Distillers put trust in premium brands

There have never been so many malt whisky products on the market and this week there will be six more.

For the first time in the UK, William Grant & Sons is introducing three additions to the Glenfiddich range, the biggest selling malt whisky brand in the world. Also this week, a competitor, Glenmorangie, is launching three products of its own. This follows a year in which Campbell Distillers, producers of Aberlour, launched seven new brand extensions around the world.

The activity comes in the run-up to Christmas, as whisky marketers worry whether this year will see the savage price-cutting on mainstream brands that has characterised previous years.

In broader terms, the whisky producers are facing pressure as key markets in the Far East spin into recession and sales flatten out in the US and European markets as young consumers choose white spirits over brown.

There has been a massive proliferation of new products and brand extensions within the malt whisky sector as marketers try to squeeze a drop of comfort from the sector. Industry predictions suggest the number of malt products has swelled by up to 15 per cent in the past 18 months.

Although malt whiskies account for only about five per cent of total worldwide whisky consumption – nearly 3.7 million cases – their sales are growing at a rate of four per cent a year, according to figures from research company Impact. By comparison, blended whisky is close to static.

Malt whisky is no longer the preserve of cardiganed grandfathers. These days it has universal appeal.

It makes sense that the marketers should look for growth from this premium sector. But many are wondering whether saturation is near.

Nicholas Morgan is marketing director of premium malt whiskies for Diageo-owned United Distillers & Vintners, the biggest spirits company in the world. The range which he oversees has increased from six to over 40 products in the past ten years. He comments: “I think the market has to reach saturation – probably within quite a short while.”

Patrick Tully, marketing manager of William Grant & Sons’ Glenfiddich brand, agrees: “Our view is that there is going to be some kind of fall-out and it will be the better-known and well-established brands that survive. There is a limited amount of shelf space you can give a category. Supermarkets are already pulling back on their range.”

Some observers predict that malt whiskies can grab a maximum 12-13 per cent share in the UK whisky market and a 15-16 per cent share of the US market. They already have about a nine per cent share in the UK and a 12 per cent share in the US. Couple this with the potential loss of European duty free within the next few years, which accounts for 500,000 cases of all malt whisky sold, and the question has to be asked – how can malts continue to grow?

William Grant & Sons will be relying on its new range. Glenfiddich has been growing at a rate of two per cent internationally. The new launch is designed to harness the two areas in which the current market is growing fastest.

These are: the premium part of the market, where products sell for between 20 and 29; and what is termed the “esoteric” market, where enthusiasts like to discover obscure vintages and where prices can go as high as 4,000. It is activity in this part of the market which seems to have driven much of the recent product proliferation.

The new Glenfiddich range includes a 15-year-old speciality malt, an 18-year-old ancient reserve (both of which will sell in the premium sector and have an esoteric appeal) and a malt whisky liqueur aimed at women. Tully says research has identified a large number of people drinking Glenfiddich who might drink more expensive and unusual whiskies but are deterred by the cost of buying an unknown name. The new products are designed to allow those people to drink across a repertoire of whiskies, reassured by the Glenfiddich brand.

“We believe this will add value to the total category, if we can encourage people to move up from a 22 bottle to a 39 one,” says First Drinks Brands group product manager Debbie Olive.

Clearly, William Grant sees future growth in the premium sector, and it identifies multiple retailers as a focus. Tully believes the glut of products now on the market will result in major retailers restricting their range to the main brands like Glenfiddich. The esoteric market, he predicts, will become confined to specialist shops, burgeoning Internet sales and mail order. This sort of selling is not cost effective for the big brands with lower premiums.

Patrick O’Driscoll, international marketing director for Campbell Distillers, shares this view. He has already launched 15 and 18 year old versions of Aberlour in the US. But he predicts another area of growth particularly for the UK, is the on-trade.

“In the on-trade we will continue to see the expansion of malt. There will be more bars that specialise in malt whiskies. We are starting to see it in the US, France and Japan,” he says.

UDV’s Nicholas Morgan comments: “It’s astonishing ( that recent growth) is not reflected in the on-trade. Over the next few years we will see (whisky bars) develop.”

The prevailing concern about malts is that their recent success is a fad. The next couple of years may be a test of their endurance, and this Christmas will show whether whisky marketers really have found the magic circle of keeping prices high, avoiding the discounting of mainstream brands and persuading consumers to pay a hefty premium for malt whisky.

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