The Battle of Flavoured Scotch

The flags of war are unfurled and hoisted, and the powerhouses of the spirits industry have readied their infantry. The battle of Flavoured Scotch can now begin.

The first shot came from Bacardi with its Dewar’s Highlander Honey release last year, but since we have seen Pernod Ricard flutter its flag in retaliation. After Ballantine’s Brasil it was finally time for Diageo to enter the fray with the much-mooted J&B Urban Honey – albeit starting its march from Spain. This represents something of a strategy u-turn for Diageo - it was only last year it told just-drinks it had no plans for flavoured Scotch.

But it was inevitable. Big groups such as Diageo and Pernod Ricard are often the architects of trends but they can be coerced by them too. With the American fetish for flavoured spirits feverishly spreading from vodka to bourbon, Canadian and Irish whiskey, Scotch can no longer be ring-fenced for special treatment. With market share and sales at stake, in the long term shareholders just won't stand for neutrality.

Diageo and Pernod may be innovators but when it comes to Scotch, they are traditionalists at heart. With that in mind – and with the SWA’s breath on their napes – it is not surprising they have moved tentatively. When the time came, they sent their mainstream brands, Ballantine’s and J&B Rare over the top first. Johnnie Walker, Chivas Regal and Royal Salute are too important to be risked in this experiment.

But that implies folly – in all probability these products will sell and sell well. North American whisk(e)y is the fastest growing category in the US – and the driver segment has been flavoured. Surely it is just a matter of time before J&B Urban Honey crosses the Atlantic. 

Brand value is another matter. Can you be a venerable, authentic Scotch brand and go down the sweetened spirit drink route too? It seems a challenging balancing act. Though, Jim Beam and Jack Daniel’s might argue otherwise.

Probably something had to be done with Ballantine’s (-4% in net sales for H1 2013/2014) and J&B Rare (-9% net sales for H1 2013/2014). In Spain, where they have long dominated the whisky market, they are now in decline. Young consumers will one day have to replace old, but are flavours a short-term fix – an irresistible honey trap of sales? Ballantine’s Brasil may too find that when it comes to its reputation in the long term, lime can be just as sticky.