The category’s production capacity jumped from 560m litres in 2005 to 719m litres in 2010 as key players looked towards a lucrative decade-long horizon and beyond, said Euromonitor analyst Spiros Malandrakis.
The solid rebound in emerging markets and the relative improvement of socio-economic fundamentals in the west show the first signs of the tide turning from the “financial crisis”, said the analyst.
In the short to medium term, the difference in performance of mature versus emerging markets will be further underlined, the analyst told BeverageDaily.com.
For example, Asia Pacific is expected to post 4.5 per cent total volume growth in Single Malt Scotch over 2010-2015 at the same time that the category’s volumes in Western Europe are expected to post a one per cent drop.
“The whisky industry is hence merely preparing to meet demand at a time when the focus is shifting away from mature Western markets,” saidMalandrakis.
Due to the 3-8+ years it takes for the category to mature, it operates on a completely different timescale than most other alcoholic drinks, measured in decades rather than years, said the analyst.
Long term planning is therefore required for capacity, production and storage before shortages or oversupply become a problem, the analyst explained.
Therefore, there has recently been an accelerated drive to expand production capacity in existing distilleries - or the process of building new ones from scratch.
This highlights key players' optimism about the category's long-term prospects, said Malandrakis.
Diageo leads the way, which accounts for around 60m litres of malt distillery capacity in 2005 – with a leading 27 per cent share of the overall market, said Malandrakis.
In 2010, the spirits giant accounted for 87m litres, which is more than 30 per cent of total malt distillery capacity in Scotland.
The firm’s Speyside unit is the latest focus area for Diageo, who recently applied for planning permission for the redevelopment of the Dailuaine distillery complexwhich involves a £9.5m upgrade of the existing bio-plant.
Remaining key players are not far behind in terms of boosting production in the country, said the analyst.
In 2010 Pernod Ricard also increased its malt capacity from 113m litres in 2005 to 127m litres , while William Grant raised its capacity from 50m litres to 66m litres over the same period.
According to Euromonitor, growing aspirational consumption and westernisation in Latin America and Asia Pacific will contribute to an increase of blended Scotch Whisky sales, which are expected to post a total volume compound annual growth rate (CAGR) of 1.6 per cent over 2010-2015.
This is in comparison to a 1 per cent growth for single malt varieties.
Single malt whisky highlights the category’s potential, said the analyst and is expected to “skyrocket” by 16 per cent total volume CAGR in China and a 19 per cent total volume CAGR in India over 2010-2015.
The signing of a series of trade agreements and the granting of geographical indication (GI) status with a rising number of key emerging markets are also paving the way for Scotch manufacturers to massively expand their sales base over the medium to long term, said the analyst.
India and Panama are two of the latest agreements to be made, he said.