This article was initially published in the March issue of Global Drinks Intel magazine. For details on how to subscribe, click here.
Brand owners are working to change consumer misconceptions of blended Scotch while ramping up their focus on Asia.
The blended Scotch whisky category will enjoy a steady year of growth in 2023, according to the latest IWSR Drinks Market Analysis forecast. Volumes will rise by a solid 4%, the research firm predicts, and the value of blended Scotch will grow by 6%, driven by a combination of inflation and the premiumisation trend, which remains potent despite the cost of living crisis in many markets.
The ongoing recovery of global travel retail, buoyed by China reopening its international borders in January, will drive blended Scotch sales. The weaker pound sterling (at the time of writing, the GBP/USD exchange rate was around US$1.20) makes Scotch more attractive in export markets, and IWSR predicts mature markets, such as the US, Mexico and Japan, should also see moderate growth this year.
India sparkles as Russia loses lustre
According to IWSR research director José Luis Hermoso, India is one of the export markets to watch this year. “India is already a growing market for imported spirits and Scotch in particular,” he explains. “We don’t know when, or if, tariffs will be reduced or lifted, but a free trade agreement (FTA) is under discussion. Whisky resonates with Indians - Scotch has a status image in the country, which is the world's largest whisky market.
“Much will depend on the details of any FTA,” Hermoso adds. “There may well be differentiation in tariffs for bulk versus packaged, which may benefit bottled-in-origin more or less than bottled-in-India.”
In contrast, the outlook for Russia, the fourth most important market for blended Scotch in 2021, looks far less rosy due to a near-universal boycott over the war in Ukraine. “We are expecting over 20% decline in Russia in 2022 and do not expect 2023 sales to recover to pre-crisis levels,” Hermoso reveals.
Brands focus on Asia travel retail
On 8 January, after three years of strict Covid-19 restrictions, China fully reopened its borders for both foreign visitors and Chinese nationals. The Chinese won’t reclaim their title as the world’s most important group of duty-free shoppers overnight, but the rapidly improving market backdrop has encouraged blended Scotch whisky distillers to step up their promotional activity in the channel in the Asia Pacific region.
Over Chinese New Year, Bacardi's Dewar’s brand ran a major activation across 11 locations in Asia Pacific, including the duty-free Chinese island of Hainan, Singapore, Taiwan and Malaysia. With a focus on travel retailers’ websites and social media platforms, the campaign revolved around a new travel retail expression: Dewar’s Double Double 20-year-old, a 46% ABV, Sherry-cask-finished iteration presented in a gift pack featuring this year’s zodiac sign, the rabbit.
Elsewhere, Diageo Global Travel partnered with Shanghai-based designer Angel Chen, a rising star on the Chinese fashion scene, to create an exclusive New Year-themed label and box design for Johnnie Walker Blue Label. The bottle and label both feature a prancing rabbit and Shen’s trademark print pattern.
Higher-price brackets set to grow
IWSR predicts that high-end, ultra-premium and prestige blends will continue to grow at double-digit rates over the next year, outperforming the value and standard price tiers. One brand prospering at the top end of the market is William Grant & Sons-owned House of Hazelwood, a series of rare blends (and malts) sourced from the private collection of the company’s fifth-generation owner, the Gordon family.
“The stage our business is at means for House of Hazelwood there is opportunity everywhere for growth,” says Hazelwood marketing director Jonathan Gibson. “China certainly holds enormous potential, as do several other Eastern markets. We opened the US market towards the end of last year and see great scope for growth there, as well as in a number of European markets. For us, the most important thing is finding the right way to connect meaningfully with the right consumers; so the route to enter a market, and the support and activation we can run within that market, can be at least as important as the nature of the market itself.”
2022: recovery and rising costs
Looking back on a year marked by rising costs, but also a period of on-premise recovery after the upheaval caused by the pandemic, suppliers broadly agree that 2022 was more of a hit than a miss. “The great Cutty Sark adventure started nearly four years ago with La Martiniquaise-Bardinet and we're very happy that in 2022 we achieved strong growth of 24% versus 2019,” Cutty Sark international brand manager Manon Brochet tells Global Drinks Intel, attributing the brand's impressive performance not only to activations in key markets (including Spain, Japan, the US, Greece and Portugal) but also to Cutty’s growing presence in developing markets such as India and China.
In a similar vein, MacDuff International brand & marketing manager Julie Christie reports that 2022 was a year of strong recovery for the Glasgow-based whisky blender. “By the end of our financial year in April, we will have seen double-digit growth and a record year in terms of turnover,” she reveals. “Blended whisky still remains the core of MacDuff’s portfolio with our historic blends Islay Mist, Lauder’s and Grand Macnish.”
Christie says the company was finally able to expand the distribution of Watermark, a blended malt first launched at the height of the pandemic in 2020, into markets across Europe, the Middle East, Asia and North America last year. Islay Mist, a mildly peated blend, also had a good 2022, she reports, performing well in Finland and Canada. Despite continued restrictions on the on-premise for much of the year, Asian markets such as Taiwan and Japan showed strongly.
Sales may be growing overseas, but Christie says the impact of inflation - in particular, the soaring prices for energy, cereals, packaging and bottling - is proving difficult. “The added challenge with Scotch whisky is the maturation time between distilling and selling,” she explains. “You have to balance out the cost increases over time and predict where they are going. to avoid putting your price up by too much and end up being uncompetitive.” At the same time, Christie adds, producers need to ensure price increases are “enough to cover costs”.
Shaking up consumer attitudes
If the blended Scotch category was a car, it would be a no-nonsense Volvo, a reliable and affordable family run-around. Single malts, on the other hand, are more like handmade Italian sports cars, racy and exciting with a hefty price tag. These popular perceptions perhaps explain why IWSR forecasts malts will grow at a CAGR of 6% over the next four years, double that of blends at 3%.
Blended whisky producers are working hard to make consumers rethink their prejudices about blends, according to Susan Blair, director of Duncan Taylor, an independent whisky merchant and the owner of the soon-to-be repackaged Black Bull blended whisky. “Younger single malt drinkers may well be interested in their favourite distillery, but equally, more and more are discovering the versatility and adaptability of blends,” she says. “Our Black Bull peated [expression], for instance, adds another dimension to many of the world’s favourite whisky cocktails.”
Blends can combine flavour profiles and different distillery characteristics to create something special at differing price points, says Paul Dempsey, sales & marketing director at Brave New Spirits, owner of Lighthouse blended whiskies. “Innovation can come from cask selection, distillation techniques, maturation or even exchanging knowledge with producers in other countries,” he adds.
If there's one company that epitomises innovation within blends, it's Compass Box, founded in 2000 by John Glaser and famed for its distinctive packaging, unusually named, award-winning whiskies and its push for greater transparency within the industry. Now co-led by CEO Maurice Doyle, the company enjoyed record sales last year with London investment firm Caelum Capital becoming its major shareholder.
Compass Box continues to surprise: last year it released Compass Box Experimental Grain Whisky, containing peated malt distilled in a column still rather than a pot still. More recently, the company launched Delos, the second in its 'Extinct Blends Quartet' series. Limited to 5,520 units, the blend contains malts from the highly-rated Glen Elgin, Imperial and Miltonduff distilleries.
“Our view is that the intent behind the whisky-making process determines the distinctiveness of the product you create,” says Compass Box whiskymaker James Saxon who says the popular route of cask-finishing is not the only method of innovation for blends. “That is your opportunity to innovate and bring new ideas to the table, using all the tools at your disposal.”
This article was initially published in the March issue of Global Drinks Intel magazine. For details on how to subscribe, click here.
