The Single Malt Scotch Gamble

Despite rising prices and younger liquid, consumers can’t get enough single malt Scotch whisky.

New products are spurring single malt Scotch’s growth. This fall, Bacardi is releasing a single malt from Royal Brackla (distillery pictured).
New products are spurring single malt Scotch’s growth. This fall, Bacardi is releasing a single malt from Royal Brackla (distillery pictured).

A few years ago, as whisky stocks in Scotland were shrinking, many Scotch houses took a calculated gamble on their single malt portfolios. They began raising prices significantly for the first time since the recession hit in 2008 and started releasing new expressions with no age statements. The latter move aimed to give master distillers some breathing room to manage inventories around the strict demands of 12-year-old, 15-year-old and 18-year-old bottlings.

Thus far the risk-taking has paid off. Consumers seem to be accepting higher prices, and in some cases, allocated premium expressions have whetted their appetites for more. At the same time, the debut of many unfamiliar labels lacking age statements has gone smoothly for most Scotch houses.

Edrington Americas, which markets The Macallan and Highland Park, has been a good test case. Over the past four years, The Macallan has seen its retail pricing rise rapidly, with the 12-year-old variant jumping from $50 a 750-ml. bottle to more than $65 in many places and the 18-year-old offering rising from around $165 to over $230. At the same time, Edrington has introduced new labels like The Macallan Rare Cask at a steep $300 price and Highland Park Dark Origins—aged in twice as many Sherry casks as the brand’s 12-year-old expression—at $80. Consumers eager to get a taste of these products have hardly been deterred by the absence of age statements. The Macallan’s U.S. volume rose 15 percent last year to 214,000 cases, according to Impact Databank. Its growth rate was more than double that of the overall category, as single malt sales in 2014 advanced 6 percent to nearly 1.4 million cases.

Paul Ross, president and CEO of Edrington Americas, says the sales gains haven’t happened all by themselves. The company has hired 100 new marketing personnel to get The Macallan out to store owners, bartenders and consumers. It’s also investing $200 million in a new distillery to increase production capacity for the brand. A key element in the Edrington Americas strategy is The Macallan Rare Cask, which launched a year ago in limited markets and is just now being rolled out across the United States. It has no age statement, but the company discloses that the current offering contains some liquid from barrels filled in the late 1980s and early 1990s. “Rare Cask has been very successful since its launch,” Ross says. “It will be the quintessential Macallan going forward for us.” Sales are good despite the $300 price point. “We’re seeing 20-percent annual growth in the over-$200 a bottle category,” Ross notes. “American consumers are looking for occasions to treat themselves.”

This fall, category leader The Glenlivet (stills pictured) is adding Founder’s Reserve, a no-age-statement offering that's positioned between The Glenlivet 12-year-old and 15-year-old variants.
This fall, category leader The Glenlivet (stills pictured) is adding Founder’s Reserve, a no-age-statement offering that's positioned between The Glenlivet 12-year-old and 15-year-old variants.

Looking Past Age

No.-1 brand The Glenlivet—which saw volume fall 0.5 percent last year to 386,000 cases, according to Impact Databank—is also jumping on the no-age-statement bandwagon, albeit at more modest price points. This fall, The Glenlivet Founder’s Reserve will launch at a retail price of $43 a 750-ml. bottle, midway between the brand’s 12-year-old ($38) and 15-year-old ($55) offerings. Founder’s Reserve has been aged in first-fill Bourbon barrels, resulting in a flavor profile that has vanilla notes similar to American whiskey. The company is also releasing its first peated single malt whisky, Nàdurra Peated. The expression is priced at $65—roughly the same as the existing Nàdurra 16-year-old—and bottled at around 55-percent alcohol-by-volume (abv). Nàdurra Peated will be marketed initially to just a half dozen major cities.

Wayne Hartunian, vice president of Scotch whisky at Pernod Ricard USA, explains that both Founder’s Reserve and Nàdurra Peated are part of a strategy to broaden The Glenlivet’s reach. “We don’t want consumers picking up a taste for peat as they explore single malt and then having to migrate to other brands,” Hartunian says, adding that finding shelf space for additional products isn’t a concern. “Single malt is extremely profitable and healthy. It’s one of the fastest-growing spirits categories. We’re trying to align ourselves with accounts that are willing to give the entire category more space.”

