Whisky Business

The Whisky Store, a major German online retailer for whisky, just reported in their German language forum that at a tasting for the company staff, Macallan officials had confirmed that there will not be any new bottlings of sherry cask Macallans of age 18 and older anymore.

If this turns out to be true, it would truly be a great shock for the whisky community. The Macallan’s reputation of being the “Rolls Royce of Scotch Whisky” was largely founded upon the exceptional quality of their older sherry cask bottlings. If this base is going to break away, Macallan runs the risk to ultimatively fall back into the continuum of middle-of-the-road distilleries.

The introduction of the Fine Oak series some years ago had already made it obvious that Macallan was having a hard time to find enough sherry casks for their whisky, despite the fact that they have even been commisioning their own sherry casks in Spain. But now it seems that the supply of sherry casks is barely strong enough to maintain production of  their standard 10yo and 12yo bottlings.

Let’s just hope that this sad situation will change again to the better in the future.

Update: Macallan just stated on Twitter that old sherry expressions will continue to be bottled, but they will be rare. Take this as an example of how quick things can go with the Web 2.0. A disturbing rumor could be dispelled within only a a few hours .

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Every once in a while, the Scotch Whisky Association (SWA) opens up a new battlefield because they see the traditional values of Scotch Whisky under attack. Examples include the lawsuit against the Glen Breton whisky from Canada or the threat against Compass Box because of their first edition of the Spice Tree.

The amendments to the Scotch Whisky Order of 1990 that will come into effect on November 23 will re-define Scotch single malt as malt whisky that is made by “batch distillation in pot stills”. The SWA was involved with drawing up the amendments. Not a big deal, you might say. After all, single malt always has been made this way. But there is one distillery that indeed will be affected by the cange: Loch Lomond distillery is the only distillery that uses column stills for their single malt. Needless to say that Loch Lomond is not a member of the SWA.

The Observer just published an article about the ecologial aspects, because Loch Lomond actually makes a great effort becoming an environmentally friendly distillery. The new regulations would pose a serious threat to the distillery.

It’s Not About The Whisky

Granted, Loch Lomond distillery has not got the highest reputation in the whisky universe, as they produce more for the mass market than for the high end sector. Their standard expression is a dram that most experienced whisky drinkers stay clear from. But that’s not the point here. They have been making perfectly legal single malt whisky for decades. It’s not everybody’s cup of tea, but if nobody bought their whisky, they would have long had to close down the distillery.

It’s All About Business

What is the reason for this change right now? Loch Lomond has been producing column still single malt for almost 45 years. Now it shall be illegal. If the SWA were truly concerned about the traditional way of making single malt whisky, they could have gone forward with this action much earlier.

Of course the true reason behind this is money. Loch Lomond Whisky is cheap, a standard bottle is not much more expensive than a standard blend. Many SWA members produce blended whisky, so Loch Lomond is in direct competition with them. Scraping off the “single malt” label from Loch Lomond bottles would mean that the distillery will lose an important property that sets its product apart from the blended whiskies. And in times of economic uncertainty, this is a welcome opportunity for blend producers to get rid of an annoying competitor.

And there is another thing: The Scotch whisky industry involved in drawing up regulations for Scotch whisky is like putting the fox in charge of the henhouse. Perfect lobbyism.

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In the first three parts of this series I looked at Glenmorangie, Ardbeg and the SMWS. Now let’s try

Putting it All Together

But hold on a minute! Wasn’t there also a third distillery involved in the LVMH/Glenmo deal? Yes, you remembered right, the bundle also included Glen Moray, a fairly unspectacular distillery – “tier 3″ as they call those in the whisky buisiness – producing mostly for blends. Well, this doesn’t go well with LVMH’s luxury attitude, so they decided to sell it.

Now when you look closely at the three portfolio items, it becomes apparent that LVMH was pursuing a cunning plan, as Blackadder’s Baldrick would put it.

• Whisky styles
  Glenmorangie: unpeated, various degrees of finishing
  Ardbeg: various peat levels from gentle to intoxicating
• Brand images
  Glenmorangie: Conservative, a touch of glamour
  Ardbeg: Progressive, celtic heritage
• Consumer appeal
  Glenmorangie: Middle aged to old, distinguished
  Ardbeg: Young and freaky
• Whisky experience
  Converted blend drinker, casual single malt drinker -> Glenmorangie 10, Ardbeg Blasda
  Regular single malt buyer: The rest of the Glenmorangie of Ardbeg ranges, according to personal taste and wallet size
  Experienced Malthead: SMWS single cask bottlings

With only three items in their portfolio, LVMH has managed to embrace the totality of single malt drinkers. Horizontally by personality, taste and age profile as well as vertically for any experience level. By giving Glenmorangie a little glamour appeal they hope to lure blend drinkers form the mass market into the high profit single malt market. And as the ultimate pinnacle for the true whisky experts there is the Scotch Malt Whisky Society where members can elaborate on the vanilla fudge notes in the 7.11. “Blue Oyster Cult and Red Hot Chili Peppers”

What LVMH did here was in fact adapting classic warfare tactics to marketing: Surround your enemy so they can’t run away, and then go for the leaders in the centre.

