aiming

to rebalance the economy away from an

over-reliance on exports and investment

towards domestic consumer spending.4

This change also echoes a longer term

value shift in emerging markets, from

material to non-material wealth. For

example, in China there has been a rising

backlash against the ostentatious

demonstration of wealth and the rise of the

anti-corruption movement.5

A large percentage of whisky consumption

in China is through corporate gifting by

wealthy state entities and officials and this

social shift could have an impact on the

overall volumes of whisky consumed.

The growth still taking place in the BRICs is

significant when compared to much of the

developed world, but this economic slow

down marks a potential threat to absolute

volume growth for whisky.

Although these markets are not specific

destinations for Irish Whiskey at present,

this highlights that future growth in these

markets may be a challenge.

The slowing BRIC economies could reduce the global demand for

whisky

Source: 1) Times of India, 2012; 2) Bloomberg, 2013; 3) BBC News,

2013; 4) BBC News, 2013; 5) Newsmax, 2011

“Brazil is going through a period of slow growth and fast inflation – a

period of stagflation…The weak data on

consumption will spark debate that this could be

more prolonged than expected

Marcelo Salomon, co-head for Latin America Economics at Barclays Plc.

“

”


Environmental concerns over climate

change and land use could create

future sustainability challenges

around supply chains and cost

structures.

The on-going irregularities in climate

change are impacting local crop harvests,

which are increasingly subject to extreme

drought and also erratic flooding. This will

obviously impact the crop supplies

available for whiskey production, and

therefore affect the overall supply chain.

There are also on-going discussions

between governments and alcohol

distillers concerning the use of precious

land space to grow what is considered a

non-essential consumer product. Any

impact on crop areas will influence the

overall supply of grains, which will

therefore have an affect on crop price.

Increased scarcity of certain crops are

already pushing grain prices higher. Any

rise in price of the grains used in whisky

production will therefore impact overall

production costs, which could create cost

challengers for distillers.

This shows how environmental issues

and concerns could come to bear on the

industry and could potentially disrupt the

future of whisky production.

However, there is an opportunity for the

whisky production process to embrace

more sustainable practices, but also to

give back to the local environment. For

example, there is growing interest in

converting whisky by-products into biofuel

energy, as a way of creating a renewable

energy source and therefore create a

closed-loop production process.

Increasing pressure on natural resources could impact some of

whiskey’s key ingredients and production processes

With the crops being poor in Scotland in 2012, the price of

malted barley was expected to increase from £300/tonne to

around £350 in 20131

Source: 1) Whisky News, 2012

“

” A commitment to sustainable whiskey production

processes in Ireland will connect well with Origin

Green; “making Ireland a world leader in

sustainably produced food and drink”


While strengthening industry regulation

is required to safeguard the integrity of

whisky coming from designated regions,

such as Scottish and Irish, there are

concerns that protection could stifle

innovation.

If the Irish Whiskey category is going to

grow and expand, consistent quality will be

key. There is an opportunity for

strengthening existing legislation to ensure

that all distillers are producing Irish

Whiskey according to set specifications

(specific % amount of grain, etc.). This is

what the Scottish Whisky Association

(SWA) has done in Scotland. Furthermore,

recent legislation will mean that Scotch

whisky producers will soon be expected to

apply to the UK Government to have their

brands verified as originating from

Scotland1

The Irish Whiskey Act of 1980 does not

actually contain a definition of the terms

“single malt Irish Whiskey” or “single grain

Irish Whiskey” or specific rules governing

production. In addition, the new Irish

Whiskey Association (IWA) is a lobbying

body without any authority to enforce

regulation. Therefore, the legislator has a

role to strengthen the existing legislation

around whiskey production.

However, there will be a need to find the

right balance between strengthening

regulation and allowing the category to

have the freedom to create its own rules.

Regulatory control could drive category growth, but too many rules

could also stifle it

As an industry we need to be very clear on quality and observation of the rules of what makes an

Irish Whiskey Brendan Buckley, Innovation and Category

Development, Pernod Ricard

Source: 1) Just Drinks, 2013

“

”

Establishing a role for Irish Whiskey


Irish Whiskey is the fastest growing sub-

section of the entire whisky category

globally.

