Global Scotch Insights 2017 Edition
About this report We ve taken a fresh look at how to deliver spirits category insight. This reports series is focused on providing data with meaning, backed up with actionable insights. Discover the essentials for your business, and what will drive profit and growth. Gain the most important global strategic insight, and quickly. Grab the facts and use them - instantly. Use this report to gain a global view on the category with its: top-down world drivers of leading markets, consumers and product innovation; future category growth hotspots - visualised; top markets, brands, owners - ranked by volume and value; insider information from leading brand owners; Essential insight - in one quick-to-use package.
About our analysts Richard Woodard Agata Andrzejczak Alexander Smith A trained newspaper journalist, Richard Woodard has been writing about the wine and spirits industries since 2000, including stints as editor of Wine & Spirit International, The Drinks Bulletin and The Spirits Business. He is a regular freelance contributor to a wide range of trade and consumer drinks magazines and websites, and has been writing regularly for just-drinks since 2006, including a monthly column on the international white spirits sector. Agata started at The IWSR in 1999 following her studies at Szczecin s University in her native Poland. Having researched 40 countries for The IWSR, ranging in size from Australia to the US Virgin Islands, she is known for her interest in Eastern Europe and undeveloped markets in particular. Alex has been with the IWSR for 15 years and has reported from all corners of the globe. He has a wide contact base and deep understanding of the global markets having written about the alcohol industry for 24 years. Before joining the IWSR, Alex worked for Shanken International in London and New York and UPI on Capitol Hill.
Table of contents World view dashboard... 1 Russia... 138 Market conditions... 2 South Africa... 144 Market key views... 4 TRAVEL RETAIL... 149 Future category prospects... 9 Usage and copyright statements... 156 Consumer drivers... 18 Consumer key views... 21 Product innovation... 22 Product key views... 25 Brands and owners... 26 Around the directors table... 33 EUROPE... 36 France... 37 United Kingdom... 44 Spain... 50 Germany... 57 Poland... 62 Turkey... 68 THE AMERICAS... 72 United States... 73 Brazil... 80 Mexico... 87 Canada... 93 ASIA-PACIFIC... 98 India... 99 Thailand... 106 Philippines... 112 China... 116 South Korea... 122 Australia... 129 OTHER MARKETS... 137
List of tables & figures Top 20 markets for blended Scotch, 2011-2015 ( 000s nine-litre cases, 11-15 % CAGR)... 5 Top five all-scotch owners in Spain, 2011-2015, retail value (000 s US$, 11 and 15 % share)... 55 Top 10 markets for malt Scotch, 2011-2015 ( 000s nine-litre cases, 11-15 % CAGR)... 7 Blended Scotch in Spain by quality, 2011 and 2015 % share... 56 Top 20 blended Scotch markets forecast, 2016-2021 ( 000s nine-litre cases, 16-21 % CAGR)... 10 All-Scotch brands in Germany, % share 2011... 58 Top 10 malt Scotch markets forecast, 2016-2021 ( 000s nine-litre cases, 16-21 % CAGR)... 12 All-Scotch brands in Germany, % share 2015... 58 Top 20 fastest growing blended Scotch markets forecast, 2016-2021 All-Scotch brands in Germany 2011-2015 ( 000s nine-litre cases)... 59 ( 000s nine-litre cases, 16-21 volume growth)... 14 Top five all-scotch owners in Germany, 2011-2015, retail value (000 s US$, 11 and 15 % share).. 60 Top 20 fastest growing blended Scotch markets, 2016-2021... 15 Blended Scotch in Germany by quality, 2011 and 2015 % share... 61 Top 10 fastest growing malt Scotch markets forecast, 2016-2021 All-Scotch brands in Poland, % share 2011... 64 ( 000s nine-litre cases, 16-21 volume growth)... 16 All-Scotch brands in Poland, % share 2015... 