As sales of blended Scotch whisky decline, companies are looking to other product areas such as blended malts and Scotch whisky-based liqueurs for growth. Parita Chitakasem of market analyst, Euromonitor International, takes a look at some of the recent brand activity.

Areas of marked growth and dynamism within Scotch have been few and far between, but amongst those going from strength to strength, the rise of single malts has remained the most significant impetus for any growth for several years. Volumes in 2004 are expected to increase by a further 5% to 694,000 cases, with demand particularly buoyant during the gift-giving seasons such as Christmas and Father's Day.

However, aside from favourable trends in single malts, there are also other pockets of growth which manufacturers have been increasingly looking to exploit which could help generate growth within the mature Scotch market.

Although they have been around for many years, vatted malts, also known as blended malt Scotch or pure malts, have experienced a renewed focus from some major manufacturers over the past six months, as producers seek to capitalise on increased consumer awareness in malt. Sales of vatted malts have already established a niche consumer base in other major Scotch markets such as France, the US, Italy and Spain.

In France, by far the most developed market for vatted malt, Ballantine's Pure Malt from Allied Domecq, Clan Campbell Pure Malt from Pernod Ricard and Label 5 Pure Malt from La Martiniquaise, remain amongst the most significant brands. Of these, Ballantine's Pure Malt achieved the best performance in 2003, increasing its niche position by 30% on the previous year, to record sales of almost 40,000 cases.

Sales are also picking up in the US, the number two Scotch market at world level in volume terms behind France, with distillers such as Lombards having successfully created a niche consumer base. In June 2004, Famous Grouse Malt also entered the US, initially in three states, and from September onwards, through a nationwide launch.

Although not yet widely distributed through major retailers, vatted malt brands which currently hold a niche share of UK Scotch include, Bennachie by United Brands, as well as Gordon & McPhail's two brands, Pride of Strathspey and Pride of Islay.

Edrington Group, currently ranked as number two Scotch maker in the UK behind Diageo, has already indicated an interest in vatted malts with sales of its Famous Grouse Malt brand, whose potential growth is expected to complement sales of the original Famous Grouse blended Scotch. Furthermore, following its somewhat disastrous affair with Cardhu Pure Malt, Diageo has now placed its hopes in the global relaunch of Johnnie Walker Pure Malt, having renamed it Johnnie Walker Green Label in an attempt to capitalise on the development of vatted malts in both the UK and abroad.

Another trend, which has led to growth in smaller, independently-owned Scotch distilleries, has been a rising interest in niche Scotch brands. As a spokesperson at the Scotch Whisky Association noted, "older distilleries which had been mothballed for a number of years are being brought out again, due to higher consumer interest in niche malts in the international market".

Interest in smaller brands has been spurred by their localised nature, along with their strong history and background - this gives them the individual "story" and character which is increasingly appealing to consumers. According to Caroline Whitfield, CEO and founder of Blackwood Distillers Ltd, "these malts offer a sense of place, and subregion, rather than the generic sense of Scotland".

Small-scale malt Scotch brands, Bunnahabhain, Highland Park, Lagavulin, Oban, Talisker and Ardbeg, which in the past had mostly been used in blended Scotch, are expected to enjoy increased demand for their own bottled single malt Scotch - although admittedly, the main impetus for sales growth is more likely to be from abroad, rather than the UK.

Although not strictly Scotch whisky, the launch of new whisky-based liqueurs in the past few months has also been a marketing focus, with a plethora of such brands coming onto the scene to compete for a share of a potentially expanding consumer base. Brands widely appearing through the off-trade include Famous Grouse liqueur, Glenfiddich liqueur and Glayva, all seeking to capitalise on the current boom in liqueurs.

Furthermore, with liqueur volumes having increased by a solid 9% during 2003, this is an area that Scotch companies will do well to tap into. Generally targeting consumers in the 35-45 consumer group, such brands are expected to attract consumers who prefer a more muted taste of whisky. Previously, the only well established Scotch whisky-based liqueur was the well known and successful brand, Drambuie.

With players pinning their hopes on other areas such as vatted malts and liqueur launches, the question of how much growth potential exists for standard blended Scotch whisky brands in mature markets like the UK remains to be seen. Statistics from Euromonitor International highlight the problem for blended brands. Even though Scotch whisky is still the UK's favourite spirit, commanding over a quarter of the country's total spirits volumes, with sales of over 8m cases in 2004, blended Scotch sales fell by 18% in volume terms between 1997 and 2004.

But the Scotch Whisky Association remains optimistic, with a spokesman insisting that there remain "opportunities for all in the UK Scotch market". However, with Scotch exports growing faster than sales on the domestic front, and with several key regions, including Asia Pacific and Eastern Europe earmarked for dramatic growth in the next few years, blended Scotch brands will find most of their opportunities abroad, rather than at home.