Global consumption of Irish Whiskey

increased by 10.5% from 2011 to 2012

compared to the whole whisky category

growth of 2.8%.1

Having moved on from a turbulent past of

technology challenges, political struggle

and the infamous prohibition era (which left

the spirit dwarfed by the success of its

Scotch cousin), Irish Whiskey is beginning

to experience a renaissance.

Jameson has played a critical role in this

success. It is seen as the engine behind the

growth, generating excitement through its

shot formats and driving exposure through

significant exporting to the US. Jameson is

Ireland’s strongest export brand,

accounting for around 3.4 million of the five

million cases exported annually.2 At the

same time, independent producers, such as

The Teeling Whiskey company, are

reinvigorating the Irish category by creating

new and innovative varieties of Irish

Whiskey.

The category is expanding from a small

base. Irish Whiskey accounts for only 2% of

global whiskey volume, compared to 26%

from Scotch.3 There is significant potential

to expand the category by those willing to

invest.

Indeed, the future looks positive; Irish

Whiskey has the highest predicted volume

growth rates of global spirits, outpacing

even vodka to 2016.4

Lessons can be learnt from whisky drinking

markets around the world when it comes to

establishing a role for Irish Whiskey. The

next section will examine key whisky

drinking markets to understand the key

learnings for success in these different

locations.

Despite potential future challenges, there is an opportunity for Irish

Whiskey to tap into the category’s overall growth

Source: 1) IWSR Data, 2013; 2) Irish Examiner, 2012; 3) IWSR

Database, 2013; 4) IWSR Database, 2011

Jameson is indisputably the engine of this train,

with 76% of Irish Whiskey sales in the US, representing about 86%

of growth Hannah O’Leary, brand ambassador for

Jameson

“

”


The US is the biggest export market for

Irish Whiskey, largely driven by the deep-

rooted connection of the Irish diaspora

community living in the US.

There has been a recent re-birth of bourbon,

the locally-produced whisky in the US. The

beginning of this resurgence can be traced

back to Japan in the 1980s. At that time, the

first single-barrel bourbon was only available in

Japan and as a new generation of young

Japanese drinkers wanted to try something

different from the Scotch preferred by their

parents, its popularity began to increase.

Young consumers wanted to find a premium

drink of their own.

Bourbon sales in the US had been fairly low

before the 80s, so a lot of bourbon sitting in

barrels in Kentucky warehouses was slowly

ageing. When Beam released its small batch

specialty bourbons in 1992, Japanese

consumers bought large amounts and the

trend for bourbon trickled back to the US where

there was still a good supply.

Bourbon is currently experiencing a

rejuvenation due to new marketing efforts from

Jack Daniels, but also due to the mixology

influence sweeping the US, spurred on by the

increasing presence of whisky cocktails in

popular culture, as well as the emergence of

leading edge bars. This is making whisky more

accessible to new audiences. Bourbon

distillers have also embraced new flavours –

honey, cherry, maple and cinnamon – have

become the most recognised in connecting to

new audiences and are strong examples of

bourbon's accessibility.

The demand for authentic, locally produced

goods, for which bourbon connects strongly, is

also another key factor for growth. Recent

years have seen the rise of American craft

whisky. Craft distilleries are experimenting with

certain types of techniques – from stills to

barrel sizes – and craft whiskies are often

priced higher than older whiskies from major

distillers.

The US: Home of the accessible Bourbon variety

THE REJUVENATION OF BOURBON

Bourbon’s growth over the last five years

has been significant. The category has

refocused on high quality products and

variety as a way of premiumising the

product. The mixology wave has fuelled

the accessibility of the spirit, making it top-

of-mind and a key ingredient in the

fashionable whisky cocktail. Also the

increasing demand for local, authentic

products has supported growth of the

category.

KEY LEARNINGS FOR SUCCESS

• Reinvigorating a declining category by

appealing to a new generation of drinkers with

new formats can significantly drive volume

growth and exposure.

