Over the last three decades, the Irish whiskey industry has roared back from near oblivion to the fastest growing whiskey category in the world. In a remarkable, now well documented, comeback, the industry has grown from just two to 35 distilleries either operating or planned. Sales have soared from 200,000 cases in 1989, to around 11 million in 2019. Despite its remarkable success, however, the Irish whiskey industry faces some significant challenges none the least of which is the impact of the Covid -19 pandemic. Recently I asked a cross section of industry leaders to comment on the challenges they face.
JM: What Impact will the Covid-19 pandemic have on the Irish whiskey industry?
Conor McQuaid, Chairman & CEO, Irish Distillers – Pernod Ricard
There is no doubt that this is a very challenging business environment, however, we remain confident in our business strategy and optimistic for the future
John Quinn: Tullamore D.E.W. Global Brand Ambassador, William Grant & Sons Vice-Chair of the Irish Whiskey Association:
The loss of the on-trade business globally is having a significant effect on the sales of Irish whiskey and Tullamore DEW. Thankfully the off-trade business is not struggling to the same extent. Our visitor centre is closed but our distillery continues to operate, albeit with rigorous operating procedures and the banning of all non-essential visitors.
The long term is obviously unclear, but the business has been in good health recently and we’re doing everything we can to plan for all eventualities to be in a good position to bounce back, whatever the market conditions when we return.”
Sabine Sheehan, Global Brand Ambassador and Senior Brand Manager, Lambay Irish Whiskey Company
As a new brand we have experienced a massive set back in terms from the pandemic. Particularly in the US where most likely we will retract our original projected 2020 sales and growth plans .We will shift our focus more on our current European markets (Germany, France, Poland, UK) with a view towards widening our market reach in Eastern Europe.
Long Term impacts are hard to ascertain presently. Collectively we must work against the introduction of high trade tariffs , maintain good export distribution channels to new markets and ensure our mature markets welcome newer brands and support the growth of the category rather than just focus on the leader brands.
Jack Teeling, Managing Director, Teeling Whiskey Company:
There is no business which is escaping the impact of the current crisis. Our Visitor Center and our offices have been closed for over 8 weeks with no sign of re-opening soon. Thankfully we have been able to keep our production facilities in operation to prevent a future Covid-19 inventory hole.
The signs of the deep impact it is having on consumer sentiment and buying behaviors are now beginning to emerge. I am concerned on the short to medium term impact on our business the effects of which are hard to contemplate.
The global interest in Irish whiskey, however, will not diminish but how people engage and discover new brands and bottlings will no doubt have to evolve. The only positive I can see is the ability to connect and interact virtually with whiskey drinkers online but unfortunately nothing will beat the ability to engage directly with them at whiskey shows or bars around the world.
Alastair Alpine, Managing Director, Celtic Whiskey Shop:
I hope the Covid 19 pandemic impact will be short lived but there is no doubt it is hitting some of the small producers hard with cash flow drying up. Within Ireland, the supermarkets are extremely busy as are online stores such as our www.celticwhiskeyshop.com , but it doesn’t pick up the industry’s shortfall from bars being closed.
The industry also faces the likelihood of no international tourists for 2020. This will impact heavily on all distillery visitor centers that rely on tourist sales. Our own Celtic Whiskey Bar & Larder is re-opening next week as a food & drink takeaway and will add on an online craft beer store to keep its head above water this year.
Large brands like Jameson will also be hit and I imagine their sales could drop in 2020 for the first time in decades. Therefore, a tough year ahead and the first real road bump for the fledgling Irish whiskey renaissance. If it continues for long, there will be casualties for producers, importers, bars and restaurants.
JM: A disproportionate amount of growth in Irish whisky sales is represented by a handful of leading brands, particularly in the U.S. market. Can the industry leverage on that success to create a broader market for Irish whiskey?
Conor McQuaid: The renaissance of the Irish whiskey category has been spearheaded by the incredible growth of Jameson, which achieved 30 years of consecutive growth, selling 7.7 million cases in 2018/19. It is now one of the top 10 premium spirits brands worldwide and is one of Ireland’s most recognized brands. Its success has created a rising level of interest for Irish whiskey in general.
The U.S. remains the key market for Irish beverage exports, accounting for 40 percent of exports in 2019, valued at €676 million/$743 million and there is growth in several others, including Canada, an increasingly important market for Irish whiskey. The next phase for Jameson is to become truly global with a significantly enhanced presence in Africa, Asia and Latin America, which are ‘non-traditional’ Irish whiskey markets.
John Quinn: It's certainly true that the bigger brands are leading the growth in the size of the Irish whiskey category and this has been the case for many years. What is also true is that many of the smaller brands are carving out interesting niches for themselves in terms of markets and channels of sale. This leads to new customers for Irish whiskey. The rate of sale of these brands is of course significantly less than that of the bigger brands but it does allow Irish whiskey to play in spaces and places that were often previously unavailable.