It becomes obvious that the Glenmorangie takover was a highly efficient and thoroughly planned manoeuver, and it seems they can already begin to rake in the cash.

Now is This Good or Bad?

The answer to this question depends on your standpoint. From a business view, this is brilliant textbook marketing. But is such a development really good for whisky in general?

I am a firm supporter of variety in whisky. This “one size fits all” approach may be highly profitable. But when marketing departments decide over the product range of distilleries, the variety is bound to suffer. And we must not forget that marketing and product design costs money. And this is money that can not be spent on buying better quality casks or improving distillation technology. It just makes the whisky more expensive without giving it more intrinsic value.

To put it shortly: What may be good for business is actually bad for whisky. Marketing driven, streamlined products have nothing in common with what Scotch whisky really is: A drink for heart and soul made with love and passion.

Let’s hope that not all distillery owners want to learn from LVMH. Scotch whisky has always been a hand crafted, artisan product. This great heritage is seriously endangered when marketing tells the stillmen what to do.

Slàinte Mhath!

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After looking at the distilleries of Glenmorangie and Ardbeg that LVMH received when buying Glenmorangie plc, we should also take notice of the fact that the acquired bundle also contained the illustrious Scotch Malt Whisky Society (SMWS).

Glenmorangie plc bought the SMWS just a few months before they sold everything to LVMH, plenty of room for speculations here. Anyway, what exactly is the SMWS?

Whisky Club or Independent Bottler?

The Scotch Malt Whisky Society was officially founded in 1983 in Edinburgh by some whisky enthusiasts who wanted to share their joy of single cask bottlings. They have always had excellent contacts to the industry because they have been able to do their own bottlings from just about any distillery. The price they have to pay for this is the non-disclosure of the distillery name on the bottles. Instead a number code is used, but as the code is publicly known it is no secret at all where the whisky in any bottle was distilled. Only SMWS members are allowed to buy the bottlings, currrently there are about 50000 of them. The SMWS owns buildings in various places that are open to visit to SMWS members, there are also accommodation facilities.

Opening up Another Sales Channel

In the first years after the takeover, everything went on as usual. LVMH concentrated more on the development of the distilleries than on the SMWS. But the latest bottlings, recently presented at the Edinburgh Whisky Blog, clearly showed that a wind of change began to blow. Colourful and “artsy” new labels, individually designed for each bottling, marked a distinct step away from the generic and uniform styling of the previous bottlings.

Why should LVMH invest lots of money into revamping the packaging of bottlings that are strictly members only? After all, these bottlings are the very reason why the members joined the SMWS. One should expect them to sell virtually on their own.

The reason is obvious, of course. Fancy design increases the chance of more whisky lovers joining the SMWS. By this, LVMH wants to create the same “wanna have” factor that made Apple’s iPhone a success. And don’t forget that it’s double payday whenever a new member joins. They pay their membership fee to be granted the right to purchase the exclusive LVMHSMWS bottlings. So it is not much of a surprise that the SMWS website is all about joining the club that brings you “the very best single cask, single malt whisky available to mankind anywhere in the universe”. That’s true British understatement as can be expected from a gentlemen’s club.

The final part of this series will put together the puzzle pieces.

Read on…

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After looking at Glenmorangie in the first part of this article series, let’s move over to Islay and LVMH’s second big distillery: Ardbeg

It’s Always Good to Have Fans

Glemorangie plc bought Ardbeg in 1997 and re-opened the distillery that had been mothballed since 1981, with just a low level production between 1989 and 1996. After the relaunch, Ardbeg managed to attract a huge following of whisky enthusiats because of various reasons:

• An Islay distillery saved from death is always a big story. There are many fans of peated Islay whisky, and they will be happy when they are provided with the stuff they love.Because of limited stocks and the long period of being mothballed, Ardbeg’s regular expressions, namely the 10yo and especially the 17yo contained whisky that was several years older than the age statement suggested. This resulted in high quality bottlings for a reasonable price that peatheads eagerly jumped upon.
• 1999 the “Ardbeg Ccommitee” was founded, where members are offered a chance to purchase limited edition bottlings.