• Tapping into broader consumer trends around

authenticity and craft production, and leading

edge culture can buoy volume growth.


A RISING STAR AMONGST SINGLE

MALTS

Although investment in Japanese single

malt began in the 1920s, it has only

recently started to attract attention in the

last decade, mainly due to the commercial

efforts of Suntory. For example, they were

one of the first Asian companies to employ

American celebrities to market their

products, they operate two museums in

Japan to promote social and cultural

programmes across the country. The

slogan of Suntory’s whisky division is “The

art of Japanese whisky since 1923”

Japan: The innovative single malt

The last decade has seen Japanese

whisky explode onto the global stage

and challenge Scotch’s dominance in

the category.

Japanese whisky is similar to the Scotch

single malt variety. Historically, Japanese

distillers travelled to Scotland to learn the

Scotch distilling practice, and took this

knowledge back to Japan.

Whisky production in Japan started around

1870, but the first distillery opened for

commercial production in 1924. There are

now 10 whisky distilleries in Japan and the

most well known producers are Suntory

and Nikka. Suntory is a three-time winner of

“Distiller of the Year” award at the

International Spirits Challenge.

Some of the subtle differences between

Japanese and Scotch, such as the water

used and its compatibility with Japanese

food, are being emphasised as strong

selling points for Japanese single malt.

Japan is now the second greatest producer

of single malt whisky in the world after

Scotland, and it is starting to gain exposure

in Europe – France, Sweden and Norway –

as well as winning prestigious international

awards. However, 95% of what is produced

is still domestically consumed.1

The main drivers behind its domestic

popularity are the increasing demand from

a younger Japanese demographic and

format innovation. A new audience of

young, male urbanites has been embracing

the ‘highball’ whisky and soda cocktail

format .

One of the key advantages that Japanese

whisky has over Scotch, looking into the

future, is that there is a large supply to meet

a rising demand; something which the

Scotch market is struggling to create.

Source: 1) Euromonitor Report, Whiskies: Growth opportunities

in all markets, 2012


• Innovation within the single malt category can

turn the traditional Scotch format on its head –

unique and local differences of a whisky profile

can be celebrated – such as the water used in

production.

• New formats, such as the ‘highball cocktail”, can

drive significant volume growth and reinvigorate

the category.

• Investing in quality control and waiting for the

right moment to release high quality whisky

when demand is high can generate high value

growth.


Whisky is the fastest growing spirit in

Russia – it grew by 48% in 2012.1 The

significant upheaval in the spirits

category is creating new opportunities

for whisky producers.

Russia is traditionally a spirit-drinking

nation, but there is an emerging fatigue with

vodka. As Russians try to sever all

connections with its Soviet past and move

into a more Western world, premium

whiskies and tequila are winning.2

Despite the government’s recent focus on

reducing alcohol consumption for health

reasons, whisky producer Beam has

expanded into Russia with success.2

Beam has targeted aspirational drinkers

whose taste buds are favouring whisky over

vodka and who also have an appreciation

for Western culture, so are more likely to

purchase imported varieties. The alcohol

legislation that is emerging is also more

focused at the most affordable end of the

spectrum and is therefore having less of an

impact on higher-end, imported spirits.

Beam is also creating more unconventional

methods of gaining brand exposure. ‘Blind

taste tests’ are set up in bars to compare

Jack Daniel’s and Beam, and Beam is also

hosting golf events and tastings at yacht

clubs to win attention with its target

clientele.

Russia: Slowly shifting from vodka to whisky

CHANGING WHISKY RETAIL

Premium elite-class retail grocery chains

are on the rise in Russia, such as Globus

Gourmet in Moscow. Globus has focused

on amplifying the physical appearance of

whisky and placed it centre stage, while

shelves of vodka have been relegated to

the sides. These are the outlets where

people with higher disposable incomes

shop.3

Source: 1) IWSR Database, 2012; 2) BusinessWeek, 2012; 3)

Ostoenko, N., 2010


• There is an opportunity to connect with

increasingly sophisticated consumers who are

looking to try something new and different.

