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Irish Comes of Age

Posted on  | January 24, 2014   Bookmark and Share
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With distinctive brands and attractive line extensions, Pernod Ricard is revolutionizing the Irish whiskey category.

It’s no secret that Irish whiskey is exploding. With revenues hitting $415 million in the U.S. last year, it’s grown 460% since 2002 according to DISCUS. However, Paul Di Vito, VP, Irish & North American Whiskey, Pernod Ricard USA, would like to remind everyone that “Irish is still in its infancy.” Consider this: Irish whiskey imports reached the 2 million case mark in 2012. By comparison, Scotch sold 8 million cases.

This translates to a very bright future for the Irish spirit. “We are only just getting started,” says Di Vito. “While we are the smallest category, we are growing at almost two and a half times the pace of all others. And value is outpacing volume by  4%.”

Even category giant Jameson, which owns 70% of the Irish whiskey market in the U.S. and has posted double digit growth for years on end, is nowhere near its potential, says Di Vito: “I would never use the word mature to describe Jameson. Even if you look at the most developed markets, places like Illinois, New York or California, Jameson is much smaller than its competitive whiskey set—Jack Daniel’s or Crown Royal—so we see incredible opportunity. We talk to our sales force frequently about how small we actually are.”

When Pernod Ricard acquired the brand in 1988 it was under half a million cases. Last year worldwide sales hit 4 million. The Irish boom hasn’t gone unnoticed: A growing number of other big spirits companies have entered the category by purchasing or developing Irish whiskey brands. Today the category is more robust and diverse than ever, thanks to innovation happening at the high end with higher proof releases, inventive maturation processes and new Single Pot Still expressions.

BEYOND THE SHOT

Jameson owes much of its dynamic growth to being embraced as the shot of choice in bars nationwide; the Pickleback—a shot of Jameson followed by a shot of pickle brine—is no less than a phenomenon. “We were one of the first brands to be part of the whisky shot revolution; we know we stole share from tequila,” says Di Vito. This occasion has allowed the brand to bring in new drinkers, Pernod Ricard has discovered—non-traditional whiskey drinkers like women and younger consumers. Rather than steal share from other brown spirits, Jameson is growing the entire whiskey pie.

But to call Jameson a “shot brand” doesn’t tell the whole story. “When we look at occasionality for Jameson, we find drinkers who will do a shot, they consume it on the rocks, and other times sip it neat or in a cocktail,” says Di Vito. “This is the fundamental, most critical reason why the brand continues to grow: It has the versatility to be consumed in a range of different occasions by the same consumer.”

RETAINING THE MATURING WHISKEY DRINKER

This is not to say that consumer isn’t evolving. Irish whiskey serves as a point of entry for many whisky drinkers, and Pernod Ricard sees opportunity in holding onto those consumers by giving them different Irish options to explore. “As whisky drinkers mature, they will experiment with single malts, small batch bourbons and locally crafted artisanal whiskey,” Di Vito says. “We want them to have other choices within the Irish category.”

The gap between Jameson’s entry level offering and the Jameson 12 Year Old and 18 Year Old is a big one in terms of both taste profile and price, so last year the distillery created Jameson Black Barrel, a richer, more intense expression which is partly aged in deep-charred bourbon barrels, priced around $43 at retail. It has been so successful, Pernod Ricard is unable to expand beyond the 13 states of current distribution because there isn’t enough liquid.

“Everywhere we place it, it takes off,” says Di Vito. “It’s a completely new Jameson experience.”

Interestingly, in addition to attracting Jameson drinkers looking to trade up, Black Barrel has pulled in Scotch and bourbon drinkers who are new to the brand, notes Di Vito: “It’s a small batch whiskey for us; we only distill it once a year. Bars have been playing with it and promoting it in new ways.”

SATISFYING THE APPETITE FOR DIVERSITY

Irish whiskey is benefiting from a perfect storm of consumer trends—the growing popularity of brown spirits, a curious consumer demanding more high-end options, and motivated retailers willing to devote more shelf space to the Irish category. “We are now able to bring to life brands with rich history; this is where the category is headed,” says Di Vito.

One such brand is Powers. Recently repositioned with a new package and price, and returned to its original strength of 43.2% abv and non-chill filtered (as it was when it launched 60 years ago), Powers is finally getting the love it deserves, Di Vito explains. “We were so focused on Jameson, we really hadn’t paid attention to Powers, which had been growing at 16% with very little effort on our part. But it got to a certain size and we realized we needed to take a serious look at this brand.”

