Category: General Blogs
As we were putting the finishing touches on this year’s Beverage Almanac, it became clear that whiskey was, once again, the big story in alcohol. However, to say that whiskey is doing well across the board would be a bit of an overstatement. In fact, there’s one major segment that didn’t have a good year at all.
The Scotch Whisky Association reported that exports—the part of the business it relies on for most of its growth—fell 7 percent in 2014. And, can you guess which market was mostly to blame? That’s right, exports to the U.S. fell a full 9 percent.
And remember, this is all happening when bourbon, Tennessee and Irish whiskey are enjoying high single-digit/low double-digit volume and revenue growth.
So why is Scotch, which long has been seen as the whiskey drinker’s whiskey, struggling to hold on to its consumers? There’s no easy answer. One could argue that all of the new Irish whiskey drinkers are pulling from Scotch, but Irish tends to be the spirit that introduces consumers to whiskey and is more likely to be attracting drinkers away from vodka and other white spirits.
Another argument is that drinkers are gravitating away from Scotch toward bourbon and other American whiskeys, but that’s probably not the case either. Though the bourbon boom can be attributed to growth across most demographic segments, millennials are responsible for an outsized portion of the volume. And before they were drinking bourbon, most millennials weren’t really drinking whiskey.
However, some insight might be gleaned from the bourbon/millennial connection. Bourbon makers have been able to connect with and become relevant among those of the younger LDA demographic. The authenticity component, which is at the very core of bourbon’s value proposition, has been particularly attractive to millennial drinkers. There’s also been a very obvious kinship that bourbon and other American artisanal whiskeys share with craft beer and marketers in both categories have been able to promote that link through efforts like beer/bourbon pairing events, barrel aged beers and hop-infused whiskeys. And those marketers have been quite adept at telling consumers about those activities through social media—the direct hotline to the millennial generation.
What’s really pulling Scotch down is the fact that the vast majority of volume is blended versus single malt, by a more than four to one margin. Single malt volume, for the most part, is doing well. There’s just not enough of it to keep the category in the black. There’s a lingering perception that Scotch is grandpa’s drink because its most visible brands are the blends widely consumed by earlier generations before single malt was even a viable segment.
But things are changing, albeit slowly. My recent tour of Scottish distilleries revealed that many have been working around the clock to ramp up the innovation with new single malt expressions and new barrel finishes. Some potentially game-changing products are still sitting in barrels.
Hopefully, Scotch marketers will be able to turn the tide before the whiskey wave subsides. Their segment could be the next stage in the renaissance that has brought bourbon, rye, Tennessee and Irish whiskey to a new generation. However, first they’ve got to figure out how to connect with that generation—and fast.