• The shift from white to dark spirits in some

markets creates an export opportunity for the

category.

• Below-the-line marketing can effectively target

consumers.


India has a strong history of producing

and consuming Indian-made ‘whisky’,

but rising incomes are leading middle-

class consumers to spend more on the

imported luxury and premium whiskies.

The domestic ‘whisky’ made in India does

not meet the European definition of whisky,

and cannot carry the category name if

imported to the EU. As a result a

comparison between the Indian liquor and

imported whiskies is not possible. However,

the history of consuming this Indian-made

liquor helps to explain the accustomed

taste to whisky, and therefore the rising

demand for imported whisky.

Indian consumers are aspiring to imported

whisky varieties, such as Teacher’s and

Whyte & Mackay, which are seen as

premium and aspirational varieties.1

Premium and super-premium brands have

seen a growth rate of around seven percent

in 2012.2

Additionally, a number of foreign producers

are promoting consumer education of

imported whisky through Scotch tasting

sessions in Mumbai and Delhi.

In 2012 the single malt category grew 20%

in India.2 In 2012, Scotch exports to India

were 27.6 million. 3

A potential barrier to growth in the future is

import tariffs, which are higher in India than

in other emerging markets. The World

Trade Organization’s efforts to decrease

taxes on imported alcohol from 550% to

40% in India is still in process.1 This means

that only the very top echelons the middle-

class can currently consider buying Scotch

whisky.

India: Moving from domestic demand to imported premium

Source: 1) Euromonitor Report, Whiskies: Growth opportunities in all

markets, 2012; 2) Livemint, 2012; 3) Business Insider, 2013

LAUNCHING PREMIUM VARIETIES

The whisky producer Beam launched

Teacher’s single malt at about Rs 4,000

(around £40) a bottle in India. The

category is growing at 30% for the

company in India. Around the same time,

it also launched Teacher’s 25 year old, a

blended Scotch priced at Rs 26,230

(around £260) in Delhi.


• Premium and super-premium positionings are

likely to win in emerging markets where

increasingly sophisticated consumers are

looking to trade up.

• Events to promote expose to the category, such

as whisky tasting, can dramatically increase

volume growth.


Irish Whiskey can learn from other markets in order to create its own

point of differentiation

Case studies into different whisky

markets can identify key learnings to

consider when thinking about the

future of the Irish Whiskey category.

They can also highlight how each type

of whisk(e)y leverages its own point of

differentiation within varying markets.

In the US, Bourbon whisky is

differentiated by its accessibility. It has

embraced the mixology trend and its wide

variety of flavour combinations makes the

whisky accessible to new audiences.

In Japan, the single malt whisky can be

associated with innovation. It has taken

the traditional Scotch model and molded it

to its unique climate and geography, using

its distinguished taste profile as a key

differentiator from the original Scotch

variety.

In Russia, whisky is seen as a more

exciting choice amidst a saturated vodka

market. It is associated with complexity

and sophistication by aspirational

consumers.

In India, Scotch imported whisky is

strongly connected to premiumisation and

meeting the needs of wealthier and more

knowledgeable consumers.

Irish Whiskey therefore needs to identify

its unique point of differentiation, and this

should align on an emotional level, with

the Irish culture and temperament.

When thinking about Irish identity, one

of the elements that stands out is

versatility.

The Irish population is one that has had to

adapt to the peaks and troughs

throughout its history; from the early

potato famines, the English occupation of

Ireland and the most recent boom and

bust of the Celtic economy - versatility is

an important way of life.

Versatility is also a credible entry point for

Irish Whiskey due to its liquid profile and

smoothness on the palette, which enables

it to be accompanied by many flavours

and occasions. This more fluid personality

connects with the down-to-earth and

open-minded attitude of Irish people.

These flexible qualities permit Irish

Whiskey to set itself apart from the more

traditional and stoic characteristics of

Scotch whisky.

WHISKY POINT OF DIFFERENCE

Accessibility

Innovation Sophistication

Premiumisation

The future of Irish Whiskey


In the face of emerging competition and to

secure growth in new markets, Irish

Whiskey must create and communicate a

clear, distinctive and inimitable USP for

the category.

