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Goblets of Fire

Around the turn of the year, two events at opposite ends of malt whisky's financial spectrum gave a great deal of pleasure to those in the malt whisky industry who like to back the underdog. The more publicised of the two events culminated in January. After months of speculation, Pernod Ricard beat off its much bigger rivals, Diageo and Allied, to walk off with Seagram's whisky portfolio. The addition of Seagram brands, such as Chivas Regal, Glen Grant and The Glenlivet, to existing Pernod Ricard brands such as Aberlour and the Irish whiskey brands will transform the company once the deal is passed by the regulator in April. It will become a major player in whisky in general (almost a third of the company's repertoire will be whisky), and in malts in particular. As Tom Bruce-Gardyne pointed out in a recent column for Harpers (print edition, 23 February) the development was privately welcomed by most of the industry, which saw Pernod Ricard as the "least bad" (not to mention the smallest) of the contenders, with the most interest in sustaining the operations up for grabs. In the words of one member of the industry: "It should mean a stay of execution from rationalisation. Quite simply, Pernod Ricard has more need to keep the distilleries it has acquired alive than either Diageo or Allied." The other event to bring good news for the supporter of the (relatively) small player happened in December, before the Seagram bunfight had been resolved. After years of inactivity under the ownership of Jim Beam Brands, the Bruichladdich distillery in Islay was acquired by the malt-bottler Murray McDavid for 6.5 million. The majority of the cash for the deal came from a group of independent, mainly Scottish investors, and a third of it from Illeachs (Islay residents), making for "a project that is Islay-based and featuring the only independent distillery on the island", according to Murray McDavid's Simon Coughlin. Having snapped up IWSC distiller of the year, Jim McEwan, (an Illeach with shares in the project, who had previously been at Bowmore for 38 years) as production manager, Murray McDavid will start releasing some of the 1.5 million litres of stocks acquired with the Bruichladdich distillery at the beginning of May, with distilling due to start shortly beforehand. "The emphasis will be on quality", said Coughlin. "We're not aiming to sell 100,000 cases."

Cautious optimism

The two developments have contributed in their different ways to a mood of cautious optimism among those involved in the malt whisky industry, where consolidation and rationalisation have been a constant threat over the last few years. However, as Campbell Evans, director of Government and consumer affairs at the Scotch Whisky Association, said: "While there is certainly optimism, it is also true that no-one is getting starry-eyed" over malt's current position. The latest Nielsen data shows why. The growth of malt whisky, which now accounts for about 10% of total whisky sales, is beginning to tail off. MAT for November/December 2000 puts the category as a whole down 2% in value and 1% in volume. It is in the on-trade where the category is suffering the most: down 7% in value and 10% in volume. According to David Warren, bar manager at Mint in London, malts are losing out, just as blends and the rest of the brown spirits market are losing out, as the key 25- to 35-year-old market continues to embrace cocktail culture, and thus white spirits. Warren summed up malt's problems in the on-trade. "The thing with malts is that you are never going to mix them really, so that rules out the cocktail drinker for a start," he said. "Then there is the fact that malts are difficult to sell in the on-trade because they are quite expensive. A customer pays a lot of money for a large single malt at a bar, then you put 50ml of liquor in front of them and they say: Do what mate? Is that all?' It looks pretty small compared to a cocktail or a beer. "Also there is a question of image," he continued. "The branding on some malt whisky could be a lot better. I'm looking at a bottle of Glenlivet now and it looks old and dull. It doesn't encourage people to ask: What's that on the bar?'" Steve Gater, brand manager for malt whisky at First Drinks Brands, with responsibility for Glenfiddich and The Balvenie, is aware of these problems. "Malt whisky is not considered a glamorous sector at the moment. Though we stress that you can drink it how you want to, I admit it is a bit of challenge to put it into a cocktail. And although it's been said many times before, it does have a heather and weather, pipe and slippers by the fireside image, and we've got to get away from that." Gater and his colleagues at other brands are concerned as much by the implications for off-trade sales, where the majority of malt whisky's volume comes from, as by the on-trade performance per se. "You only have to look at the success of Jack Daniel's and the growth of Irish whiskey in the UK to see why the on-trade is so important," said Gater. "They've come in through the on-trade. That's where people are trying new products. You're not going to spend 22 on a bottle of whisky if you don't know what it tastes like." So what is to be done? Gater believes that "more contemporary" advertising, such as Glenfiddich's recent "moments of inspiration" series, plays an important part in attracting the style-bar set. "It's really making a conscious effort to appeal to younger drinkers, to contemporise malt whisky," he said. More important still, for Gater, however, is education. So important, in fact, you can almost imagine him intoning Tony Blair and David Blunkett's mantra: "education, education, education". "We've a big job to do in educating the consumer, the younger consumer in particular," he said. "What malt whisky has to offer is a taste experience; there are a hell of a lot of malts out there and they all taste slightly different. We've got to give people the information to understand those different tastes without frightening them away. Which means giving them just enough information." One attempt to do just that is UDV's "Classic Malts plinth", which showcases the five classic malts along with their taste and provenance on a specially constructed (well, there's no other word for it), plinth for back bars. The company has backed this up with Classic Malt dinners, where each of the malts matches a part of a five-course meal. According to David Warren, who has tried both initiatives at Mint, neither has been entirely successful so far. "The plinth is a nice idea, but I don't really have enough room for it on my bar at the moment, it's a bit too big," said Warren. "The dinners were difficult to sell in Clerkenwell: not many people wanted to come, which is a shame, because they were good fun. I wouldn't rule out running them again in the future, though." Jim Cook, sales director at Glenmorangie, suggests that rather than point-of-sale material, it is on-trade staff who are best placed to spread the malt whisky word in the on-trade. "Malt whisky is like wine in a lot of respects. One of the major parts of the appeal of both lies in what you might call their varietal nature," Cook said. "In the off-trade you've got your Oddbins and independent merchants who do a brilliant job of evangelising those differences. We've got to translate that into the on-trade." Cook said that Glenmorangie has started to put its money where its mouth is in this respect. "We've been putting a lot of work into on-trade training. We have a team of people doing about 12 programmes a week." The focus of this training has been in a specific area of the on-trade which Cook believes has the biggest potential for malts. "It's what's being called the third place'," he explained. "It's a new kind of on-trade segment which is not a pub, not a style-bar, and not necessarily a restaurant. I suppose you could say the Conran places are a good example. It's the sort of place where young, professional, sophisticated people are spending a lot of time. It's an area where exactly the sort of consumer who would be interested in malts is spending time," said Cook.

