While the exploding vodka and rum markets and their flavored line extensions may be generating most of the excitement these days, the steady, reliable Scotch whisky business has found a way to right itself and continues to provide profit and prestige to retailers.
According to the 2007 Adams Handbook Advance, just published, both single malt and blended Scotch whisky sales gained last year, riding an increasing international wave of interest in malts. Total Scotch is only up a twitch – 0.4%, but that puts the category back over the 9 million case level, a symbolic number that Scotch whisky dropped below last year for the first time in modern memory.
Better than being down, but not impressive in the face of the overall spirit category growth of 3.7%. However, a closer look at the numbers reveals a strong resurgence in the brands that matter: those with an upscale image and higher price tags. Every indicator shows that the more lucrative and prestigious segments of the business are healthy and set for greater growth.
Sales figures released in January by the Distilled Spirits Council of the U.S. help tell the tale: while vodka’s 48.86 9-liter million cases brought in $3.9 billion to suppliers last year, Scotch, on only 9.57 9-liter million cases, rung up approximately $1.5 billion, an impressive performance ratio.
Foreign bottled blended Scotches crept up 1.5% to 5.45 million 9-liter cases, the highest total case volume level since 1998. While category monster Dewar’s sagged 1.1% last year, every other imported blended Scotch whisky among the top 11 except for J&B (down 2.0%) and Chivas Regal (unchanged) showed growth.
Single malts, which routinely sell for $50 a bottle and above, were up an impressive 7.3%. While the volume of the entire sub-category was only 957,000 9-liter cases last year, far less than the sales of market leader Dewar’s by itself (1.36 million cases), the retail dollar value per shelf slot must be very high indeed. And five of the top 10 single malt brands notched double-digit or near double-digit percentage increases. The Glenlivet, up 9.9% to 255,000 cases, is once again the ninth best-selling Scotch whisky of any kind in the U.S., widening its lead over Cutty Sark, now number 10.
The weak point in the business continues to be the value brands, the U.S. bottled Scotches. Of the top 11, only two – category leader Clan MacGregor and number three Cluny – did not lose share, and they both had flat years. In fact, the entire segment dropped 4.1%, continuing a losing streak of more than 10 consecutive years. The bright side to this story is that even if overall sales stay stagnant, as long as buyers migrate from valuepriced brands like Old Smuggler (down 21.0%), House of Stuart (down 12.0%) and Passport (down 10.5%) to Johnnie Walker Black (up 6.2%), Famous Grouse (up 6.2%) and The Macallan (up 6.2%), retailers will be in a position to make more on less.
Meanwhile, marketers of the various Scotch brands are striving to connect with the young and successful, pinning their hopes on consumers looking for a drink that resonates with their maturing sensibilities.
At Dewar’s, that means continuing the recently-launched campaign of “Dewarisms,” the sayings of Tommy Dewar, son of the company founder and the driving force behind the brand’s growth in the late 19th to early 20th centuries. With print and some local TV ads featuring his sayings, such as, “Don’t question your wife’s judgment. Look who she married,” and, “It’s not what a man stands for that counts; it’s what he falls for,” the campaign is designed to relate contemporary life to the heritage of Scotch whisky, said Ned Duggan, assistant marketing manager for brand owner Bacardi. (Find out more at www.dewarisms.com)
Like other top blended whiskies, association with the arts continues to be a focus for Dewar’s. And last year they also launched a promotion to establish National Repeal Day, a commemoration of the end of Prohibition on Dec. 5, 1933. Successful events last year in New York, Boston, Las Vegas and Seattle are expected to expand to other cities next December.
Meanwhile, Dewar’s 12, designed to compete with Chivas Regal and Johnnie Walker Black at the high end blend sector, has recently been tied to a series of upscale promotional poker events.
At Diageo, home of four of the top 10 Scotches of all varieties and five of the top 11 imported blends, the continuing strong growth of Johnnie Walker Black, supported by the many aspects of the “Keep Walking” campaign, and the return to solid growth of Johnnie Walker Red (up 2.3%), is being used to push forward the uber-premium blend, Johnnie Walker Blue, which retails from $180 to $200 for a 750ml bottle. (For a closer look at their brand positioning, visit www.johnniewalker.com.)
