The entry of Diageo into the Irish whiskey market has further enlivened a sector already growing steadily thanks to the efforts of the other major global spirits force, Pernod Ricard. And a new report from just-drinks suggests there is more growth ahead for Irish whiskey.

The news last week that Diageo is making a further GBP1.5m investment in refurbishing and expanding its Bushmills Irish whiskey distillery serves as a reminder that the spirits market is not all about Absolut and not all about vodka, and that the whisk(e)y market is certainly not all about Scotch.

Since acquiring Bushmills in 2005, Diageo has invested more than GBP6m in the company in a bid to tap into the significant growth opportunities in Irish whiskey underlined by the success Pernod Ricard has enjoyed with its market-leading brand, Jameson.

Indeed, according to the recently published just-drinks/IWSR report, Global market review of world whiskies - forecasts to 2012, the not-Scotch sector of the whisky market is one of the fastest growing categories in the wines and spirits market, growing by an estimated 8.7% in 2007 to reach 146.5m cases, with Indian whisky and Irish whiskey among the most notable performers.

"Irish whiskey has displayed extraordinary success in a handful of markets, but especially recently in the US," the report states. "In 2007 it was one of the fastest growth categories in the market and, as so often happens in the US, it seems to have passed a tipping point where sales begin to accelerate exponentially."

While Jameson is the undisputed market leader, with 59.7% of the market globally, and has been the prime mover behind the growth of Irish whiskey for some years, the report's authors see the entry of Diageo as extremely significant in taking Irish whiskey to the next level.

"The entry of Diageo has created a major new player, committed to building both the brand and category. Diageo's entry will have a great impact on the category," the report states.

Notwithstanding Pernod Ricard's great success in growing Jameson and putting Irish whiskey on the international map, the report suggests that, along with the entry of Diageo, heightened activity and investment by smaller players will be critical in taking the category to the next level.

"If other companies such as C&C International, Cooley and Sidney Frank are also prepared to invest for the long-term, Irish whiskey sales seem certain to continue to rocket both in the key US market and elsewhere," the report states. "So long as every brand is positioned rather differently than the next, then there should be enormous opportunities for all the players. For the first time in recent history, Irish whiskey has a real buzz about it. Four players are pushing for gains. While there is competition, there is also the feeling that, for the moment, there is enough of the existing and potential cake for all four to develop the category without direct rivalry."

There is certainly plenty to aim at. Global volumes of Irish whiskey currently stand at around 3.5m cases, of which Jameson has 2.3m cases, versus a global spirits market of some 350m cases. The US is by far-and-away Irish whiskey's leading market, showing a compound annual growth rate of 14.4% between 2002 and 2006 to 735,000 cases. The growth has been led by Jameson, but Bushmills and Tullamore Dew are beginning to make headway, while Sidney Frank's decision in 2006 to enter the market with Michael Collins is another interesting development.

According to the just-drinks report, one of the real reasons for encouragement in the US is the broad-based growth of the category in geographic terms. California is now becoming the most important single-state market, ahead of New York. The northeast as a whole is not surprisingly still bigger, but there are clearly opportunities for producers to expand beyond Irish whiskey's traditional strongholds.

In addition to the progress in the US, pockets of strong growth can be found for Irish whiskey in South Africa, as well as Central Europe, while sales are once again growing again in Ireland. Volume gains have also been the norm for Irish whiskey in the UK for a number of years, the report states. However, it adds that Irish whiskey has lagged far behind Scotch whisky in both Latin America and Asia, which the report attributes in part to Irish whiskey's relative dearth of aged offerings.

The entry of Diageo and its choice to take a very different approach to marketing Bushmills from that taken by Jameson, with Diageo placing far more emphasis on product heritage, and heightened activity from smaller players, make the Irish whiskey a fascinating sector to watch. But the volume powerhouse among non-Scotch whiskies is undoubtedly Indian whisky.

As the report puts it: "Indian whisky has been enjoying tearaway growth as economic prosperity encourages local consumers to trade up from local unbranded Country Liquor to branded so-called Indian Made Foreign Liquor (IMFL) whisky, imported whisk(e)y and other spirits."

On the other hand, there is a more varied performance among other key whisky categories, the report adds, with Canadian whisky the most sluggish performer and Japanese whisky also under pressure. However, US whiskey is enjoying a renaissance, with volumes rising by 10.3% between 2002 and 2006 to reach 28.6m cases. IWSR's preliminary figures for 2007 suggest that volumes again increased, adding a further 1.9% to top the 29m-case mark for the first time.