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Which international whiskies segments will challenge Scotch's dominance? - Research in Focus

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The future looks overwhelmingly bright for the huge international whisky category, but stock constraints continue to hamper growth, especially for Japanese and Irish whisky brands. The new Global International Whisky Insights 2018 report from just-drinks and The IWSR highlights this continuation of a purple patch of growth for non-Scotch whisky, which has moved from volumes of 270m cases in 2013 to almost 315m cases in 2017.

The new International whiskies report from just-drinks and The IWSR was published this month

The new International whiskies report from just-drinks and The IWSR was published this month

Indian whisky - much of it low-priced, molasses-based spirit - continues to dominate in volume terms, despite a marginal sales fall in 2017 to just under 190m cases. Led by multi-million-case-selling brands such as Officer's Choice and McDowell's No 1, the sub-category is set to resume robust growth in the years ahead, climbing as high as 220m cases by 2022.

Trends are especially positive for US whiskey, thanks to simultaneous growth in the home market and in an array of overseas destinations

While Indian whisky dominates the volume stakes - the sub-segment claims the world's four best-selling international whisky brands - the picture changes when it comes to value, with Jack Daniel's, Crown Royal, Jameson and Jim Beam the category's most lucrative products. Trends are especially positive for US whiskey, thanks to simultaneous growth in the home market (which accounts for roughly two-thirds of sales) and in an array of overseas destinations. Growth is being disproportionately driven by higher-price segments, partly because of tightening supplies, but also because of a growing willingness from consumers to spend more on US whiskey products.

This renaissance has spawned a new boom in production investment from established and new, 'craft' players, as well as a fresh, more cosmopolitan outlook from traditionally-conservative producers. "US whiskey exports rose by 7% in 2017 to surpass 16m cases for the first time," says the report. "The combination of surplus inventory and rising international demand will probably lead many historically inward-looking US producers to expand their horizons."

Interest in the category is being boosted by multiple layers of innovation, from flavours such as Jack Daniel's Tennessee Honey to high-end spin-offs and hot new segments including rye and single malt. As a result, super- and ultra-premium US whiskey sales in the domestic market grew by 22% and 31%, respectively, in 2017, with strong growth off a small base in export markets.

Irish whiskey looks certain to break through the 10m-case barrier in 2018

Irish whiskey looks certain to break through the 10m-case barrier in 2018 after another double-digit sales increase the year before, led as ever by Pernod Ricard's dominant Jameson brand. The US remains the top market by some distance - the country accounts for 42% of global sales - but producers are increasingly exploring a broader range of markets in regions such as Latin America, Asia and sub-Saharan Africa.

While growth looks assured in the years ahead, Jameson's dominant role could pose a challenge for the raft of new distillery start-ups, who are effectively competing for a small slice of the Irish whiskey pie. Stocks remain somewhat constrained, and some are concerned that true innovation has been hampered by the fact that many start-ups rely on tweaking (for instance, by finishing) third-party whiskies while they wait for their own spirit to mature. This is already changing as aged stock comes on stream.

Elsewhere, Canadian whisky remains strongly focused on North America, where 94% of its volumes are sold and, while leading brand Crown Royal and fast-growing Fireball are performing well, the overall category remains static.

Japanese whisky has become a victim of its own success. More than 95% of volumes are consumed domestically, but export demand is growing ahead of supply

While Japanese whisky has been one of the hottest international spirits trends of the past few years, establishing a strong reputation for quality, the category has become a victim of its own success. More than 95% of volumes are consumed domestically, with the highball trend dominating, but export demand is growing ahead of supply, leading to a serious shortage of stocks.

A number of high-profile, age-stated Japanese whiskies have been withdrawn from sale as a result, and even high-volume brands like Suntory's Kakubin are being swapped out of high-volume domestic accounts for cheaper alternatives from the US or Scotland. This should ease as production is ramped up.

Indian whisky had a challenging year in 2017 thanks to a number of domestic political factors, but growth is expected to resume in 2018 and accelerate over the next four years. The category is home to some of the world's biggest spirits brands, such as ABD's Officer's Choice (31.5m cases in 2017), Diageo's McDowell's (26.3m cases) and Pernod Ricard's Imperial Blue (18.8m cases).

Encouragingly, there are persistent signs of consumers trading up, with the deluxe sector rising 2.4% last year, and semi-premium and premium products growing even more quickly. "The higher price-bands continue to outperform," the report states, "as increasing wealth, plus commercial decisions by the majors, continue to push consumers up the price ladder."

This broader trend is also reflected in the emergence of higher-priced, locally-made whiskies, such as Radico Khaitan's Rampur and Paul John from John Distilleries in Goa. These traditionally-made single malts could carve out a new quality niche overseas for Indian whisky in the years ahead.

International whiskies insights - market forecasts, product innovation and consumer trends


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