Catching The Spirit


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The Scotch category is making slow but steady progress
toward building its customer base.

By Howard Riell

Vat by vat, expression by expression, consumer by consumer — Scotch producers and marketers continue to lay the groundwork for building a lasting customer base. For the past three years, Scotch sales have hovered in the region of 9 million to 9.1 million 9-liter cases nationally. And while the category is lagging behind overall spirits sales — especially when considering the explosive growth of the vodka and rum categories — its performance is an improvement over the constant sales decline that began in the early 1980s.

The single malt Scotch segment has regained some momentum, with percentage growth in the upper single digits. And while Scotch remains a brand to brand business, generally speaking, the high-end products have outperformed the category. To help spark this superpremium interest, suppliers have been broadening their offerings. For example, Dewar’s 12, the higher-end line extension of the top-selling Dewar’s White Label, has increased its sales rapidly since it was introduced barely three years ago. The brand has also just debuted Dewar’s Signature, an even higher-end ultra-premium blend. Among the single malts, several brands have launched additional vintage expressions, wood matured versions and new combinations. Heaven Hill Distilleries, for example, recently added Superstition — a marriage of different vintages and styles of Isle of Jura single malt — to its already available Isle of Jura 10 and 16 Year Old single malts.0404sc3

Superstition, from Heaven Hill Distilleries, is a new single malt made by marrying together different styles and ages of an Isle of Jura malt.

As always, the challenge for Scotch makers is to maintain the aura of prestige and tradition inherent in the category while driving new consumers into the category through a variety of marketing tactics, ranging from lifestyle advertising to highlighting boutique attributes to special event promotional activities.

“There is definitely an interest from a younger audience,” said Larry Kass, director of corporate communications for Heaven Hill Distilleries. “For years, Scotch people would wring our hands over the fact that our marketplace seemed to be getting older and older. Well, we’ve seen a lot of evidence lately that there are younger people who are very interested in malt whiskies.”

“Deluxe Scotch whiskies — 12 year olds like Dewar’s 12, Johnny Walker Black, Chivas Regal and Buchanan — have been growing,” said Charles Ho, marketing manager for Bacardi USA Inc.’s Dewar’s.DewarsSignature

Dewar’s Signature is emblematic of high-end line extension activity throughout the Scotch category. In selected distribution, the ultra-premium blend retails for about $200 per bottle.

Dewar’s 12 will continue as the company’s primary focus. Said Ho, “We’ve kind of dialed up our advertising.” The two-year-old campaign, called “Savor Every Detail,” will continue through 2004. Later in the year, an event called “Dressed to Kilt,” held on Tartan Week, will celebrate the contributions Scotland and its people have made. Another year-old program seeks to provide Scotch education (with tastings) to business- and law-school graduates.

Ho calls Dewar’s Signature, which is being launched nationally, “our most treasured brand.” Master blender Tom Aitken, who created the Dewar’s 12 blend, “wanted to leave a legacy in the Scotch world, and he created this one blend, which is really the masterpiece of the blended art. It includes Aberfeldy 27-Year-Old, a single malt with notes of honey, heather and vanilla.” Currently available in New York and New Jersey, it will be in national release by mid-year. It currently retails for about $200 per bottle.

“At the premium end of the Scotch category we’re seeing continued growth,” agreed Chris Willis, vice president of marketing for Scotch Whiskies for Pernod Ricard USA, “whether that’s in single malts or deluxe blends.” Pernod Ricard is the world’s third largest Scotch whisky producer whose brands include Chivas Regal, Royal Salute blends, and The Glenlivet and Aberlour single malts.

Global Positioning

Pernod Ricard has worked a lot on positioning and the advertising since taking over Chivas Regal in early 2002. Last September saw the launch of a new global advertising campaign called, “This Is The Chivas Life.” It includes television, radio and print advertising in both English and Spanish. The TV commercial depicts experiences that encourage consumers to make the most of life. For example, “Ice Fishing in Alaska” shows three men, enjoying the dramatic snow and ice setting, with fishing tackle set up around them and a bottle of Chivas Regal open by their side.0404sc4

Chivas Regal, from Pernod Ricard USA, began a worldwide brand positioning ad campaign late last year, using the tagline, “This is the Chivas life.”