64 Top 10 fastest growing malt Scotch markets, 2016-2021... 17 All-Scotch brands in Poland 2011-2015 ( 000s nine-litre cases)... 65 Top 20 global brands and owners all-scotch volumes, 2011-2015 Top five all-scotch owners in Poland, 2011-2015, retail value (000 s US$, 11 and 15 % share)... 66 ( 000s nine-litre cases, 11-15 % CAGR)... 31 Blended Scotch in Poland by quality, 2011 and 2015 % share... 67 Top 10 global brands all-scotch retail values, 2011-2015 ( 000s US$)... 32 All-Scotch brands in Turkey, % share 2011... 70 All-Scotch brands in France, % share 2011... 40 All-Scotch brands in Turkey, % share 2015... 70 All-Scotch brands in France, % share 2015... 40 All-Scotch brands in Turkey 2011-2015 ( 000s nine-litre cases)... 71 All-Scotch brands in France, 2011-2015 ( 000s nine-litre cases)... 41 All-Scotch brands in United States, % share 2011... 76 Top five all-scotch owners in France, 2011-2015, retail value (000 s US$, 11 and 15 % share)... 42 All-Scotch brands in United States, % share 2015... 76 Blended Scotch in France by quality, 2011 and 2015 % share... 43 All-Scotch brands in United States 2011-2015 ( 000s nine-litre cases)... 77 Malt Scotch in France by quality, 2011 and 2015 % share... 43 Top five all-scotch owners in United States, 2011-2015, retail value All-Scotch brands in United Kingdom, % share 2011... 46 (000 s US$, 11 and 15 % share)... 78 All-Scotch brands in United Kingdom, % share 2015... 46 Blended Scotch in United States by quality, 2011 and 2015 % share... 79 All-Scotch brands in United Kingdom, 2011-2015 ( 000s nine-litre cases)... 47 Malt Scotch in United States by quality, 2011 and 2015 % share... 79 Top five all-scotch owners in United Kingdom, 2011-2015, retail value All-Scotch brands in Brazil, % share 2011... 83 (000 s US$, 11 and 15 % share)... 48 All-Scotch brands in Brazil, % share 2015... 83 Blended Scotch in United Kingdom by quality, 2011 and 2015 % share... 49 All-Scotch brands in Brazil 2011-2015 ( 000s nine-litre cases)... 84 Malt Scotch in United Kingdom by quality, 2011 and 2015 % share... 49 Top five all-scotch owners in Brazil, 2011-2015, retail value (000 s US$, 11 and 15 % share)... 85 All-Scotch brands in Spain, % share 2011... 53 Blended Scotch in Brazil by quality, 2011 and 2015 % share... 86 All-Scotch brands in Spain, % share 2015... 53 All-Scotch brands in Mexico, % share 2011... 89 All-Scotch brands in Spain 2011-2015 ( 000s nine-litre cases)... 54 All-Scotch brands in Mexico, % share 2015... 89
List of tables & figures All-Scotch brands in Mexico 2011-2015 ( 000s nine-litre cases)... 90 All-Scotch brands in Australia, % share 2011... 132 Top five all-scotch owners in Mexico, 2011-2015, retail value (000 s US$, 11 and 15 % share)... 91 All-Scotch brands in Australia, % share 2015... 132 Blended Scotch in Brazil by quality, 2011 and 2015 % share... 92 All-Scotch brands in Australia 2011-2015 ( 000s nine-litre cases)... 133 All-Scotch brands in Canada, % share 2011... 94 Top five all-scotch owners in Australia 2011-2015, retail value (000 s US$, 11 and 15 % share)... 134 All-Scotch brands in Canada, % share 2015... 94 Blended Scotch in Australia by quality, 2011 and 2015 % share... 135 All-Scotch brands in Canada 2011-2015 ( 000s nine-litre cases)... 95 Malt Scotch in Taiwan by quality, 2011 and 2015 % share... 136 Top five all-scotch owners in Colombia 2011-2015, retail value (000 s US$, 11 and 15 % share).. 96 All-Scotch brands in Russia, % share 2011... 139 Blended Scotch in Colombia by quality, 2011 and 2015 % share... 97 All-Scotch brands in Russia, % share 2015... 139 All-Scotch brands in India, % share 2011... 102 All-Scotch brands in Russia 2011-2015 ( 000s nine-litre cases)... 140 All-Scotch brands in India, % share 2015... 102 Top five all-scotch owners in Russia 2011-2015, retail value (000 s US$, 11 and 15 % share)... 