Defined by a lingering spiciness and richer mouthfeel than Jameson due to an expensively greater inclusion of pot still whiskey in the blend, Powers is an exceptional product—and was long underpriced considering the cost going into the bottle. Pernod Ricard is still working to help the trade understand the necessity of the price increase, but so far it hasn’t really hurt sales—and at just $5 above Jameson on the shelf, it still over-delivers. The Powers consumer is someone well into their whiskey journey; an ideal transition step for the consumer looking to explore a more complex whiskey.

RETURN OF THE POT STILL—THE SINGLE MALT OF IRELAND

Hands-down the most exciting development in Irish is the return of Single Pot Still whiskey (see box). A style completely unique to Ireland, SPS was the preeminent whiskey in Ireland 100 years ago, but over the decades, the category practically died out. All Single Pot Still whiskey currently produced in Ireland hails from the Midleton distillery (where Jameson, Powers, Redbreast, etc. are produced) which enables Pernod Ricard to lead the resurgence. “We have a phenomenal amount of pot still whiskey in cask; we want to own this category,” says Di Vito.

Much of the pot still whiskey the distillery crafts goes into larger brands, giving Jameson its hallmark spicy richness, for example. Historically, the only SPS whiskey available in the U.S. has been Redbreast, the cultish small-batch whiskey which has one of the most devoted followings—both trade and consumer—of any spirit. At $50, and with a robust, powerful taste profile, Redbreast doesn’t recruit from the Irish whiskey category, believes Di Vito, but pulls drinkers from Scotch. It just broke through 20,000 cases in the U.S.

This month, Pernod Ricard is launching Green Spot, a Single Pot Still whiskey that the Midleton distillery has been producing for about a decade. It doesn’t have an age statement, though it contains a lot of older stocks. Priced similar to Redbreast, it has a slightly sweeter taste profile, and the U.S. will only get about 1,000 cases. Powers recently debuted its John’s Lane 12 Year Old expression, a Single Pot Still whiskey aged in bourbon and sherry casks.

At the top of the heap sits Midleton, the Midleton Distillery’s namesake brand. There are several expressions—all super-premium—and only 2,500 cases make it into the U.S. market (which represents 90% of Midleton’s production). The pinnacle of Irish whiskey, Midleton has generated tremendous interest among whiskey enthusiasts. Whereas Redbreast is aged in new oak and is all about bold flavors and power, Midleton is a more delicate whiskey, marked by soft pear and melon flavors. The whiskeys in Midleton Very Rare are aged between 12 and 25 years and are matured in bourbon-seasoned American oak casks.

THE CASE FOR MORE SHELF SPACE

Irish whiskey may have once been an underdog category—a whiskey that sold well around St. Patrick’s Day and languished the rest of the year. Today, as the fastest growing category with more premium offerings than ever, the opposite scenario is playing out. Irish whiskey offers incredible value to the retailer year round, which is why it’s time to give Irish more play on retail shelves and back bars, Di Vito argues: “If you look at bourbon and Canadian whisky, Jameson is on average $2 more premium—it’s a more efficient per-bottle facing. The value it delivers on- and off-premise is significant, and the more facings Irish whiskey gets, the more money the retailer will make.”

Research has shown the Irish whiskey consumer enters the category spending about $25 on a bottle. Now there is a very large group willing to spend double that for certain occasions. With brands like Redbreast, Midleton, Green Spot and Jameson’s high-end offerings, there are many more expressions to consider in the Irish whiskey set. “We want to convince retailers to showcase a greater number if Irish whiskies—similar to what they do with bourbon and Scotch. In many cases, it’s about questioning some of their slower categories and re-allocating shelf space. There is an insatiable appetite from consumers for whisky and Irish is very much a part of that.”

Experts predict the category will increase from today’s 2 million cases to 6 million within the next decade, making it bigger than gin and giving Scotch a run for its money. Pernod Ricard is planning accordingly: The Midleton distillery recently announced a 150 million euro investment which will double its capacity once it is complete in 2016. The company is laying down significant volumes of aged stocks and Single Pot Still spirit so in a decade they will be ready.

“The category has come of age and we look forward to building it with the other players and our retail partners,” says Di Vito. “Irish whiskey will triple in size over the next ten years, so we want to see it get triple the space for a reason. The retailers will benefit most.”


Comments

  1. » Publisher’s Page: February 2014 Beverage Media Group
    January 24th, 2014 @ 9:49 am

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