Report: Review of the Whisky Year 2012

Review of the Year 2012

Take over, production and new distilleries
2011 was a year rich in events, with the resurgence of the Irish Pot Sill whiskey. The Irish whiskey industry is continuing its growth and attracted not only the attention of the customers, but also on big companies, with Beam Global purchasing in 2012 the only independent Irish distillery: Cooley.

Another important acquisition took place this year, with the French Cognac Company Remy Cointreau acquiring Bruichladdich for £58 mio, a price largely superior to the price paid for Tamdhu by Ian McLeod (Glengoyne) last year. This will probably increase the value of the other distilleries available for sale (e.g., Speyside distillery), but not necessarily of larger companies (e.g,, possible sale of Whyte & Mackay).

In spite of the economical downturn in Europe (e.g., financial crisis in Greece and Spain), the value of Scotch whisky exports increased by 12%, and the large whisky companies are looking forward expanding their production capacity. Diageo has applied for permission for distillery (ies) expansion at several sites and does not exclude to build another distillery of similar size to Roseile. Pernod Ricard is reopening Glen Keith and announced new plans for their Imperial distillery. Although Edrington sold Tamdhu last year, they are looking forward for further developing Macallan. Morrison Bowmore Distillers have increased their production at Auchentoshan, working now at full capacity (1.7 mio LPA) and at Glengarioch distillery, since November, production is up to 50%. New distilleries are either at the planning or construction stage (e.g., Annandale or the Adelphi distillery in Ardnamurchan). Unfortunately, since work had not started by end of November at the Huntly distillery, it seems like Duncan Taylor had to give up on their project, as Bruichladdich before with their Port Charlotte distillery. In Japan, Karuizawa distillery is now forever silent.

Prices

With the crops being poor this year in Scotland, the price of malted barley is expecting to increase from the current £300/tonne to around £350 next year.

This could eventually result in a slight increase in prices on the final product. The impact should be however less pronounced than the increases costs linked to marketing, with an increasing number of new products released, new packaging, increased in the number of whisky fairs worldwide and thus increasing the commercial costs linked to them (e.g., more brand ambassador, more flights, more advertisements).

Over the last years, the price of very limited editions (e.g., Dalmore 1926, Macallan Lalique, etc) was continuously increasing, without any apparent limit. It seems like the limits have been reached, with the latest Bowmore 1957 failing to reach its minimum price of £100,000 (PS: the bottle available at the distillery was sold on 20 Dec 2012). This does not prevent companies to bottle more and more bottles retailing for over €1000 or £1000 (e.g., The Dalmore Constellation, Bowmore Queen’s visit, Bunnhahabhain 40 YO, Glen Grant 1952 Queen’s Diamond Jubilee, Auchentoshan 1966). Will they continue to fly from the shelves or collect dust in the shops? The future will tell.

With the price of the latest limited editions reaching new levels, this stimulates again the auction sector, with old bottles offering a cheaper alternative to comparable new whiskies. However, the number of very old whiskies (whiskies distilled or bottled until the 1960s) is becoming scarce with pricing reflecting this rarity. Some companies (e.g., Diageo) have revised the price of their latest released to benchmark the price reached by similar version at auctions (e.g., the price of the Lagavulin 21 YO bottled in 2012 is priced to the same level as the lagavulin 21 YO bottled in 2007). Several bloggers and/or whisky enthusiasts have criticized the pricing of the new Diageo Special Releases, but the most expensive bottles sold out before reaching the shelves (sold out on pre-order). Compared to other companies, prices are still acceptable and since the quality was there, customers agreed on paying extra.

My main concern is the combination of high prices with significant increases in production volumes. India, South Africa, USA, China and Taiwan are consuming whisky as never before and the potential in Asia, Africa and Latin America is huge. However, if the sales forecast are overestimated (e.g., these regions might be affected by new economic crisis, wars), then a whisky loch similar to the one of the 1980s is not excluded. Whisky is fashionable but several whisky enthusiasts are now moving to other brown (e.g., Rum) or white spirits, (tequila, mescal) which are generally cheaper alternatives.

Education and whisky fairs

New people are succumbing to the appeal of whisky every day, with a strong desire to learn more about whisky, while long term whisky enthusiasts, the “Anoraks” are consolidating their knowledge and whishing to further refine it. To answer these two categories, the majority of the distilleries are offering at least two different tours, a standard and a connoisseur tour. Education of the staff is becoming critical and some additional efforts are needed. In the latest edition of a Whisky book, I was surprised to read that most of the statements made from a brand ambassador were inaccurate. This should not happen.

Regarding whisky fairs, the number is continuing to grow, stretching the marketing budget of several companies. With several taking place at the same time, they are competing each other, potentially decreasing the interest of the old established one. Furthermore, the “quality” of the whisky tends to decrease, with the exceptions of the whisky fairs where you pay for each dram. In most fairs where you pay a fixed entry price, hardly any whisky worth other £300 can be tasted. I do not mind to pay several hundred pounds for an excellent whisky, but I am not ready to pay £500 or more for a bottle if I cannot taste it before.
In the past, whisky fairs were such an opportunity, but nowadays, with maybe the exception of the Whisky Exchange Whisky Show, this is very seldom. If producers wants to sell faster their very highly priced whiskies, they should give more opportunities for the potential buyers to taste them, even if they have to pay for it.

Whisky-news.com

Following the feedbacks received by my readers, several improvements were made to my website, including cleaning of the code, fixing incorrect links, improving slightly the presentation of my tasting note sections and providing more in depth “Distillery in focus” pages. My website remains slightly “old fashioned” but it remains fast and rather easy of access. Since I have limited technical knowledge, this will not be significantly improved since I wish to spend my time primary on tasting notes, reading books and providing you with the most accurate information available.

For my distillery in focus, I have extended my research to additional references sources, since several of the information provided on companies websites or “standard” whisky books are unfortunately incorrect or incomplete.

With an increased in traffic of almost 50% compared to last year, this suggest that these improvements were positive.

I wish a merry Christmas, and plenty of pleasure for tasting with moderation new drams in 2013!

Slainthe

Patrick