When LVMH bought Glenmorangie plc including Ardbeg in 2004, they received a fully operational distillery with an enthusiastic community of fans. What else could you wish for when you buy a distillery?

Let’s Start to Milk the Cash Cows

Other than with Glenmorangie, the LVMH marketing department decided to resist the urge of a complete overhaul of the Ardbeg brand. The distillery had enough fans, so there was no real need to open up new markets for the whisky. The old Ardbeg design was inspired by celtic writing which gave it somewhat of a mystical touch. They gave it just a subtle facelift that emphasised the celtic connection while posing no danger of deceiving the crowd.

Inspired by the success of the committee bottlings that fetched ridiculous prices on eBay, Ardbeg now started a series of limited and special releases with hefty price tags:

• Blasda – Lightly peated, chill-filtered, bottled at 40%, no age statement. Price: €50+
• Supernova – Heavily peated, NAS, Ardbeg’s answer to Bruichladdich’s Octomore. Price: €85+
• Coryvreckan – Sherried, NAS. Price: €60+
• Single Cask 772 – 16yo, Price: €250, sold out online within 20 minutes

Although there has been quite some debate about the pricing, these bottlings have been selling very well.

And Finally We Have Some True Luxury

Even with the long period of being mothballed, Ardbeg seem to have more old casks in their warehouses than Glenmorangie. No true oldies though, but at least they found some leftover casks from the legendary 1974 vintage. They could have bottled these straight away, and they would have sold like hotcakes for €500+. But this time, LVMH thought of something very special:

They made two 1974 single cask bottlings and added as a bonus:

• A handmade bespoke leather guncase
• 8 handmade sterling silver drinking cups
• A pen made from oak and sterling silver
• 2 leather bound books for tasting notes
• White gloves
• A leather cleaning kit

This ensemble was called Double Barrel which of course is a pun on the double meaning of the two single casks and a hunting shotgun. Price tag: €15,000

Lesson to learn: If you have excellent but no luxury whisky, then sourround it with luxury items and sell it for a multiple of its true value.

After two years, there are still double barrels on sale, even at online shops. But this does not really matter. Ardbeg created an enormous amount of hype around this release that certainly had positive side effects on the sales of their more affordable bottles. And that’s what marketing is all about, isn’t it?

The next part of this series will focus on the Scotch Malt Whisky Society.

Read on…

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In October 2004, French luxury goods conglomerate Moët Hennessy – Louis Vuitton S.A (LVMH) bought Glenmorangie plc from the Macdonald family who had been in possession of the company since 1918. The portfolio included Glenmorangie, Ardbeg and Glen Moray distilleries as well as the Scotch Malt Whisky Society (SMWS).

This was not just another takeover like Pernod Ricard’s acquisition of several distilleries from Seagram. As it has turned out, this was not only an attempt to get a foot into the whisky business but also a strategic move to convert the somewhat dusty and folkloristic image of Scotch whisky into that of a luxury commodity.

What LVMH has done in recent years teaches us a lesson in marketing, whether you like the results or not. In this series of articles I will take a closer look at their actions.

Where did the Sixteen Men of Tain Go?

“Handcrafted by the sixteen men of Tain” was the motto of the Old Glenmorangie, utterly rooted in the tradition of artisan whisky making, refined by centuries of experience. Bottles were adorned with deliberately old fashioned looking labels that proudly showed the distillery as a drawing.

But this corporate identity was counterproductive for the integration of Scotch whisky into a portfolio of global luxury brands. The poor sixteen men of Tain with their callous hands, sweating in the still house or stacking up casks in dusty old warehouses could have never won a fight with glitzy supermodels holding chi-chi handbags and champagne glasses in their skinny hands.

So LVMH decided to do a major revamp of the Glenmorangie brand, turning the most popular single malt sold in Scotland into a brand of global appeal. Ditch the old still-necked spirit bottle, design trendy new labels and invent new names that will evoke a feeling of luxury for anyone from Sao Paolo to Shanghai.

Now the transition is finished, and we have a product range that displays the same nonchalant boredom as anything else that has been put through the grinder of a globalized marketing department: Perfectly marketable products called Original (aka 10 yo), Lasanta (aka Sherry Wood Finish), Quinta Ruban (aka Port Wood Finish), Nectar d’Or (aka Sauternes Finish), Astar (aka Artisan Cask) or Extremely Rare (aka 18 yo).

