Analysis - Premium Scotch whisky on the rocks?

Recent figures from drinks heavyweights Pernod Ricard and Diageo suggest that premium Scotch whisky sales are suffering in the economic dowturn.

Pernod Ricard's better-than-expected first quarter sales figures last week lifted spirits in the industry, apart from, perhaps, in Scotland.

Flagship premium Scotch whisky brands Chivas Regal and Ballantine's reported sales falls of 7% and 15% respectively for the three-month period to the end of September. Volume sales fell by 17% and 13%.

Granted, half of Chivas' 8% volume decline in Asia was caused by a lack of deliveries to Japan, where the brand has moved from a distribution deal with Kirin Holdings to a Pernod in-house operation. But, the figures still make difficult reading.

Pernod rival Diageo did not give specifics on its 6% group sales fall for the first quarter. However, for Diageo's most recent full-year, to the end of June, like-for-like sales of premium Scotch brand Johnnie Walker slipped 6% in value and 11% in volume, compared to a year earlier.

While decline is not as stark as in Champagne, and does not appear to be entrenched, premium Scotch looks to be having a relatively tough time of it in the downturn.

Asia, driven by China, was the only sales growth region for Pernod Ricard in the first quarter, yet Scotch sales struggled even here.

"In China, the trend on Cognac is better than on Scotch," said Pernod's managing director for finance, Gilles Bogaert in the company's results call last week. Chivas Regal, he said, reported growth in the country, but this was largely at the expense of Ballantine's.

Some in the Scotch industry argue there is not a blanket trend on whisky sales in the downturn, however.

"There is disparity in the industry, between the big brands and smaller ones," according to Robert Hicks, who has worked in the Scotch industry for 40 years and is currently brand ambassador for Teacher's blended Scotch.

Fortune Brands, which owns both Teacher's and Laphroaig via its Beam Global Spirits & Wine division, last week reported mixed sales for the brands, with growth in emerging markets balancing out "soft volumes" in the UK.

From Scotch Whisky Association (SWA) figures, it is clear that Scotch is having a more turbulent time than it has done for several years. Scotch whisky exports fell by 5% in volume in 2008.

Although exports for the year rose by 8% in value to a record GBP3bn, they fell by 11% in value in the US, a key market. One senior industry figure last week told just-drinks that Scotch figures in Spain, another key market, have been "eyewatering" this year.  

It is expected that 2009 figures will reflect more challenging conditions, according to the SWA. From what we know so far, this looks to be the case.