One of the key happenings in the coming year on the blended Scotch whisky circuit will be the re-emergence of Cutty Sark on to the world stage. It is two years since Edrington acquired the brand from BB&R Spirits and it’s taken that long to put it through a very thorough MOT. 

“As of this month we will be driving the brand forward. Had we gone earlier its engine would have blown up – it would have failed its MOT,” says Edrington’s brand controller for Cutty Sark, Jason Craig. “Now we are way more confident and it’s all systems go.”

Edrington is keen to point out that there was no need for sweeping changes. It was just a question of rediscovering the brand’s roots and its DNA while giving it a dusting down and overall tidy up. Another factor the new Cutty Sark team had to consider was how the brand fitted into the Edrington portfolio, which boasts on the blended front The Famous Grouse and on the single malt front the redoubtable Macallan, as well as Highland Park.  

There was nothing for it. As historical archives were thin on the ground, the team needed a book of words, and to this end commissioned top specialists to write a book about Cutty Sark and its history. “This was the underpinning of the brand,” says Craig. “It brought home the pioneering spirit of Cutty, which, for starters, was blended by wine merchants so therefore paler than the existing brands on the market – in a sense it was more like a white wine to a rich dark red – and it took off.”

Prior to Edrington’s acquisition the Scotch whisky, with its iconic yellow label, was in year-on-year decline and part of the problem was that BB&R Spirits did not have the critical mass in terms of distribution so was forced to pile all the proverbial eggs into a handful of baskets, which one by one came awry. Of late in Europe this just happened to be Spain, Portugal and Greece – and in the 80s Japan and the US, markets which, of course, have been under siege over the years, and the subsequent downturns have done nothing for the brand. 

“It was a nightmare scenario which could not sustain the brand going forward,” says Craig.

So the Cutty act has been honed – its colour sharpened and its availability broadened courtesy of Edrington’s global distribution pact with Jim Beam, Maxxium. As a result there is a five-year rolling plan in position charting a 30%-40% growth – so clearly the team is in confident mood.

“While Grouse is a very premium and very traditional Scotch whisky, Cutty Sark is not – it has appeal with the younger, mid 20-year-olds – 65% men and 35% women,” says Craig. Along the way Craig had a Road to Damascus experience in Madrid when he witnessed a group of young people with a bottle of Cutty on the table, mixing and drinking it with obvious enjoyment. “This is what it was originally intended for – it’s lighter and sweeter and a much more accessible Scotch than most,” says Craig. “There was no need to change this – just to get it out there.”

Indeed, Edrington is “letting all markets have a go” along with traditional front-runners – Greece where long-term agent Karoulias still handles the brand following its own management buy-out from BB&R Spirits, and Spain, where the brand is now with Maxxium and not Varma. “It’s tough there but the negative trend for the whole market is beginning to slow.” And in the US it’s with Remy rather than Skyy Spirits – these old-time key stamping grounds will be as well as another 30-40 new markets around the world. “We are really ramping up the effort, and lighting small fires all over the place,” says Craig.  

Positive message

All in all there is a much more positive PR message coming out of the Cutty camp – it’s started to pick up awards on the tasting circuit and, come this autumn, major PR activity will focus on the Big Yellow Wave. “It’s Cutty’s 90th anniversary – so we’ve been rocking the boat since 1923,” says Craig.

In terms of brand positioning Cutty is slightly above mainstream and sees the Pernod Ricard-owned Chivas Brothers’ Ballantine’s as its nearest competitor. Of course, Ballantine’s has been up against it in Europe, particularly Spain, which is one of its main stamping grounds.

“Europe is the biggest challenge. This time next year France could be Ballantine’s number one market,” says international brand director Peter Moore. “They’re pretty neck and neck at the moment – but the rate of market drop in Spain was worse than expected.” 

Indeed Scotch as a whole is down some 10% in Spain and, while Ballantine’s “did better than that, and managed to gain a bit of share”, the going is clearly tougher than expected. 

Overall though, the Ballantine’s world is in good shape and, in spite of obvious pockets of difficulty, Chivas is “pretty optimistic”. 

“On the whole there is “quite positive news coming from the Americas, Asia and Africa”, says Moore. Additionally, the rate of development in eastern Europe has been “quite marked”. In particular the brand is doing well in Poland and Russia, Romania and Hungary.

In Latin America Ballantine’s has made good ground, albeit from a lower base, in Mexico, but the stars are Brazil and Chile – both markets evidently appreciate this “easy tasting whisky”.  

In the Far East the principle Ballantine’s fortress is South Korea, where it has built on its strengths with its key sponsorship of the golf championship, which is proving hugely successful. It has spawned the Ballantine’s Championship blend, which is now created by the winner of the tournament and, in addition, created a bespoke 41-year-old, as well as the Ballantine’s Championship Golf Pack, which comprises 17-year-old and 21-year-old, this has gone down particularly well in travel. 

“Our golfing footprint has broadened and we are seeing the benefits of long term thinking, particularly in Asia” says Moore. “The 17-year-old, and above is very strong in duty free throughout the region.”

That said, Korea as a market is still in the doldrums and it has not recovered since the economic difficulties of 2008/09. Indeed, over the ensuing years, with less disposable income, consumers are not going out to drink. In short, business entertaining has taken a hit and this has affected all whiskies “quite badly”.

However Ballantine’s is not that perturbed and is taking the long-term view as it is in China, although recent political changes have created a short-term instability. “Also the main business is with the 12-year-old so as yet it’s not as prestigious – but overall duty free as done well and our business is up there year on year,” says Moore. 

