April Scotch Whisky Association (SWA) data on 2012 exports reveals that exports fell markedly in 2012, down 70m bottles, despite a slight value sales increase to £4.3bn ($6.5bn).
The SWA blamed punitive taxation for the downturn, but market research firm Mintel said the 25% decline in exports to France was particularly problematic, since the nation is the largest export market for the category in volume terms.
“The French figures are quite surprising, and I think that’s possibly less to do with the drink itself. That’s because another category (wine) has also seen a real downturn in usage among French consumers,” Mintel senior food and beverage analyst Wisson said.
“I think that the decline will slow, and it’s probably not indicative of a massive turn away from Scotch from the French consumer. But it’s probably more reflective of more health-conscious attitudes,” he added.
‘Not too difficult to join up the dots’
Noting gloomy French economic sentiment – and new taxes affecting Scotch in 2013 –Wisson explained that Scotch was also abig investment for consumers at £10-15 per bottle.
“That’s why Spain’s down massively as well. Two big countries that are struggling financially are massively down in Scotch sales. It’s not too difficult to join up the dots there really,” he said.
Despite the growing popularity of more affordable American whiskies such as Four Roses and Jack Daniel’s, Wisson said Scotch should “guard against trying to compete with those guys too closely”.
“Scotch has obviously got the history and the reputation, it’s made there according to certain process. If you were to lose that you’d struggle to compete with the likes of Jack Daniel’s, Red Stagg etc.,” he said.
But due to the Eurozone’s struggles, Wisson predicts that more affordable blended Scotch whiskies could come to the fore in markets such as France, Spain and even the UK, “while the typically costlier single malts are likely to grow at a quicker rate in emerging global markets with burgeoning middle class populations”.
Going to the dark (spirits) side: Flavor extensions
Wisson said the main global market threat to Scotch was the rise of flavored whiskies and dark rums, and cited Bacardi’s March launch of a honey-flavored Scotch-style in the US called Dewar’s Highlander Honey, although he said it can’t be marketed as a ‘Scotch’.
Such products were proving a lot more popular with younger drinkers, bringing in many more 18-24s and under 35s in general into the category, Wisson said.
“These flavour extensions seem to be driving a lot of growth in dark spirits, and golden and dark rum in much smaller than whiskey but it’s showing much stronger annual growth – simply because it’s a bit more fun, a bit less intimidating,” he said.
“I think many younger drinkers find whiskey a bit of an acquired taste, and a difficult thing to get into at that age. Flavors take the edge of it and make it a bit more accessible,” he added.
But I think dark spirits as a whole category, if they’re going to continue to look at that, then they need to steer clear of some of these crazy vodka flavors such as ice cream or even fish!
Predicting a bright long-term future for Scotch, Wisson pointed to recent distillery investments from the likes of Chivas Brothers and Diageo to cater for future demand, specifically in single malts with their premium appeal in markets such as China and India.
And while the UK home market – 25m bottles in 2012 – remained crucial, Wisson said the Scotch’s wider success may depend on markets such as the US, Venezuela, Mexico and Eastern Europe, “which may also provide significant growth opportunities in coming years”.