The influx of new Scotch expressions may well be counter-balanced by the disappearance of others running in short supply. Beam Suntory’s Laphroaig 18-year-old ($110 a 750-ml. bottle), for instance, depleted its entire U.S. stock in August. No more is expected until 2017 at the earliest. On the other hand, the company unveiled a Laphroaig 15-year-old ($80) in July and anticipates having a 32-year-old ready for sale this month at $1,200, though there will be just 100 cases allocated for the entire United States.

Bowmore Mizunara is finished in Japanese oak casks and priced at $1,000 a 750-ml. bottle.
Bowmore Mizunara is finished in Japanese oak casks and priced at $1,000 a 750-ml. bottle.

Bowmore Devil’s Cask ($100 a 750-ml. bottle)—also marketed by Beam Suntory—is returning to the United States this month after a prolonged absence, though it’s expected to sell out by 2016. Meanwhile, Bowmore Mizunara—a no-age-statement whisky that’s finished in Japanese oak—is due to launch in the United States this month, priced at $1,000 a bottle. Maya Rubalcaba, senior brand manager for Scotch whisky at Beam Suntory, believes consumers have been ready and willing to look past age labels. “These new products show off our master distillers’ expertise,” she says. “We’ve been able to innovate and create in more different ways than ever before. And frankly, these products are aimed at consumers willing to pay premium prices for excellent Scotch.”

Some producers are displaying their credentials by harkening back to a prominent event in a brand’s history. Earlier this year, William Grant & Sons released Glenfiddich Original 1963, inspired by the brand’s 1963 single malt whisky that’s regarded as the progenitor of all modern-day single malts. Just 2,000 cases, retailing at $100 a 750-ml. bottle, were allocated for the United States.

Even though it’s priced out of reach for most consumers, The Balvenie 50-year-old adds to the brand’s notoriety.
Even though it’s priced out of reach for most consumers, The Balvenie 50-year-old adds to the brand’s notoriety.

Pricing Goals

Like other Scotch makers, William Grant has recently sought to close price gaps. In September, the company unveiled Glenfiddich 14-year-old Bourbon Barrel Reserve, retailing for $50. It fills the space between the brand’s 12-year-old ($40) and 15-year-old ($60) expressions. “The goal is to provide consumers a nice ladder of products,” says Andrew Nash, category marketing director for Scotch whisky at William Grant.

There’s still room in the game for rarities that transcend normal price ladders. William Grant markets the Glenfiddich 40-year-old, priced at $3,500 a 750-ml. bottle, and The Balvenie 50-year-old Cask 4567, priced at $38,000. Honoring malt master David Stewart’s 50th year with the company, the latter only has 15 bottles allocated to the United States. “Other companies are scrambling to drop age statements from their products, but we’re still using age statements where they matter,” Nash says. “Consumers look seriously at the interplay between price and age as they decide on a product’s value proposition.”

Something as high-end as The Balvenie 50-year-old can serve to give a brand notoriety. At the PGA Championship golf tournament staged this August at the American Club Resort in Kohler, Wisconsin, the expression was offered for $500 a 1⁄8-ounce pour to $3,995 a 1½-ounce glass. “We featured The Balvenie products all week during the tournament and had The Balvenie brand ambassador Jonathan Wingo here to help with the promotion,” says Ryan Beebe, bar supervisor for The Immigrant Restaurant at the resort. “The 50-year-old was a big hit. Even if that Scotch was a little too expensive for them, our guests were inspired to drink other expressions of The Balvenie throughout the tournament and were able to take pictures of the bottle.” The restaurant also offers 1½-ounce pours of blended Scotch whiskies, such as Johnnie Walker Red Label ($6) and Dewar’s White Label ($6.50).

Bacardi's plan to release some of the single malts that make up the Dewar's blend began with The Craigellachie (distillery pictured), which debuted a 13-year-old and a 23-year-old last year.
Bacardi's plan to release some of the single malts that make up the Dewar's blend began with The Craigellachie (distillery pictured), which debuted a 13-year-old and a 23-year-old last year.

Not to be outdone, Moët Hennessy USA is releasing the Glenmorangie 1970s Collection—a pack of five 750-ml. bottles from different vintages—later this year. The United States will get two of the 10 globally distributed five-packs ($50,000 each). Moët Hennessy execs are considering splitting the five-packs up for tasting events at high-profile restaurants that feature a flight of all five vintages. “We want to be sure consumers hear about this product,” says brand director Maxime Balay. “We don’t want just two lucky collectors to grab these and then hide them from sight.” In June, Moët Hennessy’s Ardbeg brand released the new, no-age-statement expression Perpetuum. Retailing at $120 a bottle, the offering celebrates the bicentennial of the distillery’s founding. Some 1,000 cases were allocated to the United States, and the label has exceeded expectations, according to Balay.

