Canada on the Cusp

Canadian whisky may not get as much respect as its Irish, Scottish and American counterparts these days, but if whisky-buying was “American Idol,” Canadian would definitely be competing in the finals.

After all, the entire category moved more than 13 million cases in the U.S. last year, second only to Bourbon and Tennessee whiskeys among brown spirits. The Canadian category overall posted steady if modest growth last year, up 1.3 percent overall, with leading brands Crown Royal (up 2.6 percent to nearly 4.3 million cases) and Black Velvet (up 3.6 percent to more than 2 million cases) leading the way, according to Beverage Information & Insights Group data. The results among the other eight top-ten brands was mixed — Canadian Club, Windsor Supreme, Rich & Rare and Lord Calvert were up, while Canadian Mist, Seagram’s V.O. and Canadian LTD lost ground.

And while the category has a reputation for lower prices when compared to the other whiskies, the majority of the growth last year came from the super-premium pricing tier, according to figures from the Distilled Spirits Council of the U.S.

 

Embracing Flavors and Brand Extensions

For years, the Canadian category has been a steady if uninspired participant in the reawakening of interest in whisky. With a tradition that made “smooth,” “mellow” and “easy” keywords for the style of spirit most often associated with whiskies from the North, Canadian wasn’t perfectly aligned with the contemporary taste for more robust or expressive flavor profiles found in American, Irish and Scottish varieties.

But recent signs of interest, especially by cocktail connoisseurs for the high rye expressions and by new consumers for flavored expressions, have encouraged Canadian makers to pay more attention to contemporary tastes.

“We all know brown spirits are seeing a big resurgence and we’re seeing that as well in Canadian,” says Vicki Arcos, brand director for Black Velvet at Constellation. “Bourbon is getting all the attention but we’re definitely seeing a lot of traction as well.”

Canadian’s reputation has always rested on its smooth and accessible qualities, she notes, and as a category has been reliant on brand-loyal male consumers. But now that flavors are such a huge a huge trend in brown spirits, brands are finding success recruiting users from beer, cider and vodka – as well as making inroads among female consumers.

“That older male demographic is tried and true. However, there has been an increase of older women and Asian consumers purchasing from our Canadian section,” says Erin Robertie, liquor department manager at the 35,000 square foot Hazel’s Beverage World in Boulder, Colorado.” Older women who were die-hard Bourbon drinkers for years are making the switch to a mellower dram, without sacrificing the flavor.”

“There are a number of trends driving awareness, trial and growth in the North American space and among Canadian Whisky,” says Yvonne Briese, VP of marketing, whiskey for Diageo. “The emerging popularity of flavored whisky was part of the inspiration that led to the innovation of Crown Royal Regal Apple. We feel this trend is a great way for drinkers, both men and women alike, to continue expanding their interests for not only whiskies, but flavored whiskies.

She adds, “The growing popularity of cocktails among consumers and the resurgence of classics such as the Manhattan and Old-Fashioned provide consumers with more options and reasons to responsibly enjoy whiskies, including our Crown Royal Canadian Whisky portfolio.”

Says Claire Richards, director of world whiskies for Beam Suntory (supplier of Canadian Club and Windsor Supreme), “This is certainly an exciting time for spirits, especially brown spirits. Brands are experimenting more to create new flavor experiences, and consumers are eager to explore different variants. Canadian whisky has a unique flavor profile due to its rye content, which is attracting a lot of interest from bartenders and consumers as they explore the whisky category. We anticipate that the Canadian whisky category and high-quality, approachable products like Canadian Club will continue to grow.”

It’s a sentiment shared by many other Canadian whisky marketers. “We’re really bullish on the Canadian category, at all levels,” says Kevin Richards, marketing director, whiskey and specialty brands for Sazerac, which sells Rich & Rare, Canadian LTD, Canadian Hunter, Caribou Crossing Single Barrel and the recently-launched Legacy Small Batch Canadian Whisky. “It is a category that had a tremendous heyday not very long ago and we’re inspired to bring the category back to those exciting times. To that end we have a number of new products in development (can’t be specific about any just yet) and look forward to showcasing them in the coming years.”

 

The category continues to expand

Other new products have been trickling into the market. In the past year, Diageo unveiled a new flavored extension to Crown Royal, Regal Apple, a blend of Crown Royal infused with flavors from Regal Gala apples. The 70-proof product joins 2012 entry Maple Finished in the Crown Royal flavor portfolio. The brand also in the past few years has added Crown Royal XO, an ultra premium blend of the finest 50 Crown Royal whiskies; and the 75th Anniversary Monarch Blend, a limited-edition offering that celebrates the 1939 visit to North America of King George VI and Queen Elizabeth (and founding of the brand).

Van Gogh Imports introduced TAP Rye Sherry Finished, an 8-year-old Canadian rye whisky blended with Spanish Amontillado Sherry (a companion to TAP 357 Maple rye and Canadian Rye whiskies). And Sazerac launched Rich & Rare Caramel Canadian Whisky in the middle of 2014, the brand’s first flavor entry. Black Velvet has been working on an eight-year-old expression to push forward next year, and while Canadian Club 100% Rye and Canadian Club Maple are available in Canada, Beam Suntory is currently focusing on Canadian Club 1858, Canadian Club Reserve, Canadian Club Classic 12 Year-Old, and Canadian Club Small Batch Sherry Cask in the U.S.

