Thomas Holland of Food For Thought (FFT) Magazine examines the current state of the Irish whiskey industry. This article is part one of a three-part series which was published on FFT.ie in August 2017.
ORIGINS OF IRISH DISTILLERIES
In the 18th century there were over 1,200 legal distilleries in Ireland, and Irish whiskey was the most popular spirit in the world. Up until recently however, there were just two distilleries left, acting as a monopoly for 30 years or so whilst Irish Distillers owned both Bushmills and Midleton.
According to the Bord Bia Exports Performance & Prospects Report 2016-17, Irish Whiskey enjoyed growth of 8% in 2016, with sales of €505m. This makes it the fastest growing spirit in the world and sales have grown by 300% over the last decade. They are predicted to double by 2020 and, by 2030, be at somewhere in the region of 24m cases a year.
SCOTTISH VS. IRISH INDUSTRIES
At first glance this all seems very rosy. However, when we compare it to the performance of our Scottish cousins, where export values in 2016 were a staggering €4.2bn, it’s clear that Irish whiskey has a lot of catching up to do. It is worth studying the Scotch whisky sector if we want to emulate the success they are enjoying.
Two separate developments ushered in the era of Scotch that we recognise today. The first was the introduction of the column still (an invention by Irishman Aeneas Coffey) in 1831. Allowing for continuous distillation, it made the production of base spirit far cheaper. In Ireland, we failed to embrace the invention, preferring to stick with the more laborious pot still method. A second boon for the sector was the misfortune of another drink. In 1860, when phylloxera struck the vines in France, that industry was almost wiped out, to the benefit of the Scottish distillers.
Over the course of the 20th century both the Scottish and Irish sectors have faced challenges in the forms of two world wars, Prohibition in the United States and, in the case of Ireland, the War of Independence and subsequent 1932-38 Anglo Irish Trade war (the British Empire had been the main route by which Irish Whiskey was sold globally). Perhaps the biggest threat however is a systemic one, namely the challenges around management of stock levels of a product with a very long production cycle.
The famous example of restraint shown by the Scotch whisky industry was around the Glenfiddich brand, William Grant’s highly successful and top selling single malt whisky. In the eighties, sales took off but stocks were insufficient for the demand. As a result they reduced the age from 10 years to 9, then from 9 to 8, as they awaited the maturation of their younger stocks. A commercially brave decision, and morally correct one. In the end they removed the age statement altogether, before reintroducing it several years later.
The 1980s saw a wave of mergers as large multinational spirits firms emerged from the UK’s brewers. This was heralded as a solution to production swings, but did not rationalise and consolidate whisky production. Rather, the objective of these mergers was the optimization of an international distribution capability around a portfolio of leading spirits brands.
This can be contrasted with what happened in Ireland in 1966 when Irish Distillers was formed by the merger of Cork Distilleries Company, John Jameson & Son and John Power & Son, before Bushmills too became a part of the group in 1972, leaving Ireland with only one whiskey producer.
LEARNING FROM THE SWA
Part 2 of this article will look further at the Irish market, but for now it suffices to say that there are 120 distilleries in Scotland, 7 of which operate the continuous stills that Ireland initially shunned, whilst the SWA lists 67 separate producers as members, supporting over 40,000 jobs (8,000 of which are in rural locations).
If there is a bright hope for Irish Whiskey it will in part be thanks to some extremely well-respected businesses with experience of the Scottish sector now setting their sights on Ireland. To have William Grant & Sons on these shores with Tullamore D.E.W. (the world’s second highest selling Irish Whiskey) is a very positive development. Caspar MacRae, Global Brand Director at William Grant, emphasised the importance of the Scotch Whisky Regulations (2009), saying: “The rules are designed to protect both the industry and consumers and help contribute to the consistently high quality reputation of Scotch”.
Surely, with the vast knowledge & experience of Brown Forman, Suntory (Beam) & Jose Cuervo also coming to these shores, there is much to be positive about.
However, Mark Reynier, former CEO of famed Scotch distillery Bruichladdich and the man behind the new Waterford Distillery, is concerned: “The IWA should adopt wholesale the rules of the SWA if we’re not to get off on the wrong foot. At the moment there’s a vacuum because we have nobody saying what is and isn’t allowed. The sector is characterised by wonderful enthusiasm and bravura, but also naivety, deception, and in some cases, deceit.”
Mark goes on to explain that one of the key rules for malt whisky in Scotland is what you can put and, more importantly, what you cannot put, on a label or on marketing materials. As Mark explained: “The distillery of production is clearly identified on the label. So too the bottling address. Consumers can see where the whisky was distilled and by whom it was bottled – in other words an official bottling or an independent bottling. You certainly cannot pretend you distilled the whisky when you didn’t!
“There is a list of distillery names – you cannot make one up that sounds like a distillery – or might be interpreted as a distillery – by the consumer,” he continued. “Sure, a completely invented name, a brand name, can be used as long as there is no geographical insinuation: e.g. ‘McDougall’, as opposed to ‘Glen McSporan’ which infers a real location and therefore a distillery. It’s about protecting the consumer from confusion around real distilleries and fictitious ones.
“We, in the trade, all know that the current Irish independent bottling boom is based on stock from just one or two distilleries. By pretending it was distilled by themselves (‘master distiller’, ‘xxxx distillery’, etc) who do these folk think they are kidding? The consumer of course. The number of 3rd party suppliers will increase over time, natural supply and demand conditions will catch up, so all the more important to sort out the clarity now, for everyone’s benefit, before it is too late and the whole credibility of Irish Whiskey is ruined.”
In the course of our conversations with up and coming Irish distilleries we were repeatedly told that the source of their spirit is, variously, a trade secret, confidential or commercially sensitive. This seems to run contrary to the transparent and honest sector that we should be seeking to foster.
MISLEADING LABELS ON IRISH BOTTLES
There are a significant number of businesses referring to themselves as distillers when they are anything but.
The release of 10 year old whiskeys by a distillery that has only just come on stream is confusing and arguably misleading/disingenuous, especially when the origin of the spirit isn’t mentioned.
BOTTLERS AND DISTILLERS
It is no secret that until recently, John Teeling’s Cooley Distillery was the source of almost all the whiskey in the country that Pernod Ricard doesn’t produce (excluding Bushmills), with a small number of exceptions (Tullamore D.E.W. and Walsh’s Whiskey have long had supply contracts with Pernod).
This is of course absolutely fine. Many we have spoken with argue that what are referred to as independent bottlers will play a vital role in Irish Whiskey, just as they did in the 70s and 80s in Scotland. For examples of Scottish independent bottlers think Cutty Sark, or Dewars. John Teeling’s latest venture, the Dundalk-based Great Northern Distillery, will go some way towards creating a more open and vibrant marketplace for startup distillers. Like Cooley, the Great Northern Distillery will focus on selling to third parties and already has a number of contracts signed, and is actively looking at white labelling for supermarkets.
John’s new distillery is not to be confused with his sons’ eponymous business in The Liberties area of Dublin, which is also currently selling stock from Cooley.
For the time being, we need to avoid misleading marketing speak and stay patient. The average age of Scotch whisky is eight years and unfortunately much of the marketing speak surrounding Irish Whiskey at the moment is misleading and ill thought-out.
Right now, there are in excess of 150 different Irish Whiskey brands, yet with a very small number of exceptions this all comes from one of three distilleries. What will happen when tourists and overseas markets realise this? It’s a dangerous game the industry is currently playing.
In part two of this series, we will be looking in greater depth at the recent history of Irish Whiskey & attempting to understand where we went so wrong.
Article by Thomas Holland, FFT.ie.