The enduring strength of Scotch’s category

image and the emergence of new players to

the category could potentially limit Irish

Whiskey’s expansion if it is not able to create

a compelling identity that sets it apart from

other whiskies.

To build affiliation, the category needs to

consider what captivating stories can be told

that will set Irish Whiskey apart, as well as

the most compelling ways to tell the stories.

This affiliation could come from two places:

the tangible linking of the production process

to the unique characteristics of Irish Whiskey

and/or the intangible mystique of the

category and its historical origins.

Midleton’s positioning around ‘Redbreast’ pot

still Irish Whiskey (see box) clearly

demonstrates a more tangible connection. It

is not celebrating the tradition of the process

for tradition’s sake, but for the unique depth

of flavour that pot still distilling gives Irish

Whiskey.

On the less tangible side of building

affiliation, stories can create a deeper

emotional connection with the category.

‘Monkey Shoulder’ whisky (see box) is a

good example of this, where stories of the

past link the whisky back to its historical

roots.

Portfolio plays a key role in supporting

and building this affiliation to the the

category.

As drinkers become more sophisticated and

new whiskey audiences emerge, increasing

the variety, interest and complexity of the

category will be a key focus for distillers (see

box). The role of the portfolio will be

increasingly important - rather than focusing

on one single product, a wider offering of

products will keep existing drinkers engaged

and also build a connection with new

drinkers.

Future growth of the category will depend

on a ‘co-operative’ relationship between

larger and independent distillers.

Independent distillers can complement the

volume growth and category exposure that

can be achieved through larger distillers and

their economies of scale, by adding character

to the Irish category. As a result, a synergistic

relationship of ‘co-opetition’ is needed

between the larger and independent whiskey

distillers in Ireland to build the category fit for

the future.

There are a number of important foundation blocks that the Irish

Whiskey category must address in order to secure its future growth

The name of the whisky

‘Monkey Shoulder’ relates to the

injury suffered by workers as a

result of turning the malt during

production. The Scotch brand is

one of the last in the world to

still use this technique, and the

name evokes this historical

connection and story.

The Teeling Whiskey company’s

Poitín is a niche product with the

aim to add variety and character

into the portfolio, through

celebrating an ancient Irish spirit

and recognising the history of

Ireland.

Midleton’s ‘Redbreast’

positioning focuses on

rejuvenating the traditional spirit

of Irish pot still distilling. Pot still

is unique to Ireland and stands

apart from other whiskeys with a

unique taste profile.


There are three potential growth platforms to secure a role for Irish

Whiskey now and in the future

Native

personality

Maturity

Matters

Flavour

Complexity


Leveraging ingredient origin and distillation

environment to create a unique whiskey

flavour profile There is a significant opportunity to leverage the ingredients and distillation

environment specific to geographical location in Ireland in order to build unique

flavour profiles for whiskey.

In Scotch whisky, flavour profiles are already attached to designated regions,

such as the peaty notes from the Isle of Islay, for example.

This opportunity remains largely untapped for Irish Whiskey, where there are

only five distilleries in the country, compared to around 100 in Scotland.

To classify as ‘Irish’, whiskey must be matured on the island of Ireland for at

least three years, exposing it to a unique climate. The raw Irish ingredients,

such as water and grain, as well as the climate and distillation process, provide

an opportunity for brands to stand apart from other whiskies and be famous for

a certain personality or taste profile derived from the place of origin.

As the Irish Whiskey category grows and develops, flavour and character

profiles will distinguish one brand from another.

Native personality will permit Irish Whiskey to stand out from other

whiskeys and be famous for unique taste profiles designated to Irish

origin.

Native Personality

If you build a replica Irish Whiskey distillery in Scotland and used the same ingredients to produce the same spirit, it would more than likely

taste the same. But after leaving it in Ireland for three years to mature I can guarantee the whiskey would taste different.

