Ian Buxton

Comment - Spirits - Taiwan: The Future for Whiskey?

By | 13 March 2012

There’s a large and very prominently displayed sign at the entrance of Kavalan’s visitor centre in their distillery at Yi-Lan, Taiwan. “The New Homeland of Whisky”, it reads. Now, it would be easy to dismiss that as marketing hyperbole or simple self-aggrandisement, were it not that around 1m people a year see the sign.

That’s about as many visits as all the distillers in Scotland put together – and many of their visitors will have seen more than one distillery. And, it ignores the fierce national pride that - along with a multi-million dollar investment - researched, designed, built and began making whisky here as recently as 2006. I concluded that the sign was rather more than a slogan. It seemed to me that this was a serious declaration of intent. But, should it be taken seriously?

Whisky seemed generally in good heart in the bars, clubs and off-licences of Taipei – lots of Macallan, Dalmore and Glenfiddich in view, with brands created for Taiwan such as Spey also very evident. And, plenty was being drunk and local bar and drinks people appeared buoyant and confident at the Kavalan Masters Dialogue event. Around 350 delegates attended and five local TV channels provided news coverage. Interest in whisky in Taiwan continues unabated.

Paradoxically, there seemed less evidence of Kavalan in the accounts we visited. So, one might conclude that all’s well in one of Scotland’s most lucrative markets. And yet…

The Kavalan operation has only been running effectively for around five years. In that time, they’ve collected an enviable collection of awards for their trophy cabinet; released seven different expressions ,and fine-tuned distilling operations to cope with local maturation conditions. The two pairs of stills (from Scotland, of course) are now running at about 60% of capacity, with stocks being built up for a serious assault on China. Many of their visitors fly in from China to see the distillery so, quietly and slowly, brand awareness is being developed in a critical market.

As and when the brand launches fully there I expect it to become a serious mid-market challenger. The distillery is capable of rapid and very considerable expansion that would make it a significant volume operation, though not yet on the scale of the largest single malt plants in Scotland.

And, lingering in the giant five-storey warehouse are casks of what they believe will be their best release yet. Experiments to slow the rate of maturation and thus provide an older, and more premium expression are well advanced, and discussions on an EU market entry are underway.

What also strikes the visitor is the potential scale of the operation. The distillery is part of a substantial site on the plains at Yi-Lan, with many acres of company-owned ground at its disposal for expansion. A steep range of heavily-wooded hills and mountains lie just behind the distillery and their lush, green slopes suggest that water shortages are unlikely to represent a future problem. The parent group is well-financed and, as a family-owned company, capable of taking the long-term decisions essential for success in the whisky business.

Less than 150 years ago, the Irish distilling industry had the world at its feet. Yet, within 40 years, it was in near-terminal decline and it has taken around a hundred years for Irish whiskey to stage any kind of a recovery. The factors behind its catastrophic decline were many and varied, but central to the disappearance of Irish whiskey was a belief in the superiority of their pot still whiskies over new-fangled blending, an unwillingness to embrace new technology and a consequent inability to innovate in response to changing consumer needs.

It is not impossible to discern many of the same factors in Scotland’s restrictive whisky regulations, adopted at the behest of an industry which appears to believe that it knows best.

Other whisky producers have not imposed such onerous restrictions upon themselves, hence the freedom to experiment with single malt whisky produced in a continuous still (Nikka Whisky’s Coffey Malt), flavourings (Red Stag from Jim Beam and Jack Daniel’s Tennessee Honey amongst others) or cask management (Maker’s Mark 46). 

Are all of these great whisky? Well, not to my taste, but that’s purely an opinion. Will all of these innovations flourish and prosper? Probably not, but at least the market can decide. And these are not trivial, insignificant brands from obscure producers courting sensation to make their mark. Why should it be that what is considered right for Nikka, Jack Daniel’s, Jim Beam and Maker’s Mark be so very inappropriate for, say, Johnnie Walker or Dewar’s (to pick two examples completely at random)?

Kavalan may or may not turn out to be whisky’s new homeland but – in the week when product innovation got a lot closer to Scotland’s shores with the launch of Bushmills Irish Honey from Diageo – it may just be timely to consider whether a slavish adherence to ever-tighter regulations is really in Scotch’s long-term interest.

Sectors: Spirits

Companies: Macallan, Glenfiddich, Johnnie Walker, Diageo

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