“The idea of all the promotions and advertising is the exclusivity and luxury of Blue Label, which sets it apart from other whiskies, driven by the price and the rarity of the single malt whiskies in it,” said vice president for Scotch marketing at Diageo NA, Chris Parsons. Some of the whiskies in the blend are from distilleries that no longer exist, he said. Diageo developed a multimillion dollar marketing campaign using commissioned contemporary art that includes brand elements to reinforce Blue Label as a luxury product. The visual centerpiece of the campaign was the first of many pieces Diageo intends to use for the next steps of the campaign.
“The world of contemporary art is a metaphor for the rare, exclusive Blue Label experience,” said Parsons. The art conveys a broad theme that has been used in an integrated campaign of print and out-of-home advertising, public relations, POS and merchandising displays. Ads for the campaign, tagged, “Those who know what to look for,” ran in December issues of New York Times Magazine, GQ, Esquire, Robb Report and Travel & Leisure, and in daily ads in The New York Times.
“We actually didn’t think a campaign on its own would do it but we put together a full retail campaign,” said Parsons. With JW Blue often kept in retail lock boxes, marketers strove for a greater retail presence. The hook in the key New York tri-state area market was a studio set up at the Time Warner Center, where customers, tipped by in-store displays, brought bottles to be engraved. The campaign caught fire with area retailers, and drove awareness and visibility, with 27 retailers in Manhattan alone featuring window displays. “We were up about 35% in December overall, in New York probably several hundred percent.”
Event and relationship marketing will continue to be a new focus of the major Johnnie Black “Keep Walking” campaign in 2007, he said.
Two other Diageo blend brands are headed in opposite directions, with Buchanan up and J&B down. Buchanan is one of the biggest Diageo brands in Latin America. “With the movement of consumers from that market to the U.S., it creates a perfect storm for us with Buchanan as they bring their brand choices with them.” In markets like Texas, Southern California, Florida and parts of New York and Illinois, the pockets of strength will be supported to drive greater growth against those consumer segments.
The once mighty J&B, “a great whiskey at a relatively decent price point,” has steadily fallen over the last 15 years and shows no signs of turning the corner in the U.S. “We mainly support our most loyal older consumer base through retail pricing,” he said.
|What a Life|
At Pernod Ricard, the “Chivas Life” campaign continues, bolstered by the Chivas Studio traveling lounge. Moving from New York to Dallas, Miami Beach, Chicago, Los Angeles and Las Vegas, the floating lounge brand-building program is focused as a vehicle for guests to connect the brand and campaign with music, concerts, book signings and other creative elements, according to Craig Johnson, brand director, Chivas Regal.
“The Chivas Studio allows our guests to live with the brand for an hour or two and lead the Chivas life,” he said. In addition, the annual search for the Chivas Life ambassadors are held in each city at the studio. The two winners receive $200,000 to travel the world for a year and return as brand ambassadors in the U.S.
Of course, the brand continues its holiday and Father’s Day promotions and co-packs, a traditionally strong retail tie-in for Chivas, as well as the continuing “Chivas Life” advertising and promotional campaign. As for cocktail tieins, a favorite of Chinese drinkers – Chivas with sweetened green tea – is being promoted here as well.
As for Chivas 18, the re-launch two years ago has been a great success, Johnson said, with support including out-of-home installations. “We are supporting both marques; 12 is more of a lifestyle brand, while 18 is more about luxury and hand-craftedness.” (For more, visit www.chivas.com.)
Meanwhile, Pernod’s ownership of market leading single malt the Glenlivet, which has successfully added to its lead over number two the Glenfiddich each of the past five years, has neatly integrated brand extensions (like the recently added 48% ABV 18 Year Old Nadurra, bottled at natural cask strength and produced without chill filtration) with old favorite 12 Year Old, the 15 Year Old French Oak and the 18 Year Old.
The four Scotch whisky brands owned by William Grant and Sons – the blends Grant’s and MacGregor and world leading single malt the Glenfiddich and America’s fourth best-selling malt The Balvenie – are focused on different marketing schemes, according to brand ambassador Charlotte Voisey.
