While malt whisky only accounts for a small percentage of overall whisky volumes, it is an extremely significant growth area and therefore a marketing priority for major spirits producers, according to a recent report published by just-drinks. Chris Brook-Carter reports.

The attention malt whisky receives from major spirits groups underlines how important the sector has become to the whisky business, not only because of its premium nature and marketability but also because of the impressive growth the category has been showing. According to the latest research produced by just-drinks.com, the global market for malt whisk(e)y in 2003 reached an estimated 18.15m litres of pure alcohol (LPA) and moreover the sector is set for further dynamic growth.

In a newly released report, entitled the Global Market Review of Malt Whisky 2004, just-drinks found that growth in exports, particularly to Asia, was helping to fuel a boom in malt whisky sales, although the category still makes up only a small percentage of the overall whisk(e)y market.

Exports of Scotch bottled malts to countries outside the UK accounted for 76.5% of sales in 2003, sales to the domestic UK market took 14.9% and the balance of 8.6% came from the export of bottled single malts from countries other than the UK.

In value terms, the total global malt whisky market in 2003 was worth an estimated US$703.3m. Exports of bottled Scotch single malts to countries outside the UK accounted for 78% of global sales. The UK market accounted for 15.2%, while the remainder came from malt exports from countries other than the UK.

Since exports of bottled Scotch malt whisky account for the lion's share of total global exports, it is reasonable to use them as an indicator of the global demand for 'malts'. On this basis, exports of Scotch single malts from the UK rose by 7.4% in volume terms between 2000 and 2003 to 13.88m LPA. And encouragingly the value of exports rose faster over this period, by 30.6% to US$548.7m.

Within the dynamic global demand for single malts, there are considerable regional variations. The European Union is still the major market for Scotch single malts. It accounted for 53.4% of total exports in 2003 by volume. However this represents a 13.6% fall in market share compared with its even greater share of exports in 2000 of 67% of total exports.

Exports to North America have been rising in recent years so that by 2003 the region accounted for 25.3% of total exports by volume. This was 4.5% higher than in 2000. However the fastest growth over the period in market share terms occurred in Asia. The region accounted for 13.5% of total exports in 2003, a rise of 8.9% in volume on its share in 2000.

In the rest of the world, demand as measured by export volume appears to have been steady. This region accounted for 7.8% of total exports in 2003, which was a marginal gain of 0.2% over 2000.

The industry experts interviewed by just-drinks for the report were in agreement in expecting demand to continue to grow globally. The rate of growth in the mature markets of Europe is likely to be slower than in the emerging markets of Southern Europe and Asia.

India and China are seen as offering greatest potential over the next few years. The growth in demand is expected to be driven by companies continuing to invest heavily in their key brands and in innovative new brand and repackaging launches. The report also predicts that a growing number of young consumers will be attracted to malt whisky.

These trends are well summarised by Allied Domecq, who told just-drinks: "According to IWSR, malt whisky globally, has grown in domestic markets by +5.7% CAGR between 1998 and 2003. The Laphroaig CAGR is +14.6% over the same period. Over this period, growth occurred in both mature regions (Europe +4.3%, US +5.4%) and emerging, (Asia +33%)."

Growth in most mature markets is forecast to continue, driven by increased investment by key brands and innovation, including the re-positioning of some brands to attract higher numbers of younger consumers

Meanwhile, continued substantial percentage growth is expected in Asia in particular, driven by increasing knowledge and awareness of malt whisky and investment by brand leaders. Steady growth will be seen in global duty free alongside the domestic markets.

Brands that offer well-defined propositions and tastes and a clear emotional appeal, will maintain their advantage in mature markets in particular (evidenced by Laphroaig's performance historically). In emerging markets, higher levels of spend will be required to establish brand leadership in the category, the report says.

Click here for details of the full reportThe independent Scotch group, Edrington, said: "We do not perceive any clear threats to this continued growth. In fact we think there will be continued strong growth, particularly in the premium category that we operate in. It will be slower in more mature European markets (1% to 5% per annum) compared to the stronger double digit growth in emerging European and Asian markets."

Taking into account the views of leading companies from the sector, just-drinks.com forecasts that by 2010 the value of the global market for malt whisky will rise by over 70% to around US$1.2 billion.

And just-drinks further forecasts that exports of Scotch malt whisky will increase by 80.4% in value between 2003 and 2010 to US$990m. In volume terms, it forecasts a 51.3% increase to 21m LPA over the same period.

Though just-drinks foresees a steady 16% growth in Scotch malt whisky volume exports to EU markets to 8.6m LPA by 2010, once again it points out that the main growth regions over the period will be North America and Asia. Indeed, North America is expected to see exports rise by 86.3% to 6.55m LPA and exports to Asia will more than double (+132.7%) to 4.35m LPA.