141 All-Scotch brands in India 2011-2015 ( 000s nine-litre cases)... 103 Blended Scotch in Russia by quality, 2011 and 2015 % share... 142 Top five all-scotch owners in India, 2011-2015, retail value (000 s US$, 11 and 15 % share)... 104 All-Scotch brands in South Africa, % share 2011... 144 Blended Scotch in India by quality, 2011 and 2015 % share... 105 All-Scotch brands in South Africa, % share 2015... 144 All-Scotch brands in Thailand, % share 2011... 108 All-Scotch brands in South Africa 2011-2015 ( 000s nine-litre cases)... 145 All-Scotch brands in Thailand, % share 2015... 108 Top five all-scotch owners in South Africa 2011-2015, retail value All-Scotch brands in Thailand 2011-2015 ( 000s nine-litre cases)... 109 (000 s US$, 11 and 15 % share)... 146 Top five all-scotch owners in Thailand, 2011-2015, retail value (000 s US$, 11 and 15 % share)... 110 Blended Scotch in South Africa by quality, 2011 and 2015 % share... 147 Blended Scotch in Thailand by quality, 2011 and 2015 % share... 111 All-Scotch brands in Travel Retail, % share 2011... 151 All-Scotch brands in Philippines, % share 2011... 114 All-Scotch brands in Travel Retail, % share 2015... 151 All-Scotch brands in Philippines, % share 2015... 114 All-Scotch brands in Travel Retail 2011-2015 ( 000s nine-litre cases)... 152 All-Scotch brands in Philippines 2011-2015 ( 000s nine-litre cases)... 115 Top five all-scotch owners in Travel Retail 2011-2015, retail value All-Scotch brands in China, % share 2011... 120 (000 s US$, 11 and 15 % share)... 153 All-Scotch brands in China, % share 2015... 120 Blended Scotch in Travel Retail by quality, 2011 and 2015 % share... 154 All-Scotch brands in China 2011-2015 ( 000s nine-litre cases)... 121 Malt Scotch in Travel Retail by quality, 2011 and 2015 % share... 154 All-Scotch brands in South Korea, % share 2011... 126 All-Scotch brands in South Korea, % share 2015... 126 All-Scotch brands in South Korea 2011-2015 ( 000s nine-litre cases)... 127 Top five all-scotch owners in South Korea, 2011-2015, retail value (000 s US$, 11 and 15 % share)... 128
Travel retail CAGR 11-15: 2.25% Diageo 44.21% Pernod Ricard 25.3% Edrington 7.33% Johnnie Walker Scotch 13-15: 9.03% World view dashboard Americas Africa & Middle East Europe CIS Asia Pacific MARKET GROWTH (CAGR) 1.02% CAGR 11-15 1.85% CAGR 11-15 -1.25% CAGR 11-15 2.43% CAGR 11-15 -1.56% CAGR 11-15 TOP OWNERS ( 15) Diageo 48.3% Pernod Ricard 17.24% Bacardi 10.65% Diageo 52.72% Pernod Ricard 10.29% Wm Grant s 8.35% Diageo 22.42% Pernod Ricard 19.72% Wm Grant s 9.83% Diageo 35.57% Bacardi 20.08% Pernod Ricard 9.17% Diageo 43.86% Pernod Ricard 26.73% Beam Suntory 5.19% FASTEST GROWING BRAND ( 13-15) Passport Scotch 52.47% Johnnie Walker Scotch 14.59% William Peel Scotch 8.35% Wm Lawson s Scotch 17.38% Teacher s Scotch 38.81% 1
Top 10 malt Scotch markets forecast, 2016-2021 01 02 03 04 05 06 07 08 09 10 United States Travel retail France United Kingdom Taiwan Germany Canada China Japan India Source: IWSR 13
Consumer drivers The Brexit effect: More than 90% of Scotch whisky is sold outside the UK, so the decision to leave the European Union has profound implications for the industry. Most larger operators, as well as the SWA, campaigned to remain. Free trade or WTO?: Given the mutual interest, a free trade deal between the UK and EU is likely to happen sooner rather than later, but trading under WTO lines would not be a disaster, since that s exactly what the US does with the EU now. Room at the top?: Competition can also come from beyond the whisky sphere, with the likes of vodka, gin, Tequila and rum moving into Scotch s traditional territory of discernment and status previously only inhabited by Cognac. Brexit benefits?: Since the leave vote, the SWA has moved on to highlight the potential benefits of leaving the EU, but only if the UK