Scotch whisky enjoys global revival

  • Follow Business

ALLOA, Scotland --- The noise is deafening at Diageo PLC's Abercrombie coppersmiths as skilled workers hammer away, molding 14 large, bell-shaped stills destined for Scotland's first new whisky distillery in more than three decades.

Back | Next
A coppersmith walks by parts of whisky stills being built for a new Scotch Whisky distillery in Roseisle, Scotland.  Associated Press
Associated Press
A coppersmith walks by parts of whisky stills being built for a new Scotch Whisky distillery in Roseisle, Scotland.

A few miles down the road at Carsebridge, coopers are teaching the backbreaking traditional art of making oak casks to the first batch of apprentices in years as the company ramps up production to meet increasing demand from emerging markets such as China and India.

Clever marketing by Scotch distillers has encouraged a growing middle class in both those countries to use the prestige and heritage of the drink to reflect their newly affluent status. There is also a renewed appetite for the higher quality single-malt whisky from mature markets such as the U.S.

Overseas sales of Scotch whisky rose 4 percent to an all-time high of $5 billion in 2006, the latest available figures -- equal to a whopping 25 percent of Britain's entire food and drink exports.

Industry experts say that strong growth continued through 2007 and into 2008, reversing a downturn in the drink's popularity at the end of the last century when its reputation as a tipple for the older gent saw it lose ground to white spirits such as vodka and gin.

"Suddenly whisky is cool again," said Charles Allen, global brand director for Scotch whisky at Diageo, the maker of the world's two top brands by sales, Johnnie Walker and J&B.

Diageo is so sure that demand will continue to grow that it has unveiled plans to build an $80 million distillery at Roseisle in northeast Scotland, part of a $200 million expansion program that will see roughly $160.5 million spent on expanding capacity in distilling, with the remainder dedicated to packaging and warehousing.

The whisky stills -- 15-foot-high kettles that separate the alcohol from the fermenting mix of water and malted barley -- being put together at Abercrombie will be moved into place later this year and the first production from Roseisle is slated for early next year.

Other producers are making similar moves -- around $1 billion of capital expenditure has been invested across the industry for 2008-09, according to the Scotch Whisky Association.

That funding is spread across Scotland, which has more than 60 old stone distilleries, such as Diageo's 200-year-old Blair Athol stillhouse in the town of Pitlochry, dotted across its Highlands and rolling southern hills.

As domestic sales of Scotch whisky stagnate, 90 percent is now exported with state-of-the-art bottling plants feeding the product directly overseas from the eastern Scotland port of Grangemouth.

While there is continued growth in traditional markets such as the U.S. and Europe, emerging markets such as China and India are generating the most buzz, said David Williamson, the spokesman for the association.

"It is certainly advantageous that in two of the world's largest and fastest-growing economies, whisky consumption is either a well-established tradition -- India -- or a marker of sophistication -- China," said Jason Holway, an independent analyst at Zenith International.

"An aspiration to 'trading up' and drinking Scotch whisky in each culture should bode well for the future of the industry," he added.

Scotch whisky sales in China have jumped from just $2 million in 2001 to $1.1 billion in 2006, aided by the east Asian country's decision to cut its spirits tariff to just 10 percent from 65 percent after it joined the World Trade Organization in late 2001.

Exports to India, where tariffs remain relatively high at 150 percent but well below their previous levels of up to 550 percent, were valued at $48 million in 2006, the most recent figures available.

Diageo's Johnnie Walker, the longtime market leader in the U.S. and the world's No. 1 brand by sales, is the clear winner so far thanks to the company's strong marketing push in China to sell the tipple as the world's No. 1 party drink.

Sales of Johnnie Walker grew by 14 percent to more than 15 million cases last year, worth a total of $1 billion.

Edrington Group Ltd., the maker of Famous Grouse and Macallan, is putting its faith in the growing popularity of single malt whiskies, investing millions of pounds to restart production at a dormant stillhouse that will increase output of Macallan single malt by more than 30 percent to more than 8 million liters per year.

"We are seeing some fantastic growth in terms of single malt," said Ken Grier, Edrington's director of malts.

A single malt is distilled from just one malt, or grain that has been moistened and allowed to sprout --- in the case of Scotch whisky, barley --- from a single distillery. A blended whisky is the product of mixing one or more single malt whiskies together with whisky made from other grains.

Malt exports exceeded the general sales rise for whisky in 2006, lifting 7 percent, compared to a 4 percent rise for blended Scotch sales.

The push to sell single malts is part of the industry's marketing focus on "premiumization" in mature markets. Pernod Ricard SA last year launched Chivas Regal 25, a luxury blend that sells for around $300 a bottle, while Diageo introduced its Johnnie Walker Blue Label King George V, which sells for $500.

To classify for the prestigious label of Scotch, whisky must be made at a distillery in Scotland and matured in an oak cask for at least three years.

That means an expensive and long startup process for new entrants like the tiny Kilchoman Distillery on Islay, an island off the west coast of the Scottish mainland.

Managing director Anthony Wills says the distillery's single malt, due for first release in June 2009, will be launched as a niche product aimed at the mature U.S., Japanese and European markets.

"The idea is to release small amounts on the market to create a limited edition product," he said.

Comments (1) Add comment
ADVISORY: Users are solely responsible for opinions they post here and for following agreed-upon rules of civility. Posts and comments do not reflect the views of this site. Posts and comments are automatically checked for inappropriate language, but readers might find some comments offensive or inaccurate. If you believe a comment violates our rules, click the "Flag as offensive" link below the comment.
mgroothand
5
Points
mgroothand 04/13/08 - 09:44 am
0
0
The price of this, already

The price of this, already expensive, tipple has increased at least 35% over the last month. A classic supply and demand situation as illustrated by this article. What I don't understand is why must all this type of whiskey be manufactured only in Scotland? It has a certain distinguishing flavor that could easily be duplicated by other countries. Vodka, once a Russian/Polish domain, is made everywhere as is gin and other such libations. The wine industry that was once a mainly French export was challenged many years ago by other countries. Now any California produced wine can hold its own with any from France. It's called competition that some countries prefer not to enter into.....

Back to Top

Search Augusta jobs