Lack of savoir-faire

Of course the education message is not confined to the on-trade. If anything the need is just as great in the off-trade, where most outlets are not blessed with Oddbins' evangelists. Jane Wilson, senior marketing manager at Maxxium UK, said: "We have to remember that a lot of the people who are buying malts are not the end consumer. They might be buying as a gift, or as a regular purchase for their partner, but often they go into the supermarket and think: Oh my God!' when they are confronted with the range. They are terrified of making a faux pas." Wilson says that Maxxium is looking into working with the multiples to create shelf-talkers and other POS which would provide basic information about the different styles of malt whisky, whilst "subtly promoting" the Maxxium brands, which include The Macallan and Highland Park. Gater and Cook said that their brands were working in much the same direction, coming up with simple taste scales to be placed around supermarket malt facings. Sainsbury's, meanwhile, has already come up with its own educational shelf-talkers. According to the company's spirits buyer, Simon Dunne, they will be on shelves "in the next two to three weeks", and they will "divide the category into three types of flavour: light and delicate, strongly flavoured and medium, with some representative brands and the geography listed next to each type of flavour". Ironically, while the brands and multiples have been working to make the category appear more approachable and easier to understand for the consumer, the category itself has been getting more complicated, with more range extensions and more styles of finish. Cook sees no contradiction here, however. "There is a hierarchy within whisky drinkers. I know that there are consumers who will be unable to relate to Port pipe, or Cte de Nuits finishes. For that type of consumer, who may be moving up from blends, there are the basic ten-year-old malts. They are the ones who need guidance, who would like to know if the product is smooth or if it's strong flavoured, or whatever. But there are also people who have already been drinking the ten-year-old and are looking for a further challenge. One of the great things about malt is that it can offer that step up and I wouldn't like to see that changed." Grant Ramage, spirits buyer for Oddbins, also thinks that the diversification is a good thing, within reason. "A wide range can bring in people from the top end, the connoisseur," he said. "But there have been an awful lot of range extensions over the past five years and you could say it's a case of over-extending. I don't know about that. But what I would say is that we've got a limited amount of space, so if it's a limited parcel of stock which creates focus and sells through very quickly, then great. If it's just another product, then it's a different matter." Certainly most people in the industry would agree that although it may act as a bar to entry to some consumers - and although some of the products involved verge on the gimmicky - range extensions are a far healthier way of generating interest in the off-trade malt category than excessive price promotions. As Wilson said: "Very deep discounting can blur the distinction between a premium malt, and the more premium blends, such as The Famous Grouse. That's not helpful for those of us who are trying to build the malt category, and it's not very helpful for the blends, either." The price cutting continues, however, with everyone involved saying it is simply unavoidable. "There is a danger of devaluing the category," said Dunne. "However, it is a very competitive market, and for as long as it is competitive you have to go along with it." Hence Sainsbury's 5 off the top five malts offer over the Christmas period. Wilson does think that the mood may be changing, however. "I think it's levelling out," she said. "It's the opposite to vodka and blends, where constant price cutting means that tertiary brands are going through the roof. With malts we're seeing fewer promotional periods now, it's really just confined to the important gifting periods of Father's Day and Christmas." Dunne agrees. "In malts there is a big difference between Christmas and the rest of the year," he said. "Christmas is dominated by the deal, and the rest of the year the work is put in to get drinkers to try the product." Worryingly, however, Wilson also suggests that those promotions will be limited to the leading brands who can afford to play along, confining the "smaller boys" to the specialists. "The grocers are giving more and more importance to the five key brands when it comes to promotion," she said. "We may see the fixture diminishing." Which brings us back to rationalisation, underdogs and optimism. If Wilson's tentative prediction becomes reality, how long will it be before Pernod Ricard shows itself to be less altruistic than we hoped? And how long before the first article appears lamenting the reclosure of Bruichladdich?

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