leaves the EU Customs Union, freeing it up to negotiate new trade deals in key markets. Currency gains: In the short term, the negative impact on sterling is clearly beneficial for an export-led industry like Scotch, making it more affordable in export markets around the world. It should also spur inbound tourism to the UK. Craft response: Scotch s response to this is linked to another buzzword: craft. Scotch remains a wellmade product with the notion of craft at its heart similar to Cognac, Armagnac and some Tequilas and rums but with far greater production capacity. Easing into Europe: While Scotch will not face new tariffs when shipped into the EU, other trade barriers could emerge, leading the SWA to lobby government to negotiate a deal that minimises cost and complexity for distillers. Rivals gaining ground: While it has been impacted by economic headwinds, Scotch is losing out to some extent and in some markets to rivals. Whiskies from Japan, the US and Ireland have gained market share while battling the same difficult trading conditions. Looking for improvement: Crucially, the SWA wants to see all EU rules transposed into UK law at least for a transitional period after Brexit and global trading arrangements that are better than those currently in place. Supply constraints: However, outside the US these categories are still comparatively small and supply-constrained. In the future, they will be a major competitive threat to Scotch. Demand still growing: Also, Scotch is not engaged in a zero sum game with its rivals; demand for international spirits continues to grow thanks to economic development, urbanisation and population growth potentially leaving room for everyone to grow. Blends issue: The travails of blended Scotch lie at the heart of Scotch s current problems. It is hugely disappointing to see it under-achieving in a market like the US, where the spirits sector has expanded and premiumised hugely in recent years. 18
Consumer key views Review Scotch is beginning to lose ground to its rivals, thanks to a number of factors, including generational trends and a failure to connect with the new generation of Millennial consumers. Insight Buchanan s is a great example of how we re activating against the Hispanic consumer. It s a strong brand with momentum, aiming to break the half million-case mark in the US this fiscal year. Deirdre Mahlan, president, Diageo North America While premiumisation continues to drive growth in many markets, mainstreamisation is becoming another key trend as consumers look for value for money amid difficult economic conditions. Future The shock decision by the UK to leave the EU could be a positive for Scotch thanks to a short-term boost to exports from the decline of sterling. But it will only work in the longer term if the UK can negotiate trade deals with key markets such as India. Strategy Companies need to simultaneously manage the boom in single malts ekeing out supply to satisfy demand while rebuilding the reputation of blends through the championing of the craft of the blender. I don t believe that macro-economics will improve significantly over the next few years, particularly in developed countries like France and Japan. These are two good examples of why mainstreamisation is here to stay. Jean-Noël Reynaud, CEO, Marie Brizard Spirits & Wine 21
