Scotch struggles to meet demand
Scotch whisky will find it impossible to maintain its recent explosive growth rate, despite many distilleries stepping up production, according to Glenfarclas’ sales director George Grant.
Data from the Scotch Whisky Association show that exports have almost doubled in value during the last 10 years to reach nearly £4.3 billion in 2012.
However, despite confirming a growing and broad-based global demand for Scotch, Grant highlighted a number of limiting factors on production capacity as he remarked: “It can’t continue. There’s not enough whisky for it to continue like this.”
Outlining “the three ‘w’s: water, wood and warehousing,” which are crucial to the whisky industry, Grant warned of the particular pressure on casks as distilleries work to increase production. “All these whiskies are ramping up production but then they find there are no more casks,” he told the drinks business.
At his own family’s Speyside distillery, Grant outlined efforts to support anticipated future demand, including the recent addition of four new warehouses, which have increase Glenfarclas’ storage capacity from 55,000 to 65,000 casks. Helped by this, he confirmed: “From 2015 we’ll have increased stocks coming in, especially of the 12 and 15-year old.”
As for his current ability to meet demand, Grant reported: “The only one we’re having to allocate at the moment is the 40-year old, everything else is fine.” Despite the Glenfarclas 40-year old retailing for nearly £300 per 70cl bottle, he revealed: “We’re bottling 1,000 cases next week and it’s already all gone.”
Another part of the brand’s portfolio which has surpassed expectation has been Glenfarclas’ vintage-dated, single cask Family Cask series. Recalling its first ever release back in 2007, Grant admitted: “I didn’t even go to the launch, I went on holiday. I thought it wouldn’t work, but it’s just snowballed.”
Despite the departure of the Family Cask whiskies from Scotch’s more usual age statement approach, Grant told db: “People now understand how it works. The ’57 price is so much higher than the ’52 or ’53 because there’s so much more limited stock of that.”
In response to the “insane” popularity of the Family Cask range, Glenfarclas has recently introduced new oak box packaging in place of cardboard, with Grant adding that he is also trying to “stablise” prices across the series.
Alongside this work on its core range, the distillery is continuing efforts to excite the market with limited edition releases, confirming a plan for two mature whisky launches in 2014.
Turning to the main sources of growth for Scotch whisky, Grant drew a contrast with the China-weighted boom which has caused such recent stability issues for the Cognac category. “The nice thing about whisky is that it’s happening everywhere,” he observed.
In particular Grant picked out Taiwan and Russia as performing particularly well for Glenfarclas at the moment, while South America “is just starting to take off.” Although acknowledging that “China has never really fulfilled its potential,” he maintained, “it will definitely come.”
Closer to home, Grant jokingly described the UK market as “alright”, with Glenfarclas having seen “only 46% growth this year.” A considerable part of this increase is to new listings with Waitrose and a special bottling for Marks & Spencer, which have been put in place by agent Pol Roger UK.
In addition to this, Grant remarked: “We’re still doing really well in the independents,” as he pointed to a boost from the ongoing expansion of specialist outlet The Whisky Shop.
Looking to the future sources of demand for Scotch whisky, Grant said: “At the moment everyone is on tenterhooks to see what will happen in India,” which has proposed a major reduction to its punishing import duty. “That’s why Diageo and Pernod Ricard are ramping up production,” he remarked of the enormous potential that is widely expected from this market.
According to Grant, this pressure on supply is being felt particularly in the single malt sector, which he estimates as accounting for “considerably less than 10%” of total Scotch whisky production.
Indeed, Grant reported a decline in blended whisky consumption, explaining: “When young people started drinking whisky they’d drink blended, but now with more money and knowledge they go straight to single malt.” What’s more, he noted: “A cheap blend on an optic in a bar is only 20-30 pence cheaper than a single malt. Years ago there was a real jump in price.”
The strengthening of a secondary market for Scotch whisky is also viewed by Grant as a positive sign for the category. With Scotch whisky making ever louder headlines at auction, he described this development as “brilliant,” arguing that the boost this offers to people’s whisky knowledge and passion for collecting “just drives it more and more.”
In addition to the traditional auction companies, Grant observed: “there are more than half a dozen whisky sites with an auction almost every month” as he admitted that he had even bought back an old, rare Glenfarclas bottling at auction himself recently.
As well as recruiting new consumers, the Scotch category appears to be doing a good job of retaining their loyalty. Grant remarked on whisky’s ability to see off competition from other categories, saying: “In the last few years whisky has been challenged by Tequila and rum, but they’ve never got the foothold they were looking for.”
Nevertheless, he acknowledged: “It’s not going to last forever. You never know what’s going to trigger these things. Spain was a massive whisky market but then it switched overnight to being a gin market.”
Despite the possibility of a similarly unpredicatable drop off in other markets, Grant insisted: “We need to lay down more whisky for the future across the board. Even if we went into a decline of 25%, we’d still be yards ahead of where we were before.”