US whiskey profiting from flavourable conditions – Research in Focus

Scotch whisky producers may be agonising over whether flavoured variants offer an effective means of recruiting new consumers and driving growth, but their counterparts on the other side of the Atlantic have no such qualms.

Indeed, it is the success that flavoured US whiskey brands and spiced rums have had that has prompted Scotch companies to try the flavoured route, even though they are not permitted to call such products 'Scotch whisky'.

Among all the world's whiskies, US whiskey has embraced the flavoured market most enthusiastically and, as detailed in a new The IWSR/just-drinks report, growth in flavoured whiskeys continues to be an important driver for the sector. Between 2009 and 2014, the US whiskey category grew by a compound annual growth rate (CAGR) of 5.6%, to 39m cases, and is forecast to expand by a CAGR of 4.4% to 2020. Double-digit rate growth forecast for many markets, notably Travel Retail, France, Poland, Russia, Brazil, Turkey and Mexico.

While doubts remain in Scotland as to the suitability of Scotch for flavour infusion, there appears to be a prevailing view that, by contrast, US whiskey is particularly suited to the addition of flavours.

In addition to expanding its reach geographically, US whiskey has also been successful in recruiting new consumers, in particular younger LDA women. The segment's naturally sweeter taste profile and its 'mixability' are key to its appeal to these drinkers and, as the report points out, "this flavour profile has been made more accessible still with the advent of flavoured variants".

Particularly influential have been the moves into flavoured variants by the brand leaders, with Beam Suntory's Red Stag by Jim Beam and Brown-Forman's Jack Daniel's Tennessee Honey both proving successful.
Latterly, Jack Daniel's has sought to capitalise on the growth in cinnamon-flavoured spirits, led by Sazerac-owned Fireball, by launching the cinnamon-flavoured Tennessee Fire in the US and achieving "strong initial success".

While clearly holding to the belief that flavoured variants can play a substantial role in driving growth and recruiting new consumers, without cannibalising sales or impacting negatively on the product's heritage and reputation, US whiskey producers appear determined to learn from mistakes made by vodka category in previous years.

US whiskey producers are aware that the flavours arena can become a somewhat inflationary environment in terms of product innovation, with brands forced to service constant demands for the next new flavour. "Flavours could become a constant carousel of innovation to maintain volumes," the report states. In spite of the growth that has been seen, the report claims "there are doubts about the longevity of the flavours boom, with evidence already of a slowdown in the honey trend".

Observing what happened in the vodka category, US whiskey producers are aiming for a steadier approach to flavoured variations. "Leading whiskey producers claim to have learned valuable lessons from the over-proliferation of flavours that afflicted the vodka category in the US," the report states. "Most have said they will be much more conservative with flavour roll-outs. The positive prognosis is that flavours remain an excellent recruitment agent for younger and female consumers in particular. Once captured, these will hopefully go on to explore the category and become committed whiskey consumers."

Particularly pleasing to the likes of Beam Suntory and Brown-Forman will be the report's findings that new flavoured variants are taking market share from other flavoured spirits, such as vodka and rum, rather than cannibalising sales of the core brand.

US whiskey producers are also looking to promote flavour differentiation by becoming more experimental with the proportions of different cereal grains used in their whiskeys, known as mash bills. This form of flavour variation has a completely different objective. While flavoured whiskeys make the product more accessible, in a bid to attract new consumers, the report suggests variations in the mash bills of whiskey brands aim "to satisfy an increasingly sophisticated consumer base".

Bourbon must be made with at least 51% corn but, apart from that, the precise composition is at the producer's discretion, which leaves a lot of room for innovation. For example, Buffalo Trace makes some 'wheated' Bourbon, adding both malted barley and wheat to the corn base.

Meanwhile, Beam Suntory has launched the Jim Beam Harvest Bourbon Collection, a series of six bottlings featuring different grains, such as brown rice, soft red wheat, high rye and whole rolled oats.

Of particular note have been the number of rye specialities launched in recent years. Rye whiskeys tend to have a spicier taste profile than a wheated Bourbon, with greater complexity.

Brand owners have not been slow to jump on the rye bandwagon, according to the report. In addition to Jack Daniel's Rye, Brown-Forman has now introduced a permanent Woodford Reserve rye line extension, albeit in limited quantities, to satisfy rising demand for rye Bourbons. Meanwhile, Beam Suntory has relaunched Jim Beam Rye at 45% abv and with new packaging.

As has been the case for many years, US whiskey producers continue to innovate in their use of different barrels for ageing. While grain bills make a critical contribution to a whiskey's flavour profile, barrels are arguably even more important, determining the colour and contributing much of the flavour. Brown-Forman even owns the cooperages producing the barrels it uses for ageing its whiskeys and is constantly experimenting with the use of different barrel staves. For example, special grooves are carved into the staves for its Sinatra Select brand, while levels of toast and char vary for specific products.

An unremitting and creative focus on flavour therefore appears to be an overarching priority for US whiskey producers, whether they are launching a product to recruit new consumers or devising a special edition aimed at the well-versed Bourbon connoisseur.

All this bodes well for the non-Scotch whisky segment, with a 'something for everyone' approach set to fuel growth in the year to come.

For full details of 'Global non-Scotch whiskies insights - market forecasts, product innovation and consumer trends', click here.

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