Australia Australia is enjoying healthy economic development. According to the IMF, the country s economy is expected to expand by somewhere between 2.5% and 3% year on year until 2021. It is accepted that Australians are generally drinking less but better. The market is premiumising, although in truth this is also due to discounting at the higher end. While this sounds very optimistic, it must be noted that this is not necessarily translated into more money in the consumer s pocket. Nevertheless, consumer confidence is reported to have gently increased over the last couple of years. For their part, consumers are increasingly aware of brand stories and want to be seen drinking highequity products. This means that aspirational, craft and boutique brands and categories are performing well. The population is growing. Traditionally, expats from the UK and New Zealand have dominated immigrant numbers. However, new arrivals from China and the rest of Asia are growing, and this change in demographic profile is leading to gradual diversification of the market, and should benefit Scotch. Retailers are looking to tap into this trend. Conversely, price-sensitive consumers are still reaching for valuefor-money products. Promotional activity helped to boost Australian spirits consumption in 2015, as category volumes increased 1% on the year before. Across the entire spirits category, premium-and-above products are growing the most. Australian consumers have grown tired of powerful brands that is price-competitive brands with high market penetration, which came to define the Australian market of the last generation. As with other developed markets, younger consumers are increasingly looking for differentiation, some sense of originality or authenticity, and a brand story something which many of the mainstream Scotch whiskies are trying to come to terms with. 129
Australia The final major factor underpinning market developments is the increased cosmopolitanism of Australia. The changing face of the average Australian means that preferences are diversifying. Equally, the consumption occasion has become a lot more gender-neutral than previously. Overall, blended Scotch volumes declined 1.3% in 2015, a slight improvement on recent years. Premiumisation is a notable trend; the premium segment alone grew by more than 15% last year. Counteracting this, however, was a bigger drop in volumes in the standard segment. When it comes to liquor, Australia is traditionally seen as a dark spirits markets. This position shifted somewhat with the rise of vodka (and now gin). In parallel, so-called beige spirits, such as Canadian Club and spiced rum in other words, products that suited both men and women s palates emerged. In 2016 some distributors have noted a slow move back to dark spirits, even if gin and Tequila remain the hot categories over the short term. Mainstream brands suffer from their lack of appeal to both whisky aficionados and newcomers to the category, with the latter more likely to opt for more accessible styles such as Bourbon, Canadian and Irish whiskey, or even spiced rum. The retail sector is dominated by Woolworths and Coles, although alternative channels, such as online sales and hard discount, are growing. As international discounters emerge, purchasing is likely to become more intensively driven by price and could lead to some diversification of the wine market at the bottom end, as well as further development of private labels on the spirits side. This is particularly so as Scotch supply loosens. Price competition means there is less brand loyalty in blended Scotch than in other categories. Often the biggest volume gains come to those willing to invest the most in promotional activity; the leading brands are particularly strong in this regard. The premium segment is buoyant, though largely due to Johnnie Walker Black and Chivas Regal competing for market share. Aged blends seem to be the new battleground for the multinationals; pricing has played an important role in growing volumes. 130