Jack Teeling, The Teeling Whiskey Company

“ ”

Penderyn single malt whisky

promotes its geographical

location in Wales. It celebrates

that it is produced in a UNESCO

region of geological heritage,

with specific reference to the

unique type of water and wood

used; and has created the series

‘icons of Wales’ where each

bottle commemorates a person,

milestone or event from Welsh

history.

Slane Castle Irish Whiskey is

set to be released in 2015, and

will use barley from the castle

estate and water from the river

Boyne – ingredients unique to

the area. It also promotes a

closed-loop production cycle,

where byproducts of the

production process are used for

on-site energy generation, as

well as animal feed.

Nine Leaves distillery, in

Japan, draws water from the

natural spring deep

underground that runs off the

Biwako tributary. The water

has a low PH and is very

pure - qualities which

transform the unique taste of

the whisky.

Early Indicators


Implications for Irish Whiskey brands

• Distilleries need to identify from the area of

production the unique personality characteristics of

Irish Whiskey that allow it to stand apart from other

whiskies.

• Brands need to understand and effectively

communicate the link between place of origin and

the unique taste and character profile by building it

into the story and soul of their brand.

• Through the distillery location and the local sourcing

of ingredients, brands can create something that is

inimitable.

Native Personality


Flavour Complexity

Looking to casks and processes to

naturally expand the flavour complexity of

the category There is an opportunity to build affiliation with sophisticated whisky drinkers,

as well as new audiences, by meeting the demand for new and interesting

flavour profiles.

Different levers can be pulled to tap into this opportunity:

• Filtering and distillation – experimenting with chill filtering to balance the

‘impurities’ that impart flavour for example

• Cask materials – types of wood and casks coated with other spirits

As whiskey producers continue to experiment with these levers, the result

can shift the depth and breadth of flavour profiles.

This expansion of flavours will make the whiskey category more creative and,

as a result, more accessible to new and existing whisky drinkers.

Flavour complexity will give Irish Whiskey the opportunity to show off

its versatility and creativity, increasing its exposure in the category

with both existing and new audiences.

Chivas Regal Mizunara uses

the famous Japanese oak

(mizunara) casks, which

impart hints of incense,

appealing specifically to

Japanese palettes. This is

the first time a Scotch

blended whisky has

incorporated mizunara to

create a deeper taste profile.

Bruichladdich is made

from 100% Scottish-

grown organic chalice

barley and is non-chill

filtered and uncolored,

to develop extra flavour

and texture.

Compass Box created a

limited edition whisky called

“The Entertainer” with a

more sophisticated blend. It

connects back to the 20th

century when blends

contained higher proportions

of malt whisky and where the

whiskies were more peaty in

flavour.

Early Indicators

I think there is a way to do more interesting flavouring as innovation

Steve Uri, US Whisky Blogger “

”


Maturity Matters

Rethinking the rules around ageing and

maturity

As the demand for whisky around the world increases beyond the supply

available, attitudes towards accepting No Age Statement (NAS) will continue

to shift. This highlights an opportunity to shift consumer perception and

education that is rooted to only ‘the benefits of age statements’.

As age becomes a more interesting dimension, innovations that move

towards the NAS arena will continue to emerge, as well as the education

around the age concept in whisky. In some ways, this will make ageing and

rarity a more compelling proposition. However, it will also create the

opportunity to develop more complex whiskey where maturity matters, not

age. This will place the art of the blender at the core of the production

process.

Maturity Matters gives Irish Whiskey the green light to be experimental

away from traditional and expected formats - to meet current

consumer taste preferences.

Macallan has launched a

range of no-age statement

malts whereby their natural

colour will be the indicator

of age. This is shifting the

consumer perception

around age statements.

Glenrothes malt whisky has

created the tagline “Our

whisky is ready when it

tastes perfect. Not when it’s

reached a certain age.”

Showing the importance of

maturity over age.

Maker’s Mark diluted its

bourbon from 90 proof to 84

proof in order to meet

demand, without telling its

consumers. As a result the

brand lost equity from loyal

consumers who were

disappointed to discover the

content had changed, even

though Maker’s Mark later

reversed their decision.

