Whisky Advocate

The Scotch whisky industry’s optimism for the future

December 2nd, 2009

There’s an interesting article here by Bloomberg reporting on the Scotch whisky industry’s rosy outlook, thanks to the growing appetites of countries like China and India, and to malt whisky enthusiasts like you.

The story also discusses one man’s desire to re-open a distillery in Annandale in 2011. Whisky hasn’t been made there since 1921.

What do you think? Is the future of Scotch whisky as bright as the article suggests?

11 Responses to “The Scotch whisky industry’s optimism for the future”

  1. G Llaguno says:

    Not in the short term, but eventually with the economic rebounce it will be better than it is today, but as the article says, they are planning at least 10 years from today. My personal point of view is that if the actual trend is kept (rising prices, as John wrote on his article on the 28th of Nov) and the marketing power keeps making the brand expensive, the future wouldn’t be so bright because the drink would have only a small niche of people who will and can drink it, and missing by far the bigger numbers of the less wealthy consumers.

  2. Childhood dreams are the stuff of great successes stories (and failures, too, to be sure). Without those dreams, though, and a commitment to them, we wouldn’t have some of the wonderful whiskies we enjoy today. BenRiach was closed for 65 years, reopened, closed again, yet look at it today. Bruichladdich, anyone? Port Charlotte, maybe?

    There will always be those who say, “Oh, that Thomson guy is nuts.” Others will envy Thomson’s ability to try to fulfill his dream. And a few will say, “Wish I had the guts to do that.”

    Thank goodness for David Thomson and the others like him. They give the naysayers something to talk about, and it they lose their dream and fail, they give the pessimists a reason to tell them so.

    How many successful business folks can you name that headed down their road toward the future with the intent to fail? Without the optimists we’d have neither a topic for discussion nor good whisky to drink.

  3. Yes, on balance, the future does look very promising for the industry. I don’t know enough about Thomson to comment intelligently on his prospects, but I don’t see why he doesn’t have at least a sporting chance and, obviously, I wish him every success. For the bigger players, the potential of the Asian markets is mind-bogglingly large. Consider, for the moment, that even the US market hasn’t been fully explored or exploited. Mostly, I suspect we’ll see the same basic pattern playing out to the general benefit of the rest of us — that is, great lakes of mass-market blends to meet most of the real demand, stepped-up production of fabulously well made single malts, and expanded ranges of mind-bogglingly expensive trophy whiskies. The specific product ranges we have all grown accustom to will likely be modified, since there is only so much product of X-age to go around in the short term, and some of the entrepreneurs and independent bottlers aiming at traditional markets will hopefully swoop in to fill some of the void, but largely I expect the pattern to remain in place. The X-factors are also unchanged: if the producers guess wrong in their projections and or some other economic misfortune stampedes over the dreams of avarice, etc., then the market may yet contract again. Time will tell, but as of now things actually look very good for the industry and, anyway, hope springs eternal.

  4. Brian Bradley says:

    If the Scotch Industry keeps pumping out higher and higher priced bottles its going to end up resembling the American housing crisis…

    It sounds as if they are saying, “hey, scotch is an investment and a good one”. This trend will become a nothing more then a bubble and it will burst. And when it bursts it will bring the industry down to its knees. Making an evermore pricey product for the wealthy and the collectors will eventually Push away the average drinker.

    The middle class that consumes is where the money is. These high end bottles are supposed to be nothing more then a marketing ploy to get the magazines and people talking about their product. These products serve as a vehicle to get heads to turn and to make people look toward the companies more affordable items. It is the basic product lines that are the company cash cows.

    Restructuring the market away from the consumer can only end in financial ruin.
    But, I may be way off base… I am just one of the average consumers

    Brian47126

  5. Louis says:

    Well, it all depends on who the targeted market segments are. No doubt that lots of Johnnie Walker can be sold in China with enough marketing. But that’s not necessarily good news for the Malt Advocate audience.

    Slainte.

    Louis

  6. The scotch industry likes to talk malt but most of what it sells is blends. If India and China do open up as predicted, there’s no reason to think that won’t continue to be the case there.