Australia That aside, there does seem to be some consumer interest in premium-and-above blends, which has partly been driven by new product development. 25%. In terms of sheer volume gain, this was one of the strongest years that malt Scotch has enjoyed in Australia. More retailer focus on private and controlled labels at the bottom end of the category has increased the pressure on the already embattled mainstream segment. 2014 saw a particularly sharp rise in value blends, with volumes levelling off in 2015. Continued focus here will mean sustained pressure on margins. Malt Scotch ticks all the boxes in terms of quality and heritage cues that currently define the spirits category in Australia. Moreover, the category is reaching consumers that it traditionally has not, with younger drinkers increasingly looking to trade up to malt Scotch. Suppliers have been swift in their response to the trend, stoking further interest with rare and limited editions. While the premium segment s growth is an opportunity for blended Scotch, it is mostly driven by Diageo and Pernod Ricard, and to a large extent by aggressive promotional activity. Consumers after prestige products are more likely to look to malt Scotch, US whiskey and now Australian and Japanese whisky as well. As such, moderate decline is expected throughout the forecast period. The malt Scotch category is in very good shape. Last year the relaunch of Johnnie Walker Green Label, accompanied by various non-age-statement expressions, boosted overall volumes by more than The majority of volumes continue to come through national retail accounts. However, distribution gains in the on-trade are helping to spur category volume and value growth. As previously, malt Scotch is expected to continue to grow during the forecast period, though volume growth is likely to slow as the category approaches a certain size and, potentially, as high-quality rivals emerge. 131
0 a+ +0271810953 a+0+3458101351 All-Scotch brands in Australia, % share 2015 All-Scotch brands in Australia, % share 2011 Source: IWSR KEY Source: IWSR KEY JOHNNIE WALKER SCOTCH CHIVAS SCOTCH MCALLISTER SCOTCH GRANT S SCOTCH BALLANTINE S SCOTCH J & B SCOTCH DEWAR S SCOTCH TEACHER S SCOTCH 1495 SCOTCH 42.03% 7.92% 7.06% 8.12% 6.53% 1.10% 5.59% 1.65% 0.00% JOHNNIE WALKER SCOTCH CHIVAS SCOTCH MCALLISTER SCOTCH GRANT S SCOTCH BALLANTINE S SCOTCH J & B SCOTCH DEWAR S SCOTCH TEACHER S SCOTCH 1495 SCOTCH 38.90% 10.01% 7.59% 6.38% 3.84% 2.88% 2.74% 2.41% 2.12% 132
All-Scotch brands in Australia 2011-2015 ( 000s nine-litre cases) Source: IWSR Brand 2011 2012 2013 2014 2015 Johnnie Walker Scotch 714.50 631.70 654.05 618.40 640.95 Chivas Scotch 134.65 107.75 118.50 141.40 164.95 McAllister Scotch 120.00 135.00 130.00 130.00 125.00 Grant's Scotch 138.00 144.00 133.85 113.60 105.15 Ballantine's Scotch 111.00 73.80 60.50 58.25 63.30 J & B Scotch 18.70 17.50 50.00 43.75 47.50 Dewar's Scotch 95.00 88.00 85.00 65.00 45.20 Teacher's Scotch 28.00 28.00 39.00 37.00 39.75 31.50 35.00 1,629.75 1,647.50 1495 Scotch Total 1,700.00 1,570.00 1,621.50 133
Top five all-scotch owners in Australia 2011-2015, retail value (000 s US$, 11 and 15 % share) Source: IWSR Owner 2011 2012 2013 2014 2015 % share '11 % share '15 Diageo 317,354.87 281,713.45 318,644.66 311,593.53 338,886.15 48.12% 47.32% Pernod Ricard 128,142.79 98,980.28 109,740.34 125,825.76 139,893.54 19.43% 19.53% Wm Grant's 62,473.05 68,084.40 69,827.29 64,330.69 69,291.92 9.47% 9.67% Thai Beverage 35,178.12 39,993.61 36,702.25 37,442.59 38,461.97 5.33% 5.37% Beam Suntory 13,793.23 14,285.37 17,661.21 16,976.25 19,700.92 2.09% 2.75% Total 659,439.67 608,523.50 653,491.61 674,169.51 716,209.46 100.00% 100.00% Top five all-scotch owners in Australia, 2011-2015, retail value Source: IWSR 400,000.00 300,000.00 200,000.00 100,000.00-2011 2012 Diageo Pernod Ricard 2013 Wm Grant's 2014 Thai Beverage 2015 Beam Suntory 134
Blended Scotch in Australia by quality, 2011 and 2015 % share Source: IWSR Quality % share '11 % share '15 Standard 45.24% 59.45% Premium 16.67% 24.88% Value 16.67% 13.48% Super Premium 11.90% 1.60% Ultra Premium 9.52% 0.58% 135