Love in a cold climate

North America has fallen for Canadian whisky. Hamish Smith charts the courtship rituals of the major players with eyes on the category

SOMEHOW a whisky speaks of the country from which it came. Scotch can be rugged, hard to get to know, but ultimately deep in personality. Irish whiskey, perhaps like the Irish, is approachable and mostly light-hearted. Japanese is complex and bourbon is big and youthfully exuberant. Canadian whisky’s mildness is surely no accident either. Certainly its mother country’s propensity for understatement goes some way to explaining the spirit’s near anonymity outside of North America.

“As a category and a country we have been apologetic about our whisky instead of saying we really make good whisky,” says Laura Bruce, senior brand manager Canadian Whisky at Pernod Ricard’s Wiser’s. 

Davin de Kergommeaux, author of Canadian Whisky: the Portable Expert, agrees. “Canadians by their nature do not spend a lot of time patting themselves on the back. We know we have great whisky. We just do not talk about it. I hope that will change.”

Likely it will. The category’s owners are no shrinking violets – they are, in fact, the spirits industry’s über-groups. There’s Diageo with category leader Crown Royal and Seagrams VO, Pernod Ricard with Wiser’s, Beam with Canadian Club, Brown-Forman with Canadian Mist and Collingwood. William Grant has Gibson’s Finest and Constellation owns volume brand Black Velvet. Yet, for all this international wherewithal this 20 million 9-litre case category is very much a regional force.

But for the first time in a long while the weather vane has stirred, catching on the winds of change. Gruppo Campari’s Ä125m purchase of Forty Creek Distillery last month was not a surprise, given the group’s brown-spirit strategy, and underlined Canadian whisky’s unexplored potential. “It’s been one of if not the fastest-growing spirits companies in Canada,” Gruppo Campari CEO Bob Kunze-Concewitz says of Forty Creek. “Its major business – roughly 62% – is Forty Creek whisky, a high-end, handcrafted brand, which for six years in a row was the fastest-growing Canadian whisky in Canada. This deal is accretive from year one. It’s a very profitable brand with high margins.”

There are two parts to the Campari plan. Part one is the US, where brown spirits are hotter than the stills that produce them, and whisky has gone nuclear. “Forty Creek is extremely well positioned in the high-potential US market,” says Kunze-Concewitz. “Currently the Canadian business is four times bigger than the US business on this brand but the industry norm is the other way round – the US being eight times bigger than Canada. So in the mid to long-term there is significant up-size potential.”

According to Euromonitor International, more than three-quarters of the Canadian whisky action happens south of the Canadian border in the US, about 15% to its north, while the rest of the world makes do with a measly 7% of volume. 

Surprisingly, Canadian is so big in the US, it rivals bourbon in size. “Until 2010, Canadian whisky was the best-selling whisky style in North America and had been since 1865,” says Kergommeaux. “It’s about 16.5 million 9-litre cases – it’s huge – 8% of the overall US spirits market, adds Kunze-Concewitz.  Part two of Campari’s plan is about Canada. “By combining our existing portfolio in Canada as well as Forty Creek we’re going to be able to create our own distribution platform, our own in-market company, which is slated to become operational at the beginning of 2015,” says Kunze-Concewitz. 

“This continues what we have done in Argentina, Australia and Russia, which has significantly contributed to strengthening our brand-building activity and our growth over time.” 

So while Diageo is on a path to decentralising (just last month Diageo Canada enlisted distributor Wirtz Beverage Group to broker its brands), Campari is looking to take things in-house. 

Either way, Canada is a strong brown spirits market, with Canadian whisky representing about 3.5m cases, some 20% of total spirits consumption. 

But it isn’t all good news. “Twenty-five years ago it was 35% of spirits,” says Bruce, whose employer Wiser’s is the category’s biggest brand. “The sector has declined because the likes of vodka has increased market share. The category is relatively flat at -1%, which is good news as it had been in [more serious] decline.”  

Climbing the premium ladder

According to Bruce there are four segments in Canadian whisky: Economy CAN$23-CAN$25 (35% of the category). Premium $25-3$0 (47%), the very broad Super premium, $30-$100 (10%) and flavoured whisky (7%).  

Premiumisation has yet to take off in the way it has with Japanese, bourbon and Irish. “Historically a large percentage of economy tends to be consumed by older people. [In terms of growth] the economy segment has held back the category,” says Bruce.

Canadian is traditionally drunk with a mixer – cola, lemon and lime soda, juice or even ginger ale – but there are signs of a more refined future. “We are seeing the growth from super-premium,” says Bruce. “We will see the economy brands slowly die off. Wiser’s is not recruiting people into economy.” 

Probably Canadian’s total sales volumes will remain static until the category’s rookie segments grow up,
such is the effect of a waning economy sector.

The real news, though, is that Canadian whisky value sales are up 17.5% in the US, according to Diageo. With 5.5 million cases, the group’s Crown Royal represents 60% of the entire Canadian whisky market in the US and, with its entry level Deluxe starting at $25 a bottle, this is a whisky that knows a thing or two about the super-premium proposition.   