Bacardi USA is offering the biggest flood of new single malt products. Best known for the blended Scotch whisky Dewar’s, the company is taking single malts from some of the brand’s distilleries and releasing them under their own names for the first time. Craigellachie 13-year-old ($50 a 750-ml. bottle) and 23-year-old ($280) debuted last year, while the Aultmore 12-year-old ($50 to $55) and 18-year-old ($115) and the Deveron 12-year-old ($45) and 18-year-old ($110) are launching this fall. In addition, Bacardi will unveil the Royal Brackla lineup with 12-year-old ($65), 16-year-old ($130) and 25-year-old (price to be determined) expressions.

“We’re in an enviable position to be bringing five single malts to the market with multiple age expressions,” says Bacardi North America vice president and managing director of marketing Dan Pilas. “There’s a lot of excitement in single malt right now, and retailers have been looking for new products.”

The Glenrothes is replacing some expressions in an effort to gain new consumers.
The Glenrothes is replacing some expressions in an effort to gain new consumers.

Diverse Market

There’s still a lot of existing inventory for the marketplace to digest. ImpEx Beverages offers 10 different expressions from Isle of Arran Malt and another eight labels from Kilchoman Distillery. The Kilchoman whiskies have no age statements, but command premium prices nonetheless: The Port Cask variant retails at $120 a 750-ml. bottle, while the Loch Gorm offering is $90. “U.S. consumers are getting educated,” says ImpEx president Sam Filmus. “They’re demanding cask-strength whiskies and no artificial colorings. They’re asking all the right questions of their retailers.”

Chris Riesbeck, a director with Classic Imports, agrees that consumers have gotten more particular about their Scotch whisky. This month, the company is releasing the Benromach 10-year-old Imperial Proof, bottled at 57-percent abv and priced at $90 a 750-ml. bottle. “A decade ago, there wasn’t much of a market for cask-strength Scotch,” says Riesbeck, whose company imports the portfolio of independent bottler Gordon & MacPhail, among other brands. “Now consumers are deciding they want stronger whisky, and Scotch producers are recognizing the value in putting out pure distillate.” Imperial Proof falls between the Benromach 10-year-old ($60) and the new 15-year-old variant (around $100).

At Anchor Distilling Co., president Dennis Carr says The Glenrothes brand is jettisoning its Select Reserve expression and replacing the entry-level whisky with an offering called Vintage Reserve, which blends 10 different vintages. Priced at $54.99 a 750-ml. bottle, the label will be supplemented by a Sherry Cask Reserve and a Bourbon Cask Reserve (both $59.99), the latter replacing the Alba Reserve. The Glenrothes has been a bit quiet of late, but Carr is promising what he calls a “reintroduction” of the brand at media and trade events this fall and continuing next year with an aggressive sampling program. “The goal is to bring new consumers into this franchise,” he says.

Scotch needs new and younger consumers. Many retailers say the Bourbon category has stolen much of single malt’s thunder in the past few years. Rob Mackay, the whisky buyer at the single-unit Tiffany’s Wine & Spirits in Kalamazoo, Michigan, notes this trend. “Bourbon is simply more popular at this point,” he says. “It’s taken some sales away from Scotch. People between the ages of 21 and 30 are all looking for Bourbon now.” The Scotch assortment at Tiffany’s ranges from $24 a 750-ml. bottle for Dewar’s White Label to $1,400 for John Walker & Sons Odyssey. Mackay worries about the rising prices of Scotch whisky. “Bourbon is easier on the wallet,” he says. “People drink Bourbon and get Scotch as a gift for their boss.”

The Scotch Malt Whisky Society reports that its tasting extravaganzas in cities like Chicago, Boston and Seattle pull in 400 to 600 people each year, with tickets starting at $150 a person. Those numbers were much smaller when the Scotch Malt Whisky Society debuted more than two decades ago. “We’d get 15 or 20 people to show up at one of our events,” says COO Lauren Shayne Mayer. “That gives you a pretty good idea just how far Scotch has come.”