== American roots ==
In assessing the global market for deluxe blended Scotch, it is right to start with the United States, since it was here that Chivas Regal effectively created the category after the second world war. According to Martin Riley, marketing director at Chivas Brothers: "It came in offering something that was entirely different. A 12 Year Old blended Scotch that was twice the price of other blends. It became the drink of business success. It had this very clear message - if you're successful, drink Chivas, period." In other words, it was made for the American dream, and by the late 1970s annual sales peaked at 1.2 million cases.
Today, US sales of Chivas Regal 12 have slipped to just 480,000 cases. More galling still is the fact it has been eclipsed by its arch-rival Johnnie Walker Black Label, which seized poll position as the world's number one deluxe blend some time in 2000. Perhaps not surprisingly, Sophie Gallois, Chivas Regal's brand director, is happier talking about Chivas Regal 18 Year Old, whose US sales have jumped 55 per cent in the past 12 months to reach 15,000 cases. Of the 12 Year Old, she says: "It grew fantastically in the 1960s and 1970s. It is a mature brand, but we really believe we are getting younger people into the brand through those premium extensions." She adds that a good role model for Chivas in the US might be Cadillac - an ageing brand that has managed to rejuvenate itself.
If Chivas Regal is a badge brand to be drunk as proof of wealth and status, some question its relevance in today's America. Gallois is quick to refute such allegations. "Personally, I think that social status is very relevant in the States, certainly among the Hispanic community; but it depends how it is expressed," she says, adding that there are no plans to switch the focus to Ballantine's 12 Year Old - the brand acquired from Allied Domecq in 2005. "No, Chivas Regal is at the heart of Chivas Brothers. It is the jewel in the crown, and its status is more premium than Johnnie Walker. It starts at 12 Years Old and finishes at 25."
Ben Anderson, global brand director for Johnnie Walker, puts Black Label's success in the US down to "consistency and brand positioning". It has certainly communicated the same message in its advertising since 1999.
"The Keep Walking campaign has really helped us transcend the category, particularly in the US where Scotch can be seen as 'my father's brand'. But when you link it into the fact that men want to progress in life, the Johnnie Walker campaign is incredibly strong. It has elevated the category and keeps it attractive to a new generation of consumers."
== Latin developments ==
The US Hispanic market is extremely important, and here both companies use their full portfolio, of deluxe blends and play on any Latin links they can. Diageo actively markets Buchanan's to immigrants from Venezuela - the brand's heartland, as well as to ex-pat Colombians, while Chivas Brothers pushes its Ballantine's blend.
Dewar's joined the 12 Year Old stakes somewhat belatedly in 2001, but still leads the standard blends category according to owner, Bacardi. It seems Dewar's previous owners wanted nothing to distract attention from the cherished Black Label in the deluxe sector. Dewar's was originally owned by Distillers Company, which in 1986 was acquired by Guinness, which in turn merged with Grand Met to form Diageo in 1997, the year before Dewar's was sold to Bacardi.
Bacardi has invested heavily in its new 12 Year Old and even employed Sean Connery to promote it in 2004, although the ads were shown only in Latin America, Greece and parts of Asia. Yet Johnnie Walker, thanks to its broad portfolio - rising from Red Label through to Blue and
Gold - may have overtaken Dewar's as North America's most popular brand of Scotch. Anderson says this happened in 2006.
Johnnie Walker Black Label is also powering ahead in Mexico and Brazil. With its global message about moving on and progression, Diageo is convinced it has tapped into a universal truth that can be applied anywhere with slight regional adjustments. That said, Anderson accepts Latin American markets can be highly volatile and that it's sometimes simply a matter of making hay while the sun shines. "I can't influence a market's economy, but I can make sure I market the brand in a sustainable way."
== Battle of the giants ==
On the other side of the world, the position of these two brands is reversed. Thanks to an unshakable faith in China, Seagram laid the foundations for Chivas Regal's success before passing the baton to Pernod Ricard. The French company has not squandered its inheritance and has invested heavily with its Chivas Life campaign. For Gallois, the results speak for themselves. "I think we're now the largest imported spirits brand there [China]. If you look at the Chivas Brothers portfolio, including Ballantine's and Chivas Regal, I think we have about 65 per cent of the deluxe market, so we're very dominant."
But having reached this position, Chivas is not likely to grow its already large share in China. "We think the whole market is going to premiumise as it is with Cognac," says Gallois. "In China, we're about growing value now."
With a strong portfolio of blends at 18 years and above, she claims her company now has 43 per cent of the world's so-called super-premium category. Meanwhile, Ballantine's 12 Year Old claims to be in third position, as it does in Korea and Japan. According to brand manager Peter Moore, Ballantine's well-defined image sets it apart from its more glamorous stable mate. "Ballantine's is not a brand that's overt. It is understated, but nevertheless has a slightly more knowing feel."
