A right royal time for Scotch

The buoyant times currently being enjoyed by the Scotch whisky industry have led many top distilleries to pledge to increase production and capacity to meet rising demand around the globe.

HRH The Prince of Wales was in Speyside last week to open the new £10 million expansion to the Glenlivet distillery, which will help increase production by 75% as part of Chivas Brothers’ long-term ambitions for the brand, in what was very much a “good news week” for the Scotch industry.

Thriving international markets led Chivas Brothers to expand the Glenlivet site. Earlier this year the Scotch Whisky Association reported that an impressive performance in the second half of 2009 had contributed to record-breaking levels of global exports for Scotch whisky at the end of 2009.

Exports have risen by £977m in shipment value over the last ten years, representing a 45% increase.

Christian Porta, Chivas Brothers chairman and CEO, reiterated the importance of this investment to the future success of The Glenlivet at the ceremony, saying: “Today’s opening represents the latest milestone in a period of sustained investment and strong growth in The Glenlivet.

“Since 2002, we have taken the brand from No 3 to No 2 globally with investment in packaging, marketing and new product development.

“The stunning new extension not only gives us the production potential to meet the buoyant demands of global markets and one day take the No 1 spot, it is also a sympathetic and aesthetically enduring legacy for generations to come to admire.

“We are already leading from the front in the US, the world’s most valuable Scotch whisky market and No 1 single malt market, and we are now well-positioned to replicate this success internationally.”

Indeed, The Glenlivet was the first malt to be promoted in the US, as soon as Prohibition was lifted.

Today, it is the No 1 single malt in the US and the world’s No 2, and one of only two malts ever to sell more than 600,000 nine litre cases per year.

The opening of the expansion coincides with the recent appointment of new master distiller Alan Winchester, a lifelong resident of Speyside.

Winchester said: “Scotch whisky is the beating heart of Speyside and The Glenlivet has been at the heart of the industry since 1824.

“This is an historic occasion that leaves a profound legacy for tomorrow’s distillers and future guardians of this Scotch whisky legend. It has been a privilege to be involved.”

Meanwhile the Isle of Arran distillery has also pledged to double production to meet rising demand.

Despite a difficult 2009, which saw the collapse of the distillery’s distributor Malcolm Cowen, Arran managed to increase turnover to over £2m, representing a 3.3% increase on 2008.

The producer also reported an operating profit of £38,223 and bottom line improvement of £120,747 over 2008.

An increase in people opting for holidays in the UK also meant a record number of visits to the distillery’s visitor centre on the Isle of Arran.

Managing director Euan Mitchell said he is in no doubt the distillery needs to double its output to make the most of the opportunities facing it.

“Our confidence is based on the quality and provenance of our unique whiskies,” he said.
 
“Having delivered improved financial results, we are looking to grow significantly by doubling our production.
 
“We are delighted with the results for 2009. Trading was unquestionably tough but through close control of costs and maximising the sales opportunities available we have made tremendous progress.

 
“With new appointments, new products being rolled out and a plan to enter and expand in new markets we have great scope for growth.”
 
The appointments include a new agency agreement in the UK with Blavod Drinks.

In addition, at least five new whiskies are being launched into the market by the end of this year; one of which includes an exclusive 600 bottling being rolled out in July for the 15th anniversary of Arran distillery.
 
Overseas, the brand is also performing well, especially in the US, where malt sales grew by 53% and Norway where the distillers, currently the second-top-selling malt by volume in the country, have gained three new listings.

This year, the brand’s focus overseas will continue, highlighted by the appointment of regional sales manager Andy Hogan whose aim will be to grow The Arran Malt brand in North America.

Similarly, Ian Macleod Distillers, owners of Glengoyne Highland Single Malt Scotch Whisky, also predominantly credited its 90% year-on-year profits after tax rise and its 18% increase in turnover to "increased sales to export markets, in particular sales of three year old blends in the Middle and Far East, with improved performance of premium brands in Europe."

Case sales also grew by £4.2m to £19.3m due to a combination of expanding existing customer sales and new entry points generated by managing director Leonard Russell, the company said.

Gross profit increased from 40.6% to 41.1% due to the impact of pricing agreed over the previous 18 months.

The sterling exchange rate reduced the impact of the recent price agreements on those export customers who purchase in sterling, thereby holding up volumes.

Last year the company invested in the Norwegian spirits distribution company Cask Owners AS, in which it now owns a 34% share.

This new venture enabled Ian Macleod Distillers to be more directly involved in the Scandinavian market place and be able to grow spirit sales by being closer to the buyers in those markets.

Russell said: “Taking a share in this distribution company, in one of our important markets, is a natural progression for the company.

“We started life as whisky brokers, moving into bottling and distributing in the UK then took a major step with the purchase of Glengoyne Distillery in 2003 to become a single malt distiller.

“We are continuing the evolution of the company by extending its capability and reach into export markets.”

Travel retail sales are up 40% on 2008 representing a £0.5m increase, attributed to the company’s five-year Travel Retail strategy, which started in 2007 with the appointment of Andy Lane as director of travel retail.

Travel retail sales are driven by Glengoyne Highland Single Malt Scotch Whisky, and its popularity in the market as well as the introduction of Travel Retail exclusive products such as Smokehead Extra Rare.

The company has invested most of the cash generated by its operations into bulk stock as overall stock has increased by £2.4m (11%).

“Investing in stock is an essential pre-requisite for growing the business and ensuring long term stability and security,” added Russell.

“This has been an excellent year for Ian Macleod Distillers. We are progressively expanding and deepening our capabilities, which is then enriching our offering to our customers.”

See the June edition of the drinks business for an in-depth analysis of global Scotch whisky market.

Alan Lodge, 09.06.2010