Said Willis, “It’s an extremely strongly branded campaign.” From the launch through 2004, he added, the campaign will have cost about $10 million, “a pretty sizable investment.” A second TV commercial, which broke during the first quarter of ’04, is called “Tiger’s Tail.” A third due out by the end of March is called “Tango.”

Indeed, among deluxe Scotch, Johnnie Walker Black has shown the most impressive sales growth over the past few years. Its annual compound growth rate has been more than 6% for the past five years, with sales of 675,000 9-liter cases nationally last year. “The theme across all our brands at Schiefflin is about reaching out to more people than ever before,” said Richard Nichols, Product Group Director for Scotch at Schieffelin & Somerset (S&S), which markets the blends Johnnie Walker Black, Johnnie Walker Red, J&B and Buchanan, and Oban, Lagavulin and Talisker single malts. Indeed, building awareness — through education — is something Scotch suppliers must and will continue to do through 2004 and beyond, he added0404sc5

Johnnie Walker Red enjoyed a positive sales year in 2003, and recently debuted a new label.

“We returned to basics on both Red Label and J&B, focusing on the people who commonly drink both of them,” said Nichols. “And we just concentrated on the off-premise and on relationship marketing.” Direct mail is being used to establish ongoing communication with consumers. Initial results have been “very promising.”

Johnny Walker Green Label, launched in the U.S. in June ’03, will continue to expand into new markets this year. It retails for around $50. Said Nichols, “Once you go above the $30 mark, that’s where all the action is, and there is a lot of activity, a lot of vibrancy there. We’re very optimistic on both blends and malts in 2004 and beyond.”

Extending Single Malt Brands

Line extensions featuring different product attributes and different ages (including vintages) have become the recent hallmark of single malt Scotches, both large and small. For example, Glenmorangie, which boasts a 10 Year Old, 15 Year Old and 18 Year Old, also features its collection of wood-finished single malts — Glenmorangie 12 Year Old Port Wood Finish, Glenmorangie 12 Year Old Madeira Wood Finish and Glenmorangie 12 Year Old Sherry Wood Finish. Not content, the brand has created a Limited Bottling Series that include single malts in very limited quantities produced one time: Glenmorangie First Growth Claret Wood Finish, Glenmorangie Fino Sherry Wood Finish and Glenmorangie Elegance, made from 21 year-old malt and packaged in a swan-neck pot still-shaped decanter. The most recent entry is the 1981 Glenmorangie Sauternes Wood Finish, in extremely limited quantities (960 bottles into the U.S., retailing for about $300).

Brown-Forman, which markets Glenmorangie, also handles Ardbeg single malt Scotches (with 10 Year Old and 17 Year Old; a 1978 Vintage and 1974 Vintage Provenance limited edition ran out of supply) and Glen Moray (with 12 Year Old, 16 Year Old and Wine Mellowed).0404sc6

Glenmorangie, from Brown-Forman Beverages Worldwide, is one of several major single malt Scotch brands that offer a wide range of expressions.

A $45 burgundy wood finish will be added to the Glenmorangie line in late spring or early summer, as well as a 10 Year Old, high-proof Ardbeg matured in cherry casks (about $70 retail), said David Dorsey, vice president/global brand director for Brown-Forman.

The Glenlivet is the best-selling single malt Scotch line in the U.S. and grew 5.5% last year, with national sales of 211,000 9-liter cases. The brand features a wide portfolio of single malts of different ages, as well as a specialized Cellar Collection of limited release expressions. Just recently, The Glenlivet French Oak Finish 1983 debuted in the U.S. It comes in a collectible wooden box and retails for about $200 a bottle.

The Glenlivet had an “excellent” year in 2003, according to Chris Willis of Pernod Ricard. “It’s been pretty consistent over the last four or five years now, so we’re very happy.” Pernod Ricard also markets Aberlour single malt Scotch in the U.S., and it is also growing, Willis said.

“If you look at the Scotch category in total, single malts over the last five or six years have probably averaged growth of 6%,” said Willis. “The deluxe Scotches are growing at about 5%.”

