Folklore has it that the heavenly angels are partial to a drop of scotch, which explains the 1 percent loss from each cask through evaporation. But it will take a little bit more than the so-called "scotch mist" to get rid of stocks covering eight years of future consumption.
Scottish distilleries raked in more than 1 billion ($1.5 billion) from overseas sales in the 12 months through June, but the industry's marketing men are having to work overtime to secure scotch's standing as Britain's fifth largest export earner.In 1985, export earnings of 994 million were 7 percent higher than in 1984, despite the sales volume dropping to 226 million liters of pure alcohol, or lpa, from 231 million lpa in 1984. Reaping higher revenues from lower sales volumes is admirable, but the trend in volume shows the industry needs an image shake-up that will more than stir the diehard traditionalists.
The need for something to happen is clearly illustrated by looking at the latest distillery runs, which show output running some 50 percent below 1980 levels. Moreover, the glens are awash with 2.6 billion lpa of scotch - equivalent to eight years forward cover - as misjudgments of the market in the heyday of the late 1970s led to a heavy buildup of stocks. Most alarmingly, there were 24 distilleries shut down in 1985.
Promoting scotch as a quality product has been the linchpin of the industry's success story. Scottish highland spring water, Scottish barley, Scottish peat and a process that lasts anywhere between three to 12 years all adds up to a thoroughbred product. But, distilleries salesmen admit out of earshot of their master blenders, the product is pretty homogenous, even if it is superior to any other whiskey in the world.
Product differentiation explains why eight of the world's top selling spirits are whiskies, and why three of those are Scotch. However, the challenge to sales is bigger than any one brand can meet. Which is why the takeover five months ago of the No. 1 Scotch firm, The Distillers Co., by
Guinness PLC to form the fifth largest drinks firm worldwide is still making the front pages of the British financial press. Guinness unearthed what it describes as deep-seated problems at Distillers, and has installed a new streamlined management.
There is concern in some quarters that Guinness will take the product down-market to boostsales, and there have been worries that the company will also dilute the Scottishness of the product. However, within the industry, there is also a hope that Guinness's marketing prowess will spill over into the Scotch Whisky Association, which some claim labored too much under the influence of Distillers.
The sensitivity of the issue flickers nightly across the nations' television screens in an advertising campaign that explains the Guinness mission to restore a faded national heritage rather than exhort the country's drinkers to quaff more scotch.
It is probably the U.S. market where the main search for a fresh image will be launched. The United States is the largest market by far. In 1985 nearly 66 million lpa was sold to the United States, of which around 45 percent was in bulk form for blending with U.S. domestic whiskies. The total value of the trade is more than 270 million.
The U.S. market is on the wane, shipments in 1985 were down 3 percent from 1984, and last year the United States accounted for around 25 percent of the market, compared with 33 percent in the late 1970s.
Meantime, Japan used to rank as the No. 2 export market, with bulk exports to enhance the local whiskies providing the lion's share of sales. But, the sun has gone down on "Old Suntory," the premiere Japanese whiskey, and sales of whiskey slumped as Tokyo's businessmen turned to Shochu, a cheap rice-based white spirit, to wash away their yen.
Distillers had a policy of not selling bulk scotch for blending with foreign whiskies, and regard the practice as akin to selling Scotland's birthright. U.S. and Canadian companies like Hiram-Walkers and Seagrams Co., which control Scottish distilleries, have been less averse to selling bulk scotch. It remains to be seen whether Guinness will stick to the policy of not selling bulk scotch for blending elsewhere.
In 1985, sales of 23 million lpa of scotch to Japan fetched nearly 59 million, and 60 percent of the volume was in bulk form. It looks like a lot of scotch, but those figures are down around 33 percent on 1984, and largely
because of a fall-off in bulk sales. Despite the downswing, one Japanese importer saw fit to buy Tomatin, Scotland's largest distillery (capacity 5 million lpa annually), which went bankrupt recently, in order to ensure future supplies.
Fortunately, there is another side to the glass, as sales to France leaped 16 percent last year to become the second largest export market. The French market absorbed more than 23 million lpa last year, and pulled in almost 100 million for the Scotch distillers.
Pernod-Ricard's ownership of the House of Campbell gave that small
distillery group the distribution network to make a sizable impact on the French market. The House of Campbell's out put is just 1 percent of the entire scotch industry, but the company has managed to establish its Glen Campbell blended whiskey as the No. 1 seller in the French market.
The marketing men are flummoxed by the export market for single malt whiskies, which may only account for 2 percent of the total whiskey trade - the rest being bottled blended whiskies or bulk sales - but it is the most vibrant part of the industry. Malt whiskey exports have shot up 30 percent in the last five years, and the Italian market has boomed. The Scots cannot explain it, but Italy takes 37 percent of all malt whiskey exports. Maybe it's chic to mix with Campari, Perrier and Galliano.