Early Indicators

At a product level there is a knowledge that age doesn’t guarantee quality…Bottling a whiskey when it is ready is as valid an approach as

bottling a whiskey when it’s 20 years old. A lot comes down to the art of the blender.

Brendan Buckley, Innovation and Category Development, Pernod Ricard

“ ”

New roles for Irish Whiskey brands


The three platforms converge to create three opportunity spaces for

Irish Whiskey brands

Native

personality

Maturity

Matters

Flavour

Complexity

Timeless

Character

Inventive

Flavours

Sophisticated

Origins


Timeless character

High quality wood

Kilchoman, which opened on Islay in 2005,

removed the age statements and its Machir

whisky uses high quality wood instead to

achieve maturity.

Where origin of ingredients and the personality

developed from locality can establish new markers of

quality where age statements once stood

Rather than prioritising the age of a whiskey, the individual whiskey

characteristics are sufficient to stand alone, creating a new language in

the category.

The main facilitator of this shift away from the age focus is the awareness of

high quality ingredients to achieve maturity. This will provide an opportunity for

brands to build their character and quality from their local environment and

ingredients, rather than how long they have been aged (see box). Local

ingredients and locality (village, region, river etc.) will become the shortcuts to

quality.

This timeless identity places the focus on the highest quality ingredients, but

also the personality that can be developed from the production process. A

number of creative distillers already invite consumers to create their own

bespoke whiskey, as well as experience the production process for themselves,

which further drives the focus away from the length of ageing, but places more

emphasis on the core ingredients that the consumer selects – the cask size,

wood type and grain variety (see box).

Irish Whiskey brands have permission to leverage ingredients

and production processes unique to Ireland to craft new

overarching quality statements.

Bespoke character The London Distillery

Company offers

consumers the

opportunity to design their

own bespoke whisky.

They can select their cask

size, wood type and

barley variety, as well as

shadow a distiller for a

day to gain an insight into

the whisky production

process. The focus is on

the character derived

from ingredients.


Timeless character

THINGS TO CONSIDER

• Which Irish ingredients, unique to an area, could be used to communicate and act as new markers of superior quality?

• How can Irish brands educate consumers around the importance of maturity and character, to sit alongside the importance of age statements?

• What technological innovation could help shift the consumer mindset from age to the quality of ingredients used?


Sophisticated origins

Traditional reinvented

Pot still is unique to Ireland and the

most recent marketing campaigns has

focused on the ‘rediscovery’ of Irish

Whiskey. This adds character to the

type of whiskey and how it is distilled.

The taste profile is also suggested to

appeal to consumers who like the

complex taste of single malt.

Cross category synergies

Whisky food pairing is becoming a

popular activity, which increases the

accessibility of the category. Scotch

Broth Events promote new ways of

enjoying whisky, and pair whisky tasting

with sampling artisan Scottish food.

By tapping into the emotional connection to Irish

people and geography, and by celebrating the flavour

profiles originating from locally sourced ingredients

and materials, brands can create inimitable offerings

that appeal to the sophisticated drinker.

Brands can build unique personalities that combine the complex flavour

derived from Irish terrain and local ingredients, with evocative stories that

relate to the traditional production process and history of Ireland.

The traditional Irish pot still whiskey, for example, is experiencing a renaissance

(see box). The distillation method imparts a complex taste profile, likely to

resonate strongly with sophisticated single malt whiskey drinkers, and which is

unique to Ireland. Furthermore, its history linked to the production process

conjures a powerful emotional attachment to place, as this specific process does

not exist anywhere else in the world.

Sophisticated flavours can also be further enhanced by local origins. This can be

seen with cross category food and whiskey pairings (see box). It is said, for

example, that a Laphroaig whisky from Scotland will enhance the flavour in

seafood because of the sea air the whisky is exposed to during distillation. This

synergistic combination of sophisticated flavour and origin builds an emotional

connection between the drinker, the whiskey and the land which will deepen the

overall whisky experience .

Irish Whiskey brands have access to local ingredients and

history to celebrate sophisticated flavours from the land to

deepen emotional connections with consumers.


Sophisticated origins

THINGS TO CONSIDER

• Which local ingredients and materials should be used to create complex and unique flavour profiles?