Willis sees it as important for the Scotch companies to continue recruiting new consumers. Both Chivas and The Glenlivet, he pointed out, have “very significant” recruitment programs, which rely heavily on bar promotions and tastings. “The Glenlivet also started doing a lot more Scotch tastings last year, and we’re working to develop that program.”0404sc7

The best-selling single malt Scotch in the U.S., The Glenlivet, from Pernod Ricard USA, also offers several different versions, including this latest French Oak Finish 1983 release.

By the spring, he added, The Glenlivet will have started “what we call experiential marketing, with a particular focus in golf clubs.” The brand will sponsor several golf tournaments, “where afterward we would use Scotch tastings with The Glenlivet. That’s an important project for us.” Both Chivas and The Glenlivet will see packaging updates, particularly on gift boxes, later in the year.

William Grant & Sons also boasts an impressive single malt Scotch lineup that includes Glenfiddich and The Balvenie. “We’re actually happy with the single malt category in the last year, and perhaps the year before,” said James Bruton, marketing manager for the Scotch Whiskies for William Grant & Sons. “We’ve been very, very happy with the Glenfiddich 15 Year Old and 18 Year Old.”

In addition to its top-selling 12 Year Old, Glenfiddich also offers a 30 Year Old expression as well as a 40 Year Old, which sells for about $2,000 a bottle. Said Bruton, “We’ve been pretty happy with those results.” The company has also introduced Glenfiddich 1937, which has not been made available in the U.S. Worldwide, there are only 70 bottles available, selling for about $12,000 per bottle.

Bruton describes The Balvenie as “the quintessential esoteric single malt. We have the 10-Year-Old Founder’s Reserve, the 12-Year-Old Double Wood, the 15-Year-Old Single Barrel, the 21-Year-Old Port Wood, the 25-Year-Old Single Barrel, and this year a 1972 Vintage Cask that is selling for about $400 a bottle.” A new vintage is set to debut during the third quarter.

(William Grant & Sons also produces U.S.-bottled blends Clan MacGregor and Grant’s. Clan MacGregor was the the top-selling U.S.-bottled Scotch and the second-best-selling Scotch in the U.S. last year behind Dewar’s, Bruton said. Indeed, the brand’s sales were up nationally to 720,000 9-liter cases.)

The Macallan, from Remy Amerique, also offers consumers a range of expressions, including single malts aged 7, 10, 12, 15, 18, 25 and 30 years. About a year ago, Macallan introduced a new cask strength, The Macallan 1841 Replica, priced at around $200. The Macallan Exceptional V, released this past January, is a 15 Year Old.

Building A Portfolio

Allied Domecq Spirits & Wine North America plans to reintroduce its Laphroaig, a single malt Scotch Whisky from the remote island of Islay, with the March introduction of 10-year-old Laphroaig Cask Strength, which has been available until now only outside the U.S.Laphroaig 10

Allied Domecq’s Laphroaig single malt Scotch also boasts a wide range of expressions. Allied Domecq will group the brand with its other single malts to market them in a “portfolio approach.”

The move is part of the firm’s strategy to “start with some quick wins focused around things that are in demand,” said Kevin McCarthy, senior brand manager for Allied Domecq. Laphroaig will also continue to be available in 10, 15, 30 and 40 Year Old 750 ml versions.

The company is working hard to recruit new consumers to become Friends of Laphroaig. The idea, said McCarthy, is to increase the number of people involved in the program “and use it as a vehicle to build awareness.” Currently, there are about 17,000 members. Club events will be held in key metro areas.

Another element of Allied Domecq’s plan for this March is to take what McCarthy called the “portfolio approach” to marketing, drawing Laphroaig under an umbrella with sister brands Glendronach, Scapa and Tormore, a 12-year-old product from a relatively new distillery in Scotland. Allied Domecq also markets Ballantine’s Finest, a blend that is its top-selling brand globally with particular strength in Europe.

“The point is that the Allied portfolio represents all areas of Scotland,” he noted. The program will include shelf talkers and permanent racks. “We’re trying to break down some of the barriers that Scotch has built up, including a vernacular that’s tough to understand if you’re new to the category.”