Jack Teeling: We are in the middle of a long-term cyclical up-trend for Irish whiskey, however, to keep this going we need, as an industry, to ensure that Irish whiskey has the breadth and choice whiskey drinkers are looking for.
Today’s whiskey drinkers are not as brand or category loyal as previous generations and are constantly seeking new tastes and ways to express themselves. This is where we and other independents come in.
Our goal is to help drive the true segmentation of Irish whiskey and provide unique differentiated Irish whiskeys that do not compete with existing brands but provide a wider range of expressions
While the U.S. has been the engine there has been significant pockets of growth in Central and Eastern Europe as well as strength in large mature markets such as the France, Germany and the Nordics. The global forecast for Irish whiskey continues to be very strong, thus creating great opportunities for any Irish whiskey brand who can carve out their own niche.
Sabine Sheehan: Our focus is on our competitive advantage within the Irish whiskey category, such as our ability too leverage on our association with Camus Cognac to offer new and different blending and cask finishing techniques.
Alastair Alpine: I think a very high percentage of growth will come from the existing main players; Jameson, Tullamore, Bushmills and the large players like Redbreast, Teeling, Slane as well as some under-performers like Beam’s Kilbeggan/Cooley. These main players will increase sales plus a broader base around their line extensions. Most of the rest will be growing from a standing start and will take time and a lot of brand development & consumer education to make an impact.
JM: The major trend in the international whiskey industry over the last several decades has been premiumization. Ultra-aged whiskeys have figured prominently in this trend. Only a handful of historic survivors from the 1980s, however, have deep stocks of aged liquids. How do Irish whiskey producers compete in a market increasingly driven by premium products?
Conor McQuaid: There is no doubt that today’s spirits consumer is drinking less, but drinking better quality products, which is clearly an opportunity for the Irish whiskey category.
Our predecessors had the foresight to lay down single pot still stocks more than 30 years ago, securing the future of the quintessential style of Irish whiskey. They did so at a time when sales were languishing, and the industry was in dire straits.
Our prestige range increased by 25 percent last year led by Redbreast and the Spot range. Indeed, Midleton Very Rare also allows the category to stretch into the world of luxury spirits. We very much expect to see premiumization continue to drive the category in 2020 and beyond,
Age, however, is not the only indicator of the quality of the whiskey, the flavor profile also determines the premiumization of a brand and increased competition will continue to drive innovation at the premium end of the market, delivering new and existing propositions.
John Quinn: Premiumization is an aspiration for all whiskey brands whether Irish or otherwise. But premiumization doesn’t have to be age-related. Understandably many whiskey consumers like the reassurance of whiskeys (or whiskies) with age statements but for others who are keen students of the category they will know that interesting and unusual wood finishes, mash bills and combinations of these can produce amazing whiskeys that have a story to tell and a lesson to teach about whiskey, beyond the age profile.
Jack Teeling: The growth of the super-premium non-aged American whiskey market has proven that people will pay a top price for a good interesting high-quality offering rather than solely rely on an age statement. Offerings of aged Irish whiskeys will for the foreseeable future be very limited. This rare nature, however, can play into their uniqueness and price and increase their collectability.
We are custodians of some of the oldest Irish Single Malt inventory and we are very mindful on how we bottle this to make sure we continue to keep the whiskey community and collectors engaged with Teeling and Irish whiskey. Keep an eye out for a very limited release of a 37-Year-Old Teeling Whiskey Irish Single Malt later this year!!
Sabine Sheehan: Premium Irish whiskey is expected to continue to grow at a fast rate which, combined with an increasing interest in premiumization and brands with compelling stories, creates an ideal opportunity for super-premium Irish whiskey – an opportunity which Lambay Irish Whiskey is set to capitalize on. Matching supply with demand will undoubtedly be a challenge. Establishing a route to market and distribution is just as important a factor to producing liquid. Our approach is more about building the brand and global distribution channels.
Alastair Alpine: There is a shortage of aged whiskey among the new producers, but I think you will see an increasing range of single cask releases which will keep a freshness to this category. With several distilleries having whiskey reaching 3 years+ there might be a significant push on value blends and malts for the next few years and the premiumization from the new players will follow in 5 years or so.
JM: Many new Irish whiskey producers have drawn stock from legacy producers like IDL, Bushmills, and Cooley to design their ranges. Notwithstanding different maturation strategies, cask finishing and bottling strengths, this gives many liquids a common DNA. Will new Irish whiskey consumers find that “Irish whiskey tastes the same”?