  7. John Lamond says:

    18 months ago, the distillers were VERY bullish about future prospects in the markets which y’all have already mentioned – as well as Russia. These markets were also buying high-end products. Since then, we all know what has happened, but… Scotch Whisky seems to have been cushioned from the worst of the downturn. Sales – and profitable ones – have continued to grow, although not at the expansion rate of 24 months ago. The point for many distillers/bottlers has been that they have not had to discount.
    Yes, blends have been the major segment, but they ALWAYS will be! Single malt only accounts for around 8% of the market.
    Your comments about these expensive bottlings have all been aired before. In some cases, there are only 250 bottles available for the whole world.
    What is a distiller to do?
    Drop the price and watch the free-for-all as the retailers have to decide who their favourite customers are, only to upset half a million other customers who want to buy a 50 year old at $500 a bottle, or up the price, make it exclusive and make a profit which can be used to promote the younger, more affordable bottlings?
    As Chinese, Indian and Russian consumers become more wealthy and develop aspirations to own phones, cars, fridges, etc., so Scotch becomes an aspirational drink and there are many years’ growth to come yet, even if we experience an economic downturn every 15 years or so. Even 100 years from now, there will be pockets of inhabitation in India, China, Russia, Africa, even the US of A where people will never have heard of Scotch Whisky, never mind tasted it.
    So, this is a good time to open a distillery – as long as you have the backup funds to wait until you can sell some product and make a profit some years later.
    Annandale is close to the English border, a market of 50 million people. The south west of Scotland is a beautiful and peaceful tourist area missed by many visitors who only visit Edinburgh, Glasgow, Speyside or Islay. In the area at the moment, there is only Bladnoch, which is a good hour and a half’s drive from the M74, the main arterial route into Scotland. Annandale is five minutes off the M74 and close to Dumfries, so should benefit from general tourism (as well as whisky tourism) quite heavily.

  8. Louis says:

    Some more thoughts. I stopped off at Warehouse Liquors (NYC) on the way home. There are now plenty of decently priced malts, and yes, plenty of choice in the $30-40 range. One thing that I have seen before, yesterday’s latest-and-greatest at blowout prices. This time, it was the Glenkinchie Distillers Edition for $30, and the Cragganmore DE for $43, among others. The market is talking. As an SMS lover, I am perfectly happy to wait a year or two, and then stock up. Of course, it would be nice if the distilleries would just price eveything fairly, but that’s another story.

    Slainte.

    Louis

  9. kallaskander says:

    Hi there,

    in the mid term yes I think. But for the long term view Scotch whisky industry has set the track switches – Americans do call them points? – set to another desaster like in the late 1970s and early 1980s.

    You can take the Bell`s blended Scotch as an indicator.

    Everytime there was a slump in demand the Bell`s suddenly carried an age statement. Why? There was a surplus of whisky so they could afford to sell it at a higher age as a quality marker.

    When Demand rises Bell`s loses the age statement and is barely more than 3 years old.

    That last a while until the quality has go to such a low that demand slumps again. Trees do not grow into the skies.

    If you consider that Glenlivet and even Macallan now have distillery capacities of 8 million litres of alcohol a year – what do you call that? I call is mass production. And if you are American what have you learned from the likes of Mr Ford and others? Mass production makes products cheaper.

    Mass always is the contrary of quality.

    I tink we will see another crash in the Scotch whisky industry in our life time. the question is not if but when.

  10. Neil Fusillo says:

    I think the future of Scotch is quite bright and rosy in the near to mid term. In the long term, we’ll see. Tastes change. Something else may come into favour. Or it may not. The whole single malt fervor is, by and large, not THAT old. It was next to impossible to find single malts anywhere outside of distilleries only 35/40 years ago. Now they’re everywhere.

    But that’s no guarantee that they’re here to stay in a place of prominence. The trend could go to blends in the up and coming countries. Or, like some european countries, they could only care about cheap scotch mixed with cola. One never knows.

    OR… and this is what I honestly see happening to some degree, the whisky makers in India, China, and Japan could really shine in their local markets with a greater understanding of the customers.

    Time will tell.

  11. John Hansell says:

    Maybe we can’t predict the future, but one thing is for certain: the next 10 years is going to be an interesting time for whisky.

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