Bells and The Famous Grouse are the best-selling whiskies in the UK and are considered "premium blends" with a non-discounted shelf price of over £15 a litre. Last year this sector grew by £7.4 million in the off-trade according to Nielsen, at the expense of "secondary blends" and "cheapest on display" whiskies. This trend was confirmed by Simon Dunn, spirits buyer at Britain's biggest supermarket, Tesco. "We're seeing that, at the bottom end, some [consumers] are dropping out of Scotch, following price increases, and moving into white spirits; others are trading up." The Edrington Group, owner of The Famous Grouse, also reports growing market share.

Cautious optimism

Among export markets, Spain is second only to the US, and here too there's a move towards premiumisation with shipments up 38 per cent in volume and 57 per cent in value. Talk to the major brand-owners, however, and there is a definite sense of caution, as shipments and sales never quite match. After two decades of heady growth, Scotch whisky was already under attack from rival spirits as it passed the millennium.

"Cutty Sark was definitely suffering two years ago, but seems to have recovered somewhat," says David King, marketing director at Cutty Sark International. "But there's no doubt the category is under serious pressure from golden rum."

Other issues in Spain include a clamp-down on drink driving, which has dampened on-trade, and the country's economic slowdown. That said, the number two brand behind J&B - Ballantine's Finest - claims to have grown its share and become the leading brand "of the night", says Martin Riley, marketing director at Chivas Brothers.

He also credits the new Start an Impression campaign for boosting Ballantine's performance. With its images of Bob Dylan and Steve McQueen, Riley says the advertising "has brought a fresh message to the category".

In France, the brand now enjoys the distribution muscle of Pernod Ricard and has managed to penetrate the on-trade - a sector that was quite weak under Ballantine's previous owners, Allied Domecq, according to Riley. The French company already had Clan Campbell, one of the top-selling blends in France, which is distributed by the Ricard sales force.

Grant's Family Reserve is a strong rival, and its global brand manager, Kate Athanasi, talks of double digit growth in France, partly thanks to increased sales from the new 20cl size bottle. She feels there is a similar dynamic to the UK, where secondary brands and cheapest-on-display whiskies have shrunk to the benefit of well-known, well-supported brands like Grant's.

Greece, the country with the largest per capita consumption of Scotch, "is generally holding up pretty well," says David King, whose Cutty Sark is number two to Johnnie Walker Red Label there. Greece is also the largest export market for The Famous Grouse, which claims to be back in growth after a few tough years. And while single malts remain small, there has been a definite trading up among whisky drinkers towards deluxe blends.

Elsewhere in Europe, The Famous Grouse is still the top-selling blend in Norway and Sweden and enjoyed growth last year in excess of 10 per cent. Part of this was due to The Black Grouse - a recent range extension with a smoky flavour derived from the inclusion of some Islay malt in the blend. Following its success in Sweden, the new whisky has now spread to markets such as Finland, Denmark and Holland, as well as South Africa and Russia.

Thinking big

Shipments to America declined by 5 per cent last year, according to the SWA, though value rose by 5 per cent to £419 million. The big trend there, in the mass-market off-trade, is the boom in larger-sized bottles as price-conscious consumers trade up from the standard size thanks to tempting discounts. "Dewar's grew by one percent off a high base in a very strong, competitive environment," says Iain Kennedy, global brand director at Bacardi. Dewar's White Label is the top-selling Scotch in America, with total Dewar's branded sales, including the 12 Year Old and Signature extensions, reaching 1.347 million cases last year. William Grant's blends also did well, according to Athanasi: "Possibly because people are beginning to trade down, though it's probably too early to say." How fears of recession and the credit crunch will affect sales will be a key issue this year.

Beyond mature markets like the US, the BRIC economies are causing real excitement within the Scotch whisky industry and not just at the deluxe level. "Cutty Sark has seen really good growth in Russia and Brazil," says David King, who feels even China will open up to standard blends before long. So far, Chivas Regal and Johnnie Walker Black Label have totally dominated, with Pernod claiming over 60 per cent of the market if you add in Ballantine's deluxe variants.

Given the scale of investment involved there, those without Pernod and Diageo's deep pockets are waiting on the sidelines. With "the two biggest guys in the playground, you don't want to get caught in the middle," says King, who feels pressure on aged stocks will force the market towards younger blends. By then the world's largest "whisky" market, India, may have slipped within reach as the protectionist wall of tariffs on imported spirits begins to crumble.----=== SWA report paints a healthy picture === At the end of April, the Scotch Whisky Association released news of new export records set in the full year 2007, under the heading: "Global demand for Scotch at record high". Overall Scotch export volumes hit a historic high, growing 8 per cent to reach the equivalent of more than 1.1 billion bottles, with overall value up by 14 per cent to £2.8 billion.

The report said: "Bottled blended Scotch whisky exports broke the £2 billion barrier for the first time, with shipment value up 15 per cent (to £2.2 billion). Bottled malt exports also rose by 11 per cent in value to £454 million."

Regionally, the EU showed a remarkably healthy 27 per cent growth in shipments. This is explained, said the report, by "the trend towards premium spirit drinks". Also though, it's a reflection of the new markets opening as Europe's new members gear up. "Bottled malts increased by 18 per cent in value and bottle blended Scotch whisky exports grew by 32 per cent. Germany's 62 per cent growth reflects the pattern of routes to market and also increasing exports to central and eastern Europe."

Africa's 13 per cent shipments growth to £129 million, albeit from a small base, reflects the rapid growth of the South African market, which was worth £91million in 2007. India's tariff reforms in the middle of the year helped to boost exports by 36 per cent in value, to £33 million. The only negative was in Australasia, down 2 per cent to £52 million, of which £46 million is in Australia.

SWA chairman Paul Walsh said: "Distillers continue to watch market developments carefully, but the trends remain positive, with both mature and emerging markets performing well."