For the two blended Scotches, the company is committed to keeping prices low, which also means no major promotional or marketing pushes are anticipated. Voisey said there may be some residual efforts to connect Grant’s to Glenfiddich, but as the world’s fourth best selling blend and the 7th in the U.S., Grant’s is seen as a steady performer at the value sector of the business.
“For our flagship brand, The Glenfiddich, our 2007 brand strategy is all about education,” she said. For the first part of 2007, a combined distributor/onpremise/off-premise educational push will be the brand’s focus. Last year a 21-Year-Old Glenfiddich was launched to join the 12 and 18 Year-Olds already in the U.S. market.
With the Balvenie, which has focused on its varied expressions, will continue its biennial temporary introduction of a new expression. Recently, they brought in the New Oak 17 Year Old, a limited release that takes Balvenie aged in traditional barrels and matures it further in toasted and charred new American oak.
Cutty Sark, which recently staunched a decline of more than 10 years, has recently upgraded its packaging, emphasizing the Scotch’s “sociable, upbeat and congenial personality,” according to U.S. distributor Skyy Spirits. The new pack includes enhanced embossing in the depiction of the Cutty Sark, the clipper ship that is the brand’s icon, and a slimmer bottle, featuring a smaller, more elegant two-part label.
Skyy was recently reappointed to continue representing Cutty Sark and The Glenrothes Single Malt. Skyy’s ceo Gerry Ruvo has stated, “We are excited that Skyy Spirits will continue building the quality portfolio of Cutty and The Glenrothes Scotch Whiskies with innovation and style. We have a true partnership with [owner] Berry Bros. & Rudd Spirits and believe in the long-term equity locked up in the Cutty Sark brand and the potential growth of The Glenrothes in the luxury single malt segment.”
Other single malts have continued to extend their strength in the U.S. with new expressions: The Macallan’s success with their Fine Oak line (distinctly lighter and leaner than the sherried richness that is the brand’s trademark) has helped it continue strong growth in the U.S. The 10, 15, 17, 21 and 30 Year Old expressions are matured in a combination of European oak sherry casks, American oak sherry casks and American oak bourbon casks.
International icon Glenmorangie, credited with launching the wood finish trend so important to contemporary Scotch making, has continued its limited edition releases with the rare Margaux cask late last year. Port, Sherry and Madeira finishes remain as the brand’s “finished” backbones, while the 10 Year Old remains among the most popular whiskies. (Glenmorangie also offers a 15 Year Old and 18 Year Old in the U.S.)
Glenmorangie is expected to continue benefiting from its takeover by Moet Hennessey USA, whose focus on expanding niches for high-end luxury products is well known. Similarly, little Islay stablemate Ardbeg, a worldwide success since reopening in the late 1990s, has experimented with different expressions as it ramps up production to meet demand. Its most recent launch in the U.S. was the brand extension Ardbeg Airigh Nam Beist, known as the Beastie. Pronounced a-ram-na beest, which means “shelter of the beast” in Gaelic, this latest is named for one of the lakes which feeds the distillery and, as all other Ardbeg expressions, is non-chill filtered, this one from a limited stock of 1990 distillate. The Beastie, being six years older than the standard Ardbeg ten, is a round, softer version of the peatiest and smokiest Scotch whisky made. Now firmly entrenched in the Moet Hennessey stable, Ardbeg is getting support as a luxury brand with strong Scottish heritage but a playful, mysterious image.
Highland Park has launched a redesigned package encompassing the brand’s complete range, including the 15- and 18-Year Olds released in the last year or two. The new label design includes educational notes about the malt.
Single malts are niche brands for Diageo, with none threatening to break through to the top five, probably due to the many popular blends requiring malt contributions. “We have always chosen to drive a portfolio play; there are constraints around how big and fast they can grow,” said Parsons. But Oban, Lagavullin and Talisker continue to do well, and recent reintroductions of Islay malt Caol Ila and Clynelish in the U.S. market have expanded Diageo’s range.
The malt end of the business is in such good shape in the U.S. that even Bacardi, which has stayed out since its acquisition of Dewar’s in the 1990s, launched two versions of the single malt Aberfeldy in the U.S., a 12 and a 21 Year Old. It’s another sign that things are good at the top of the malt whisky heap.