While Diageo may previously have been distracted by other markets - notably India, which many in the industry believed would take off before China - there is no sign of complacency now. "They're an obvious competitor," says Gallois, "and they [Diageo] have obviously decided to spend a lot of money in China. But I have to say our strategy is different. If you listen to their CEO, they are clearly about share of market and volume. If you look at Vietnam, for example, they are selling their Johnnie Walker at a very cheap price." From Diageo's latest report, there seems some truth in what she says about chasing volume. In it came the boast that Johnnie Walker had taken six points of share out of China.
So will the striding man ever catch up with Chivas in China? "Yes absolutely," says Diageo's Anderson, "without a shadow of a doubt. We've got great momentum in China at the moment with fabulous activation around our Formula 1 activity and advertising. The brand seems to be in rude good health and is doing extremely well."
On the question of whether the brand's strategy is about volume share or value, he hedges his bets slightly. "You can't look at a single answer, but the critical thing about deluxe brands is always going to be value. You always need to be able to sustain a premium, which is what these brands are all about."
Not that either Chivas or Black Label, or indeed any deluxe Scotch whisky brand, need feel constrained by demand in a country that now has a hundred cities of over one million people. According to Anderson, GDP among the emerging Chinese middle classes has risen 600 per cent in the past five years. "Think about your own income, and you think that if it is keeping up with inflation and maybe doing a little bit better here and there you are doing really well. Imagine what you would be consuming if it had gone up six-fold!"
== Age matters ==
This would seem to give plenty of scope to other deluxe 12 Year Olds from the likes of Cutty Sark and Dewar's, but the cost of entry into the Chinese market is prohibitive. "You have to pay the nightclubs vast amounts of money to be the main supplier," says Gallois.
David King, marketing director at Cutty Sark, sees more opportunity elsewhere. "We're doing a pretty good job in India, where because of the [fragmented] structure of the market, the big boys can't express themselves so well." As the vast Indian market begins to open, finally cutting its exorbitant import tariffs in July this year, shipments of Scotch whisky are expected to rise significantly. Yet as consumers climb up through the seven categories of Indian whisky to reach standard blends of genuine Scotch, it will be some time before many can afford the deluxe version: the tax cuts may shave only 10-15 per cent off the shelf price of imported spirits.
One brand seeking to make the most of India is Whyte & Mackay, whose deluxe expressions include 13, 19, 22 and 30 Year Olds. The brand was bought by the Bangalore-based drinks mogul Vijay Mallya in May for £590 million. Mallya's company - United Breweries - will be able to use its phenomenal distribution muscle to bring Whyte & Mackay to a wide audience.
But a lot will depend on how much whisky UB leaves to mature in Scotland and how much it ships over to feed its own blends of Indian whisky. Beyond India, the brand's strategy is similar to other deluxe blends, as company innovation director David Robertson explains: "In a category dominated by two very strong players, Whyte & Mackay aims to nibble at the edges."
Within the total market for deluxe whiskies, deluxe blends have to coexist with single malts. In some markets, there has been a definite shift towards malts. The success of The Macallan in Taiwan, for example, must have been to some extent because it stole sales from Black Label.
Yet one should not obsess about these category differences, which often mean far more to the whisky industry than to whisky drinkers. When Diageo researched how Spaniards viewed their top-selling malt brand Cardhu, for example, they found most consumers perceived it as simply a premium whisky and an alternative to deluxe blends such as Chivas.
Anderson believes the idea that mature markets are moving straight to single malts, bypassing deluxe blends, is to take a very UK-centric view of the whisky industry. He points to the current success of Johnnie Walker Black Label in Spain and Greece. In the emerging Russian market, the brand claims to be the number one Scotch whisky, full stop.
Meanwhile, France has been considered a fully mature market where consumers drink malt whisky if they want a premium brand. This view has been challenged by Pernod Ricard, which is pursuing a policy of premiumisation by backing Chivas Regal 18 Year Old. According to Gallois, the brand has managed to tap into the French flair for exuberant design through sponsorship, and has seen growth of 62 per cent in the past year to 15,000 cases. She is convinced this has helped the mother brand grow 12 per cent over the same period to reach 130,000 cases.
Ultimately, dominance of the deluxe whisky market will come down to who has the greatest stocks of aged whisky, and here Chivas Brothers claims to have the edge. If true, they may be able to leverage this advantage to overtake their main rival, Diageo, before its massive new Roseisle distillery comes on stream with stocks of 12 Year Old, which is scheduled for 2021. ?