There’s a storm a-comin’

Whisky has always moved in waves, a giant swell of peak and troughs, a pattern that repeats at 20 year intervals. In the ‘60s it was the ascendency of blends and satisfying the demands (in volume and flavour) of the US market. 

By the ‘80s, distillers were having to deal with a crash in sales and how attract new drinkers. 

By the turn of the 21st century you see the rise of single malt, tapping into the desire for provenance, a widening of the flavour palette, and premiumisation. It would seem that we are now on the downslope once again

Every conversation at the recent Whisky Show looped back to the same question: ‘how are you finding it?’, the ‘it’ being sales, and general market conditions. The answer would always be one word. ‘Tough’. 

You can pick your reasons for the fall. Optimists say it is just a readjustment after the reckless purchasing during COVID levels, others that it’s de-stocking. Those of a more gloomy (or realistic) outlook point to a lack of consumer confidence in the economy, while others point to a generational rejection of whisky (or alcohol in general) coupled with the rise of neo-prohibitionists. Take your pick, it’s probably a bit of all of them.

The recent SWA export figures seem to back up this downbeat analysis. Shipments are down, there’s a sense that the good times are at an end. 

‘We’ve been here before,’ said one buyer to me. ‘I’m telling the team that we just have to hold firm. It will come back.’

He is right, but this is the first time that those running most firms – especially the largest – have experienced a downturn. Their whisky lives have been filled with rises in sales, a happy life, working in a benign climate, not looking at the horizon where skies have been darkening. Crucially, there are few people around, especially in the super tankers which sail the whisky seas, who have navigated this storm before.

It is also coming at a time when there is more whisky being made than ever before. Falling demand meet rising capacity. It’s not a good mix.

WE’VE BEEN HERE BEFORE

There are lessons to be learned here from what happened to Scotch in the late ’80s and early ’90s. At that point whisky’s global decline was driven by a new generation turning away from blends. 

Firms who had seen nothing but sales rising for over two decades were slow to accept what was happening. Despite the steep decline in sales, production continued to rise. When they finally engaged (or panicked), the only solution they came up with was cutting prices. 

The result was a death spiral as the majors fought to keep market share and reduce their surplus. It was a race to the bottom resulting in commoditisation. Brand loyalty was lost as those who still drank whisky simply bought whatever was cheapest. With margins non-existent, there was no money for advertising and promotion, while the notion of education was unknown. 

Scotch’s saviour was single malt. Baggage-free, untainted, it could talk abut whisky in a new way to a new consumer, borrowing from wine to speak about flavour and location.  It was small scale to begin with and targeted at what seemed to be a new community, many of them being those who would never have considered drinking the blends their parents drank. It worked. Slowly the market recovered.

Remembering this (yes kids, I’m that old) produces a sense of deja vu about what’s happening now. The rise of FMCG strategies, short-term solutions, flinging out ‘innovative’ new brands in the hope that one might stick. Budgets are slashed, education programmes postponed, despite this being the precise moment you need to invest in education to reinforce the existing consumer base and find new drinkers.

BUILD THE MAINSTREAM

You also have to be realistic about what people want to drink and how much they are willing to pay. For too long the misguided belief that the future of whisky lay in the luxury market has dominated thinking. It doesn’t. It never has.

You cannot build a market with luxury whiskies. You certainly can’t save it. The fancy bottles and one-offs of rare drams have a place, but they are not what the people who could save your business want to drink. They are a distraction. 

Scotch wasn’t built by luxury offerings, but by brands which offered a reward to all people. Luxury has to be more than packaging and opaque messaging, it has to offer quality, and a justification for the price tag. Ultimately, Scotch has to remain democratic, not elitist.

The whisky market cannot be built at the commodity end either. It has always been built in the mainstream – great whisky at an affordable price. The brands which are bucking the trend know this – witness the success of new distilleries, IBs and ‘forgotten’ distilleries. All are offering something genuinely different and quality at a sensible price. Glimmers of hope? Maybe. 

If this is a strange rerun of the 90s, then who else could be whisky’s saviours this time? You have to look wider than Scotch. Ironically, given the serious over-capacity globally, the fact that there are so many great new whiskies available is what might just excite a new whisky drinker.

This in turn begs the question, is the rejection this time not blends but tired, old brands? Is it Scotch? Might the drinkers of the 2020s who will save the category be those who seek out whiskies from anywhere that are new, exciting, different, and with quality? 

Whisky will recover because that’s what it does. How quickly is unclear and depends on distillers learning from history and not panicking into making the same mistakes. There will however be casualties, and it will only be those with quality-driven, long-term strategies who will survive.

Batten down the hatches, lash yourself to the wheel. It’s going to get rough.