Conor McQuaid: There is a variety of different distillates that can be used in Irish whiskey production, including but not limited to pot still, malt and grain whiskeys, with vastly different mash bills ensuring differentiation. Similarly, the maturation process allows producers to experiment and innovate across their portfolios.
For Irish Distillers, it has meant that we are able to produce single pot still and single grain whiskeys in a wide variety of casks ranging from more traditional ex bourbon and sherry casks to those recently used in our Method and Madness range, made from chestnut, acacia wood and wild cherry wood.
John Quinn: I think the essential point is that consumers have taken to Irish whiskey in recent times due to its distinctiveness of flavor. People like the taste of Irish whiskey. This obviously applies to traditional Irish drinkers but the arrival of younger consumers into the whiskey business has given a great boost to Irish whiskey sales. Over time they identify their favorite styles and brands and they choose (and even switch) according to the different styles available.
to the different styles available.
Finishing is a powerful tool for offering different flavor profiles to whiskeys, even when they have been distilled at the same distillery. There are now 31 operating distilleries in Ireland, with 14 of them holding their own distilled mature whiskey stocks, and each of these will have its own personality, story and DNA.
Jack Teeling: We have focused on unique maturation and bottling techniques to impart the extra flavor and character we are striving for from our whiskeys through using the likes of ex-White Burgundy, Margaux or Sauterne casks in our production process and bottling all our whiskeys at 46% with no chill filtration.
We currently have 70 different cask innovation projects in our warehouses, which proves that through maturation you can really create a range of different taste profiles to make your offering stand out from the crowd.
We also drive innovation through using unique ingredients and distillation techniques. For example, we are using a proprietary yeast cocktail, including some white wine yeast, to ensure our wash is as flavoursome as possible as well as using innovative mash bills containing crystal malt, rye, and chocolate malt. This will allow us to continue to be the leader in the segmentation of the category through the continued expansion of our portfolio with unique differentiated whiskeys. Watch out for our triple distilled Teeling Whiskey Peated Single Malt coming out later this year.
Sabine Sheehan: While liquids can be similar off the still, it’s the maturation, blending and finishing of whiskey where taste profiles can vastly differ and where quality will be recognised.
Consumers are seeking new taste profiles. This is being driven by the rise of more mature taste palettes for whiskey across all categories. Innovation in distilling and mash bills with varied cereals being used is also quite interesting. Using Irish oak once again keeps the providence of Irish whiskey close to Ireland. These are all very dynamic long-term strategies to maintain a point of difference among key players.
Alastair Alpine: I think we are now getting to an exciting stage in the development of Irish whiskey where the new distillery liquid is coming online, and this creates a market for collectors and drinkers. We are also seeing a growing demand to purchase casks of Irish whiskey for further maturation. We’ve just launched Celtic Whiskey Cask Sales to tap into this trend. Our first offerings will be casks of newmake spirit from Great Northern Distillery in Dundalk.
JM: There are a lot of new distilleries springing up in Ireland. Will these new producers find a market, and especially a road to market, for their production?
Conor McQuaid: There’s huge opportunity for growth for everyone, especially in new and emerging markets. As Irish distillers, we are fortunate to have access to the Pernod Ricard distribution networks. Our largest markets continue to be the USA, South Africa and Russia, followed by Ireland and the UK.
Our portfolio continues to perform well in emerging markets, up 23 per cent in 2019, with Nigeria, India, Mexico and Brazil all recording record levels of growth, and we have also seen sales increase by 12 per cent in the last year in Eastern Europe, driven by the Russian and Ukrainian markets.
The rise of the middle-classes in India has led to increased demand for authentic, imported brands. China and the other key Asian markets represent another great opportunity for Irish whiskey. Our focus is also on markets not traditionally associated with Irish whiskey, with great success in South Africa and plans for the African continent.
John Quinn: That’s a very interesting question. Obviously, there are bigger brands who already have a broad consumer base, and which have a level of sales that is reassuring as they produce from their own distilleries. The question regarding route to market is key for those launching in recent times. As the category grows in popularity so too does the demand for alternative whiskeys, new stories and even new styles.
The challenge can be to get the distributor network to make room for other Irish whiskeys and for the bars, restaurants and liquor stores to understand that there is room for a variety of brands in a growing category. We are gradually getting more shelf space for Irish whiskey, and the retailers and bars are seeing the validity of this.
Jack Teeling: Many of the new entrants are very small in size and when you map out their production capacity against the projected growth in the category, they will not have any major impact. Ireland is still a relatively small whiskey producer so the added production and the subsequent competition with the industry can only be beneficial in my eyes and support the long-term sustainable development of the category.
Alistair Alpine: As the new distillery liquid comes online it will create a market for collectors and drinkers looking for new styles. Good quality and product differentiation will drive an expansion in demand.
JM: Thank you