Scotch: A New Reality

30 May, 2014
China: A New Reality

Burke reports that the William Lawson’s strategy is to go after beer markets and it tries to be one of the most active value brands in terms of marketing. 

Over at William Grant, Clan MacGregor is seeing success in Russia, where the brand has grown 58.2% in the past five years. And, according to Diageo’s Morgan, White Horse is “performing with great vigour” in Russia and eastern Europe. 

“In Russia there is big jump from domestic spirits to Scotch,” he says. “But White Horse is at a very good price for trading up. It plays a similar role in Latin American countries. The White Horse symbol resonates with consumers.”

“Premiumness is in the eye of the beholder,” adds Burke. “For the mainstream market in Russia, Scotch is the aspirational brand.” He adds that once an LDA-30 consumer has chosen a brand, “it’s hard to get them to switch”. 

Burke says that William Lawson’s Super Spiced Spirit Drink edition is being trialled in its core markets, including Russia. “I think it has potential. American whiskey has cracked it with flavoured whiskey in the US and has been able to export that success to other markets.” 

Poland is definitely on the up, with Scotch volume rising 39% and value up 38% to £60m. Here Ballantine’s is running at +18%, with Pernod’s Scotch brands collectively in double-digit growth. 

North to the Baltics and Distell/Burn Stewart’s Scottish Leader is cleaning up. It is the number one Scotch in Estonia, number two in Lithuania and number three in Latvia. 

Africa

The brand is growing at 8%-9% globally and currently stands at 550,000 cases per year. African expansion is on the cards too, since Scottish Leader was taken over by Distell, which has local know-how and expertise in the sub-Sahara. “That’s the vision – we’re looking at the likes of Kenya, Nigeria, Angola, Namibia and Nigeria,” says Marco Di Ciacca, Burn Stewart’s senior brand manager. 

Scottish Leader is already number five in South Africa, another emerging market to have hit the brakes of late, with value growth of just 1% last year, but is still slated as a market of the future and a gateway to Africa. 

Di Ciacca talks of unlocking “the black economy” as being key and the emerging “Black Diamonds” demographic, as they are known. “They have a lot of money and want to spend it,” he says. “Our parent company, Distell, is in a very strong position to capitalise on the trend down there.” 

Africa isn’t quite ready for the company’s new-look Black Bottle blend though – which in 2013 was reformulated and repackaged in a sleek black bottle ready for a strategy of targeting the top 20 bars of big cities around the world. “Consumers in developing whisky markets have to go through the mainstream brands first,” says Di Ciacca. “There’s a journey that whisky markets have to go through.” 

No truer words have been said. Markets work in cycles, the trick is to be in the right place at the right time, which takes foresight, luck or incredible agility. Over-exposure to any group of markets, traditional or emerging, can be dangerous. 

At Cutty Sark, a brand that has bombed from 2.5 million cases in its pomp in the 1970s to the 800,000 cases it is at now, the problem was of over-exposure to traditional markets, such as the US, Spain, Greece and Portugal. 

Since joining the Edrington stable from Berry Bros & Rudd in 2010, the brand has been spread across the world to find new growth and mitigate the risk. 

“We do not have infinite funds so we are spread-betting. We trial and invest to see if there’s interest and if we can scale the business. In 2008 we had too many large eggs in large baskets, now 80% of our volumes are in our five top markets, 20% in emerging, of which we now have 20-40. The UK for us is an emerging market, because traditionally Cutty Sark only sold a few cases there.”

When the UK is described as an emerging Scotch market, you know things are complicated. Perhaps one observation can be made in the mist: in nearly all fading and failing markets, consumers don’t seem to be falling out of love with Scotch. 

There are many reasons for see-sawing sales and rarely is it consumers’ dissatisfaction with the product. Producers must judge where the meddling hand of politics is getting in the way of a good dram in the short term and where it is a long-term problem. 

In the end it is probably only time, that prophetic arithmetic, that can tell which emerging markets will continue their march and which will turn back the other way.





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