Kass, of Heaven Hill Distilleries, agrees wholeheartedly with that approach. “We’ll continue what we’ve been doing for the past four or five years, which is a tremendous amount of Scotch education, which takes place in terms of consumer tastings and events.” Another step in that direction has been Heaven Hill’s hiring of Willie Tait, a 30-year-industry Scotch veteran, to serve as its Scotch ambassador. Besides educating consumers and the trade about the category in general, Tait will focus on the attributes and history of Isle of Jura Single Malt Scotch.

Marrying Malts

New from the Isle of Jura Distillery in the remote Hebrides Islands of Scotland is a single malt Scotch called Superstition, an extension to the Isle of Jura single malt family, consisting of a 10 Year Old and a 16 Year Old. While the 10 Year Old (about $27 retail) has been on the market for awhile and has seen steady incremental growth, the more recently introduced 16 Year Old (about $49 retail) has had huge success of late, said Susan Wahl, Isle of Jura brand manager. Indeed, the older malt had to be air-freighted from Scotland to meet demand late last year, the company said.

Superstition is an unusual single malt expression in that it combines different versions and ages of the same malt. While the 16 and 10 Year Old are unpeated, Superstition uses peated whisky that is aged for four years and marries that with unpeated Isle of Jura single malt whiskies that are aged 13 and 21 years. The peated whisky represents 13% of the result, with the 13 Year Old representing 37% and the 21 Year Old accounting for the remaining 50%. The new brand, presented in a unique, stylish bottle, retails for about $35.

At Jim Beam Brands, The Dalmore single malt has been making strides. Marketing for the brand got a boost in 2003 with a new ambassador program starting in September. Through it, Simon Brooking, Dalmore’s Master Ambassador, travels around the country talking to consumers and the trade about the brand. “It’s having a great impact on our business,” said Rachel Levy, Jim Beam’s brand manager for dark spirits. “The Dalmore continues to outpace the category with double-digit growth, above 10%.”

At Skyy Spirits, Marc Bromfeld, senior brand manager for Scotch whisky, noted “as far as Cutty Sark is concerned, we’re maintaining our strategy of keeping our core consumers happy.”

The strategy consists of targeting “real guys.” A Father’s Day flask neck hanger on the 750 ml will sell at retail for $16.99 to $19.99.

This spring, Cutty will kick off Rock the Mansion: Part Three. Radio spots and sweepstakes will lead to a trip to the Playboy Mansion in the fall.

Skyy’s Glenrothes single malt had a “phenomenal year,” according to Bromfeld, with sales up about 20%. The brand has positioned itself as a vintage malt, with price points from $59 to $99.

All the signs are pointing to an increasing interest in the Scotch category. And after two decades of being beaten up by the marketplace, it’s about time.

Leading Brands of Scotch whisky

(Thousands of 9-Liter Cases)

Brand Supplier 2002 2003p % Change
Foreign Bottled Scotch
Dewar’s Bacardi USA 1,394 1,390 -0.3%
Johnnie Walker Black Schieffelin & Somerset 645 675 4.7%
Johnnie Walker Red Schieffelin & Somerset 650 665 2.3%
Chivas Regal Pernod Ricard USA 479 460 -4.0%
J & B Schieffelin & Somerset 414 387 -6.5%
Total Leading Brands 3,582 3,577 -0.1%
U.S. Bottled Scotch
Clan MacGregor William Grant & Sons 715 720 0.7%
Scoresby Diageo 392 392 0.0%
Cluny Heaven Hill Distilleries 295 295 0.0%
Inver House Barton Brands LTD 245 233 -4.9%
Old Smuggler Allied Domecq Spirits USA 228 211 -7.5%
Total Leading Brands 1,160 1,131 -2.5%
Single Malt Scotch
The Glenlivet Pernod Ricard USA 200 211 5.5%
Glenfiddich William Grant & Sons 135 143 5.9%
The Macallan Remy Amerique 70 75 7.1%
The Balvenie William Grant & Sons 47 51 8.5%
McClellands White Rock Distilleries 34 39 14.7%
Total Leading Brands 286 308 7.7%
Total Leading Brands 5,028 5,016 -0.2%
Others 4,070 4,046 -0.6%
Total Scotch 9,098 9,062 -0.4%

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