• Can Irish distilling methods create complex flavours to rival the sophistication of Scotch single malts?

• Are there new occasions or events which can simultaneously enhance the flavours and origins of Irish Whiskey?


Inventive flavours

Brands can create innovative propositions to challenge

the role of age statements through the four levers that

enhance flavour complexity.

Altering the distilling and filtering process, changing the cask materials

and experimenting with more sophisticated blends are inventive

techniques to produce creative and complex flavours.

These flavour innovations can move the focus away from age statements and in

turn expand the category. For example, changing the cask materials can

account for around 75% of a whisky’s flavour.1 American oak can offer sweet,

silky, vanilla and coconut flavours; European oak can produce spicy and fruity

notes and French oak’s tighter grain can allow for a more gradual integration of

flavours, which is favoured by winemakers. This opens up a number of flavour

options to create a taste profile where complexity dominates, instead of age.

At the same time different production techniques can be used to modify the

ageing process itself. How a cask behaves will depend on its age, size and local

climate - ageing takes place three times faster in the tropics. Ardberg has

experimented with the local climate element through producing the first whisky

aged in space (see box).

Irish Whiskey brands have the versatility and momentum from

the recent interest in the category to be creative with flavours

and develop mature taste profiles that are not constricted by

age.

Ardberg sent whisky molecules to age in

space in 2012 in charred-oak casks

amidst a near zero-gravity environment

and the result was Ardberg’s Galileo. It

was named the best whisky in the world

at the annual World Whiskies Awards.

Innovative ageing

Source: 1) The Sunday Times Magazine, 2013

Vintage concept

Glenrothes is one of the distilleries that

has rejected age statements in favour of

single-year vintages. The ‘vintage

concept’ increases the flavour options

whilst removing the need for age

statements.


Inventive flavours

THINGS TO CONSIDER

• In what ways could the cask temperature and atmosphere be altered to change the ageing process?

• How can young and aged blends create innovative and surprising flavours that attract new whiskey drinkers and excite established ones?

Final thoughts


Final Thoughts

It is essential that Irish Whiskey identifies

its key point of difference.

Irish Whiskey needs to create a clear USP

for it to stand out in the whisky category,

when compared to other whisky varieties.

Versatility is a credible entry point, due to

Irish Whiskey’s smooth texture, which

bestows it with adaptability to different

flavours and occasions. This quality also

connects emotionally with the Irish culture

and temperament.

Strengthened regulation will ensure

quality control and consistency for long-

term future growth.

As Irish Whiskey continues to grow in

volume and value, existing legislation in the

category will be strengthened to ensure that

the quality of Irish Whiskey and its

reputation is maintained for the long-term

future.

Category growth will rely on smaller and

larger players working together - ‘co-

opetition’.

Larger whiskey producers will be able to

create significant category volume growth

due to their economies of scale and their

access to resources and distribution

networks.

They are likely to achieve significant growth

by focusing on a concentrated portfolio of

products and their established global

presence will consequently generate

significant category exposure.

Smaller distillers will then be able to ride the

positive wave of increased exposure and

consumer awareness. They will then be the

ones who are able to add creativity to the

category, by adding portfolio variety through

small batch innovations. In turn larger

distillers will benefit from the energy injected

into the category by smaller distillers’.

For this reason, larger players should

support smaller whiskey producers with

difficult business challenges - such as limited

access to capital, succession issues and

resource shortages - as it is in their best

interest to secure overall growth in the

category.

Irish Whiskey investment and planning

needs to have a long-term focus in mind.

Due to the long-term nature of the category,

whereby whiskeys may take 20 years plus to

be released, emerging social, technological,

economical, environmental and political

considerations should be taken into account

when making any future investment plans.

This is to ensure the long-term survival and

growth of the category.


“Too much of

anything is bad,

but too much

of good

whiskey is

barely enough.”

--Mark Twain--

--THE END--

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The Future of Irish Whiskey - Bord Bia - Irish Food Board · About this report This report has been ... level trends shaping consumer behaviour and the future of the ... from 2011