Blended Scotch whisky producers are banking on emerging markets to provide the growth to offset flat or declining sales elsewhere but a new report from just-drinks suggests this cannot be expected as a matter of course. Meanwhile, any revival in mature markets will be hard to achieve without fresh thinking about how and to whom blended Scotch is marketed.

The undoubted development potential of the BRIC countries may offer genuine cause for optimism among Scotch whisky producers but a recent report from just-drinks suggests the prevailing challenges in mature markets cannot be underestimated, and that the industry may even be taking the immense growth potential of the BRIC markets a little too much for granted.

The report, 'Global Market Review of Blended Whisky - Forecasts to 2012', predicts that the total blended market will rise by 1.5% per annum between now and 2012, but adds that that growth projection will be on the optimistic side for many players.

"Despite the growth of new markets, most firms are predicting that the blended category will remain pretty much flat," the report states. "In fact, our final figure of a 1.5% per annum rise is on the optimistic side for many players. Some markets will grow faster than that, but others will, as ever, pull that figure down. The rises in China, Brazil, Russia and, conceivably, India are more than likely to be offset by continuing falls in the mature markets."

The report suggests that the issue of how to attract new consumers in mature markets such as the UK, France and Japan, which has vexed the industry for more than a decade, remains and no convincing solution has been discovered. In markets such as the UK and France an over-reliance on discounting has only exacerbated the problems for the blended category.

The underlying trends of unfashionability and irrelevance are also seen as affecting the complex US market. Moreover, the issue of stagnation and decline is now being faced by brands in the once fast-expanding markets of Southern Europe, notably Spain, where a new generation is proving more resistant to the charms of blended Scotch and is being seduced by rum.

All the brand marketers interviewed for the report agreed that in mature markets the issue of image was paramount, but the report identifies some diverging views on what image blended Scotch should project in order to foster growth, and discusses in depth the strategic choices facing Scotch whisky marketers in this regard.

Some brand owners clearly favoured the idea of returning to core values of heritage and provenance. "This retrenching to heritage tries to ally standard blends with the same gloss which exists within malt. In some ways this could be seen as a ceasing of talking of them as 'brands' and more as 'whiskies'," the report points out. However, the report notes that the more conspicuously successful brands, such as J&B, Chivas and, most of all, Johnnie Walker, have been doing precisely the opposite.

While positing that the answer to the problem in mature markets may not lie in trying to revive an old brand, but in giving consumers something new, effectively treating these countries as "post-mature", or emerging markets, the report concludes that this thinking is not informing the branding strategies of many Scotch whisky producers. "It is clear that there is not a step-change taking place in the marketing of blended Scotch," says the report.

"Many firms remain convinced of the importance of establishing and maintaining the heritage values of their brand in order to retain their core consumer."

Notwithstanding the upbeat views expressed by many brand marketers in the report regarding the potential for recovery and growth in mature markets, it is the intoxicating possibilities on offer in emerging markets which most excite Scotch whisky professionals.

However, even here the report sounds a note of caution. The Brazilian economy, although growing, is doing so at a slower rate (3%) than its Latin American neighbours and still lags behind overall world growth, while investment levels remain low. In other words, Brazil, while growing, is not yet at the tipping point which will cause a real boom in blended Scotch sales.

At the moment, Venezuela looks a better short-term bet. However, there are inherent problems there as well, as the economy - and therefore consumer spending patterns - are linked to the price of oil. Currently, times are good, but Venezuela is a volatile country which has gone through repeated booms and slumps.

Russia, meanwhile, is very much in its infancy as a Scotch market and sales remain concentrated around Moscow and to a lesser extent St Petersburg. In addition, whisky is only one of a number of international spirits which are trying to break into the market.

India, as one interviewee quoted in the report described it, is in "a Mexican standoff" with the Scotch whisky industry over the tax issue. But even when the situation is finally resolved, it can hardly be taken for granted that Indian consumers will switch loyalty away from domestic whisky to imported Scotch.

Even in China, the ultimate emerging market, Scotch whisky will face stern competition from other international spirits. Cognac sales are on the increase and Jack Daniel's is growing faster than Johnnie Walker Black Label, while vodka is the fastest growing international spirits category. Furthermore, China's massive spirits industry is perfectly capable of creating its own wood-aged domestic spirits.

Examining the various structural issues facing the BRIC markets in particular, the report asks whether the industry is perhaps over-simplifying the inevitability of success in the BRIC economies and, dazzled by the huge numbers, is simply assuming all will be well.

For more information or to download this report, click here.