Luckily the whisky itself hasn’t changed too much. It was good before and it is good now. Just the prices are up to pay for the marketing expenses.

But Where is the Luxury?

Distilleries like Dalmore, Glenfiddich, Macallan and others regularily release very old whiskies for extremely high prices. Single malts aged 40, 50 or even more years can be sold with four or even five-digit price tags. Now you would have expected a dedicated supplier of luxuries like LVMH to come up with something along this line. But all they have to offer is their new Signet with no age statement (!) for €100+ and a 25yo for a measely €300. And we take notice that they already call their 18 yo “Extremely Rare”.

This is a clear signal that Glenmorangie – despite having been in contiuous operation for over sixty years – have no old stock to speak of that they could use for true luxury bottlings. If they had, they wouldn’t have hesitated a minute to offer it to the rich and famous. But who cares? Clever marketing will make up for that.

The series will continue with a look at Ardbeg.

Read on…

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Buy at the Whisky Exchange

I stated that in this blog I didn’t want to get into industry buzz. But here is a news that I just have to pass on and comment on because this is more than just another whisky relase.

Compass Box just announced that their award-winning Spice Tree is available again!

For those who don’t know the story behind that whisky: The Scotch Whisky association (SWA) disapproved of the Spice Tree because it was finished in casks with additional inner staves of toasted new oak. Although there are no legal regulations about how the inside of a whisky cask has to look like, the SWA regarded this practice as a deviation from the traditional way of making whisky and threatened to open a lawsuit. Compass Box decided to comply, even though there would have been a realistic chance to win the lawsuit. But David vs. Goliath situations are never guaranteed to end like in the Bible.

Compass Box did a lot of experimenting and now came up with a method of recreating this whisky that is compliant with the SWA’s view on making whisky. Instead of inserting additional staves into the cask, they now use heavily toasted cask heads that impart the same effect on the whisky as the staves. Re-charring and re-toasting used casks has always been done, so there is no way the SWA could be opposed to this practice.

At first glance, this sounds like a victory for the SWA, as they have forced a whisky maker to comply with their regulations. But this is just one side of the medal. All its worthwhile efforts in promoting Scotch whisky nonwithstanding, one has to take into account that the SWA is also a lobbyist organization of the big players in the whisky industry. It’s big money we’re talking about here, so the SWA has a keen eye on anyone who they think might disturb their circles. Their talking about how innovations in whisky making will destroy whisky tradition is at least partially a fig leaf to cover the fear that their member’s market shares might shrink.

In this light, Compass Box has managed to beat the SWA with their own weapons. This is great news for anyone interested in innovation in whisky making while retaining the authenticity of the product.

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It is now an open secret that whisky industry giant Diageo will launch a new series called “Manager’s Choice” on September 4. News has been leaking for about a week, so Diageo has decided to make it official now.

The series will feature exclusive single cask bottlings from all 27 distilleries owned by Diageo, to be launched in batches over the next year. At first glance this is a brilliant idea, reminding a bit of the legendary “Rare Malts” series of the 1990s. But if you look closer, there are two fundamental differences:

1. The “Rare Malts” bottlings were specifially chosen for their rarity. Focus was on distilleries seldom seen on the shelves with an additional emphasis on silent stills. And most whiskies were over 20 years old.

The “Manager’s Choice” series spans all Diageo distilleries from the obscure like Teananich to the famous like Lagavulin. And it was the intention to seek the “most distinctive expression of that distillery’s single malts” as the press release states, resulting in a list of fairly young whiskies as compared to the “Rare Malts”

2. The “Rare Malts” were priced rather sensibly, and even today, years after discontinuation of the series, many bottles sell for around or somewhat above 100 Euros on the collector’s market.

The prices for the “Manager’s Choice” series will go far beyond that. Here is a list of prices for the fist released batch, taken from What Does John Know?:

Cardhu™ , distilled 1997, 252 bottles, £250
Glen Elgin™, distilled 1998, 534 bottles, £250
Linkwood™, distilled 1996, 480 bottles, £200
Mortlach™, distilled 1997, 240 bottles, £250
Oban™, distilled 2000, 534 bottles, £300
Teaninich™, distilled 1996, 246 bottles, £200

I strongly suspect that the £300 for the Oban will set a new price record for a newly released whisky that is less than 10 years old. It is not only my guess that most of the bottles will lead a sad life taking dust on collector’s shelves without ever being opened.

I am conviced that the “Manager’s Choice” bottles will be sold out almost immediately. But cranking up prices like this leaves a very bitter aftertaste in light of Diageo’s plans to close the Kilmarnock bottling plant beacuse of declining revenues.

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