Crown Royal is aimed at LDA-34 and is becoming more and more multicultural in its appeal, according to Yvonne Briese, VP of marketing, whiskey, Diageo USA. “Crown Royal is unlike the rest of the category. It is a nuanced brand. It has very strong roots in the southern part of the US. Texas is its largest state – they see Crown Royal as their whisky – Louisiana is a deep-rooted Crown Royal market, Mississippi too. But also in other states with large populations such as California and New York.” 

Cocktails

Cocktails are also a driving force in North America. “Cocktail culture has played an important role in the growth of whisky culture,” says Briese. “Many of the 1920s classic cocktails were made out of whisky and many were made from Canadian whisky. Rye whisky was very hot and the core of many classic cocktails. Old Fashioneds are everywhere right now.”

Pedro Berrueco, senior brand manager of Brown-Forman’s Canadian Mist and Collingwood agrees: “The rise of mixology is an important factor in the category’s growth as bartenders continue building cocktail programmes using a greater variety of spirits. 

“Consumers are seeing a variety of expressions of Canadian whisky at higher price points, just as they are with bourbon and Scotch, and these premium expressions are experiencing success. There are increasing numbers of handcrafted, smaller batch Canadian whiskies, and Collingwood fits into this segment of the category.”

Collingwood may be handcrafted, but it is not ‘craft’ in the microdistilling sense. Unlike in the US, where a garage just doesn’t seem complete without a still, Canada has punitive start-up costs that have stunted the craft movement. 

Here’s Kergommeaux to explain: “Distillers have to pay the taxes when they make their spirits. Large companies can afford the CAN$1m tax deposit [required]. It’s an enormous expense. It’s cold here so it could be 10 years before they can sell their whisky. Many start out trying to sell whisky, then sell vodka.”

Flavoured

Flavoured spirits is an American fetish but just over the border, Canada is exposed to the trend. “Flavoured brands have taken off in huge way. It has exploded in the US and Canada tends to follow,” says Wiser’s Bruce. 

Among the flavoured fold is Wiser’s Spiced, Crown Royal Maple, Black Velvet Toasted Caramel and Cinnamon Rush. Canadian Club has Canadian Club Dock No 57 – a spiced that also comes in Blackberry form – and Gibson’s Finest has Grey Cup, which includes ‘a hint of maple’. 

Essentially if you are in the Canadian whisky game, you are probably doing a flavour. “The new Black Velvet flavour extensions appeal to younger adult consumers and have resulted in an increased volume of the overall brand family,” says Martin van’t Zelfde, regional director of Europe for Black Velvet.

Unlike Scotch, Canadian whisky producers are allowed to add flavours to their whiskies. Tristan Stephenson takes a break from writing his second book, The Curious Bartender: An Odyssey of Whisky, to give us his take on the category’s pragmatism. 

“Much of Canadian whisky’s success can be put down to its quick reaction to changing tastes and demands. Producers’ ability to put these changes into effect can, in turn, be attributed to the relatively broad legal requirements of Canadian whisky – it can be distilled to virtually any strength, flavouring can be added
to the tune of 9.09%, and ‘rye’ rarely means 100% rye.

Spreading the word

Though corn is the dominant grain in Canadian whisky, rye is historically part of the blend. As we know, rye whisky is hot property in the cocktail capitals of the world, so could now be the time to expand to Europe and beyond? Let’s ask London bartender and consultant, John Lister. 

“When I was at Dach & Sons I wanted to get into Canadian whisky, but there isn’t much shipped over so I haven’t tried many.” So is there a market, in London at least? “It depends on the mash bill. If there’s a whiff of rye, then game on.”

For those schooled in Scotch, it might surprise buyers and consumers that there are only nine major distilleries in Canada – and many more brands. 

At the Hiram Walker distillery – which is subject to a CAN$9m expansion – Pernod Ricard’s Wiser’s is produced alongside William Grant’s Gibson’s and Beam’s Canadian Club. Kergommeaux explains how brand-home sharing works. “They may share a distillery but it’s deadly competitive. They have different blending practices, wood regimes and separate marketing people.”

Could this be Canadian whisky’s Achilles heel? Kergommeaux says: “We have come to revere what marketing wants us to revere. Just because Canadian whisky brands operate in a contiguous space doesn’t mean they can’t create their own individual whisky. It doesn’t match with the Scotch story but that’s a question of marketing.”

It’s true that Canadian whisky is not short on stories to pull on. Take Crown Royal, which was created for King George VI, then passed down to the people – “Made for a king” goes the slogan. In terms of production narrative, the emphasis is on the art of blending, not distilling. 

“Most of Canadian whisky is blended. We ferment, distil and age grain whiskies separately. The master blender then brings it all together,” says Wiser’s Bruce. 

“The big difference in doing it that way is that the rye is more spicy and flavourful.  In the US they put them in a mash together. They make all their blending decisions at the beginning of the process, whereas we make them at the end.”

Canadian whisky will want to go its own way in the world, but other categories can provide hope of
global transition, if not the direction. “There is increased interest in whisky, such as Japanese and Irish – I would expect Canadian to follow over the
mid-to-long term,” says Kunze-Concewitz.

With the US their stronghold, international expansion may not be priority for most producers. But should Canadian whisky really want to make some noise beyond its North American borders, it is starting to develop the products and identity to make buyers listen. With the spirits world’s elite whisky groups conducting its future, one day this category could really sing.