Flavors have generated a lot of interest among most Canadian producers. “After carefully looking at whisky and flavored specialty spirit trends in the U.S., we decided to introduce four Canadian Mist flavors,” says brand manager for Brown-Forman, Pedro Berrueco. “Our intent is to provide consumers with a new and exciting brown spirit experience, blending Canadian Mist with its well-known clean and smooth taste without the harsh finish or bite with liquor-based flavors. This combination will provide an unexpected taste experience, especially for 21- to 29-year-old consumers who may be looking to start enjoying Canadian Mist but have the tendency to search for flavored products.” The flavor line extension includes Peach Mist, Maple Mist, Cinnamon Mist and Vanilla Mist.

While Canadian has sold steadily in solid markets like the Upper Midwest, its performance hasn’t been uniform; Robertie says she’s seen a dip.

“In the past year, I have noticed a decline in sales in the entire Canadian category. From 2012-13, Canadian whiskies amounted to eight percent of our total whiskey sales, compared to flavored whiskeys at 12 percent, and domestic leading the category at 40 percent. From 2013-14, Canadians have fallen to less than six percent in the category, whereas flavored has increased slightly to 13 percent, and domestics maintain 40 percent.” She points out that in her market, the resurgence of American whiskey, (especially flavors), has diminished interest in Canadian whiskies.

 

Time to differentiate

One of the reasons Canadian has been lagging the other whiskies in growth may be its modesty, suggests Richard McLeod, Brand Director, North American Whisky for Pernod Ricard.

“I think that we have to start beating our chest a little more about our quality, what makes us different and how we stack up against the rest of the world,” he says. “Globally speaking, over the last 10 to 15 years we have seen [most] of the major whisky producing regions in the world stand up and actively support their whisky export business. It is time for Canada to get involved and show the world that we really do make incredible liquid as good as any being made by our colleagues in those countries. We have as much flexibility in the maturation and blending process as anyone, which gives us greater freedom to express different taste profiles for the consumer to enjoy.”

Each nation has specific rules for whiskey-making and naming, but Canada’s can be confusing to an American. For instance, what can be bottled as rye whisky in Canada wouldn’t meet U.S. standards, in that in this country a rye must be made with at least 51 percent of that grain as a component of the spirit. In Canada, a mostly corn spirit that gets small amounts of flavorful rye added to the blend can be called rye. While all Canadian whiskies include some rye, it’s primarily used as a “flavoring whisky,” adding a peppery punch to the mostly corn-based spirit. But oddly enough, two of the newer, pricey and widely sought-after rye brands — WhistlePig and Lock, Stock and Barrel — are sourced from Canada.

And while Canadian whisky is usually the product of one distillery, U.S. laws encourage the inclusion of American spirits into the mix, meaning sometimes Bourbon or other American whiskeys make their way into the final product. Also, unlike the American tradition, Canadian whisky distilleries generally make spirit from each grain separately, rather than in a house-style mashbill. The different spirits are then aged separately and blended together before bottling (Canadian Club being the most notable exception, since the brand is blended before barreling).

 

Broad expansion appeal

“We want to continue to elevate the category, thus increasing consideration,” McLeod of Pernod-Ricard says. “For a long time Canadian Whisky has had the value stripped out of it. We want to reverse that trend. We want to be at the forefront of premiumizing Canadian Whisky in the same way that Jameson, Red Breast and Middleton have elevated the Irish Whiskey category.”

The results they’ve found with the roll-out of J.P Wiser’s and other brands popular in Canada is encouraging.

“Not only have we seen great engagement from the trade and our internal people, we have also seen an overwhelmingly positive reaction from the consumer,” she says. “We always believe in the quality of our liquid but seeing positive, tangible results materialize has been fantastic.”

They will be focusing on promoting JPW Rye through trial, a partnership with ESPN Fantasy Football, and garnering attention among aficianadoes for higher priced brands Pike Creek (finished in port barrels), JPW 18 year old and Lot 40 100% Pot Still Rye. The latter has already developed a cult reputation for its 100 percent rye make-up.

Higher-priced Canadians may be the wave of the future; Sazerac’s Legacy Small Batch Canadian Whisky launched last fall and is in a growing number of markets around the U.S. This after the good results from the 2010 launch of the ultra-premium Caribou Crossing Single Barrel, with a suggested retail price of $49.99. And other results have encouraged Sazerac, says Kevin Richards.

“Our Rich & Rare Reserve Canadian Whisky brand, a premium line extension of our core Rich & Rare brand, continues to beat our expectations in its third year. We are increasing our promotional efforts on the brand as distribution expands.”

With most companies looking to increase their social media presence, sampling experiences and connection with the cocktail resurgence, they acknowledge the importance of the off-premise retailer to the category.

“Retailers have done a terrific job offering their customers variety and diversity when it comes to whiskies. Continuing to support various flavors and spirits and educating on the wide range of offerings available will help drive interest, as well as exposing their customers to more rye variants,” says Claire Richards of Beam Suntory.

And McLeod suggests providing retailers with a profitable Canadian solution that is targeted against current consumer trends for flavors and rye will help, but that retailer support as higher priced brands emerge is important. “Achieving these things will see an elevation in the category and a better experience for the consumer. And, as always, if we can make this happen in the U.S., then a lot of other markets will follow.”

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