Number one market

Overall China has developed into Chivas Brothers number one market largely through the development of its 12-year-old blended Scotch whisky flagship Chivas Regal. Figures have yet to come through for the all important trading period for both Scotch and Cognac that is the Chinese Year – but the Chivas camp is in positive mode, and along with its 18-year-old and above is the leader in the super premium sector of the market.

“The jury’s out at the moment over China, there’s a growing up phase, and that with the new government is throwing up a few changes,” says Chivas international brand director James Slack. “Chivas has a great reputation when it comes to gifting.”

Given this it’s not surprising that the brand has such a high profile in the duty free world, which is underpinned by its international visibility. With annual case sales around the 1 million mark, duty free per se is really the brand’s number one market.

Outside this channel its China, the US, Mexico and France which top Chivas Regal’s export league and in terms of development it’s eastern Europe which “is building across the board”, and India. “Russia is showing strong growth,” says Slack. “It will not be long before it’s a top 10 market. As for India it’s an important battlefield – Chivas is growing by 20% year on year, aided and abetted by the massive acceleration of its middle class.”

Chivas Regal’s main rival is Diageo’s Johnnie Walker, which, with its core six-strong range, has powered ahead over recent years and now weighs in with an impressive annual case tally of 18.9 million cases in 2012 (DI Millionaires Club). This represented a5% growth on 2011 and, by all accounts, will be much improved on this year.

According to Diageo’s half-year results, Johnnie Walker delivered total net sales growth of 14% – that is up 6% in Europe, 38% in Africa, 12% in Latin America and a massive 27% in south east Asia. Clearly the Johnnie Walker Keep Walking campaign in Mexico and Brazil, Walk with Giants in Nigeria and the Step Up campaign for Johnnie Walker Red Label in South Africa underpinned growth in these respective regions.

Latin American success

“Clearly there are some downbeat parts of the world but everyone seems delighted with Latin America, Africa, Russia and the US,” says Dr Nick Morgan, head of whisky outreach for Diageo. 

In terms of Latin America two other brands have motored ahead – Buchanan’s and Old Parr. The latter, with its stamping grounds in Mexico, Colombia and Venezuela has done “exceptionally well” and is now on course to exceed the 1 million case mark. Over in Brazil, Diageo extended its category leadership and crucially gained market share. 

In west Latin America and the Caribbean net sales growth for the trio, Johnnie Walker, Old Parr and Buchanan’s were up 16%, 50% and 43% respectively. There was increased investment behind both Old Parr and Buchanan’s under the Life from A Different Perspective and Mark Your Difference campaigns.

But overall Johnnie Walker remains the Diageo star, and the secret behind its dynamic performance, apart from the support investment, is put down to the launch of more variants, in particular Johnnie Walker Double Black and Platinum. 

“Double Black has surpassed all expectations and not cannibalised on Black Label,” says Morgan. “We also have new releases in duty free, such as the Johnnie Walker Explorers Club, and these come in at very accessible price points.”

Interestingly, though, the single most important innovation of the year to date has been the judicious launch of the Johnnie Walker Red Label in 20cl bottles. “Red Label is the growth engine of the brand it attracts consumers in then they can trade up the Johnnie Walker ladder.”

In the faster growing markets of Asia, Diageo is upbeat and hardly surprising considering it “continued to deliver strong double-digit top line growth”, which was aided and abetted by the 28% net sales growth of super-premium Scotch. 

In south east Asia, Johnnie Walker posted 27% net sales growth and gained further share. This was driven by the successful Johnnie Walker Double Black and Johnnie Walker Platinum Label launches, price increases and the halo benefit from the Johnnie Walker Voyager marketing programme. 

In China, Reserve brands grew 59% as super-premium Scotch continued to gain share, driven by Johnnie Walker Blue and the innovations Johnnie Walker Gold Label Reserve and John Walker & Sons Odyssey.

In India Johnnie Walker Black Label and Red Label depletions grew 41% and 33% respectively, on the back of Formula 1 activations and through the High Ball signature serve programme. In Global Travel Asia, the Johnnie Walker super-premium portfolio increased net sales 41%, supported by the successful launch of the travel retail-exclusive Johnnie Walker Blue and innovations The Casks Edition and Explorer’s Club Collection.

“India is undoubtedly the biggest whisky market in the world and has the heritage of Scotch whisky brands in its DNA, whereas in China we have to build a Scotch whisky culture,” says Morgan. To this end the company has been investing heavily and by the end of last year completed its second Johnnie Walker House in Beijing. 

The first in Shanghai Diageo is considered to have played “a part in shaping the international spirits landscape in China with luxury Scotch”. In terms of luxury this is high-end stuff and all geared for the super, super-rich. The houses are dedicated solely to the enjoyment of luxury whisky and to this end boast some of the finest whiskies available for both sampling and purchase. The proof is in the pudding and sales of super-deluxe Johnnie Walker whisky have increased 64% year on year.  

Clearly the chief protagonists in the Scotch whisky firmament are in good heart, buoyed by the ongoing growth in Scotch whisky’s popularity around the world, which is put down to its general appeal to the younger consumer. There are a few problems on the horizon and there is continued pressure in eurozone countries, notably Spain, Portugal and Greece.  

However, growth in the US, Venezuela and Germany in the first six months ending October 2012 helped offset any declines and the value of Scotch whisky exports remained at £1.8bn. Exports to the US jumped by 13% to £303m, while exports to Venezuela spiralled by 31% to £42m. Interestingly too, exports to India over the same period grew by 38% to £28m – held back by the heavyweight 150% tariff on all important spirits. Imagine the figures if India was on a level playing ground.