Posted on | February 18, 2015
Written by | Jeff Cioletti
There’s no denying that whiskey has been on a tear as of late, but the fastest-growing segment of the category tends not to get as much attention as its Scottish and Kentuckian cousins.
Overall, whiskey already accounts for more spirits revenue than vodka and it’s poised to overtake it in volume soon enough. That’s due in large part to the surge in demand for high-end, straight American whiskeys—including the bourbon, rye and Tennessee segments—as well as the top price tier of the Scotch segment, single malt.
However, the real MVP, in terms of percent growth, has been Irish whiskey, which has been growing in the mid teens to low 20% range for the past several years. Irish represents about 2.5 million 9-liter case equivalents, or just under 5% of total U.S. whiskey volume, according to the Distilled Spirits Council of the United States (DISCUS). In revenue terms, Irish accounts for about $500 million of the $7 billion whiskey category, or about 7% of total dollars. For 2014, Irish volume increased 9.1%, while revenue increased 10.7% to $553 million, according to Nielsen.
Segment leader Jameson has had a great deal to do with Irish whiskey’s overall trajectory, as brand owner Pernod Ricard reported its revenue growth in the U.S. market slightly outpaced that of the brand’s overall global business, surging 13%. Those numbers seem even more impressive when considering the fact that Jameson commands nearly two-thirds of the global market for Irish whiskey.
“There’s obviously good marketing behind the brand, thanks to Pernod Ricard,” says Heidi Donelon, internationally renowned Irish whiskey expert and the driving force behind the Ireland Whiskey Trail. “But at the end of the day, you could throw all the money behind a product and if it’s not good, it’s not going to be a massive success.” Jameson’s signature smoothness and approachability, she says, has been helping consumers discover or rediscover the category.
Shifting drinker demographics have also played a role, says Jameson brand director Sona Bajaria. “Whiskey drinkers are different than they were 10 years ago; consumers are changing and becoming more savvy,” Bajaria says. “Whiskey drinking occasions are evolving—straight, mixed, cocktails, etc. Additionally, more women are entering the category.”
Pernod Ricard expects Jameson to be a billion-dollar brand before the end of the decade, and its momentum is a welcome development not only for the parent company, but other brand owners competing in the space.
The category, Bajaria says, will continue to welcome new entrants offering not just new trademarks, but also further segmentation within the category like small-batch offerings and flavored options. “In the context of this category, Jameson will continue to build upon its current advocacy by remaining relevant with its current offering, innovation and application to multiple usage occasions.”
For the new and smaller players in the category, Jameson is that proverbial rising tide, and they hope that some of the spotlight the dominant brand is enjoying might spill on to their contenders.
“The other brands are capitalizing on the growth of Jameson,” says Alejandra Peña, senior vice president of marketing for Castle Brands, known for its Clontarf brand and the more premium Irish single-malt Knappogue Castle, available in 12-, 14- and 16-year-old expressions, as well as some limited-release bottlings.
A key growth driver for the overall Irish whiskey segment has been its approachable taste profile, which tends to be a bit milder than the more flavor-forward bourbon and Scotch. “Irish whiskey, compared to other whiskeys is much easier to drink,” Peña notes.
Castle has been able to play in that space, given the familiar flavor characteristics consumers may initially have encountered with Jameson. “We have Clontarf, which is a blend and basically we are a value brand, priced a bit below Jameson,” Peña explains. “And we have been growing quite nicely in the U.S., as well as Europe. But it’s hard to compete against the giant; we don’t have the same resources. Consumers like Jameson, but at some point they’re ready to try something new. That’s why smaller brands see the benefits of what Jameson is doing.”
In that respect, Irish often acts as a bridge for regular vodka drinkers who want to transition to a spirit with a bit more flavor. “Irish whiskey is a perfect fit, as opposed to going straight to Scotch,” Peña explains.
There’s also rising interest among those already drinking whiskey who are looking to broaden their palates across all of its diverse styles and expressions. Social media certainly has made the consumer base more well-rounded and better informed.
“I think the category is seeing such growth because many consumers are looking for an alternative to standard whiskeys,” offers Mara Melamed, the senior brand manager for Beam Suntory’s Irish whiskey portfolio. “There is a certain appreciation for Irish whiskey that is evolving along with today’s whiskey drinkers. Consumers are now more educated and are looking for new options with distinct flavors.”
EXTENDING OUT & UP
Once consumers participate in the category on the sub-premium level, the time may come when they’re ready to trade up. “There’s room for premium brands like in the vodka segment with Grey Goose and in tequila with Patrón,” Peña notes. “Premiumization hasn’t really happened yet, but [Knappogue Castle] is the brand we have to compete in that segment.”
Peña says she hopes to woo a few Scotch drinkers to the Irish side, especially since those consumers tend to have an affinity for history and heritage. “They like to explore,” she says. “Maybe not the super hardcore single-malt drinkers who like products that are very smoky. We’re much more delicate in taste profile.”
Meanwhile, Beam Suntory plays across most of the price tiers, starting with 2 Gingers, which retails for $19.99 and whose smoothness and slightly sweet profile is designed to appeal to a new generation of whiskey drinkers of both genders. “We’ve introduced 2 Gingers as the ‘converter,’ as it’s meant to convert consumers who typically drink beer or vodka into whiskey drinkers,” says Beam Suntory’s Melamed, calling the brand “genderless, seasonless, mixable and accessible.” It’s also double-distilled, which goes against the grain of the typically triple-distilled Irish whiskeys and is more in the Scotch tradition.
Also twice-distilled is Kilbeggan, Beam’s premium-blended brand, produced in a 180-year-old pot still and selling at a suggested price of $23.99. Tyrconnell, which retails for around $34.99, is positioned as an ideal introduction to the world of single malt Irish whiskey. Those looking for a more smoky, peaty profile akin to an Islay Scotch are the target for Beam Suntory’s Connemara brand, selling at a suggested $44.99. Finally, Greenore, with a price tag of $49.99 gives consumers a chance to try one of the few single grain Irish whiskeys on the market.
NO DRAM, YES DRAMA
Beam Suntory’s enhanced presence in the category hasn’t been without its controversies. In 2011, Beam acquired the Cooley Distillery, which had produced the whiskey for Sidney Frank Importing Co.’s Michael Collins brand. In a lawsuit filed two years ago and still ongoing, Sidney Frank’s legal team asserted that its contract with Cooley was “wrongfully” terminated by its new owner, which effectively cut off supplies for Michael Collins and pushed it off the market. A Sidney Frank spokesperson confirmed that the brand has been discontinued “due to lack of supply.” As a result of its absence, Michael Collins, whose line included a blend and a lightly peated single malt, has become something of a collector’s item.
While Beam Suntory has made a conscious effort to step up its profile in the category, Pernod Ricard has continued to apply full support to its Jameson franchise. Of special interest: Black Barrel, introduced two years ago, pushing Jameson in a similar direction—namely special barrel finishes—as other whiskeys of late. Not to be forgotten, Pernod Ricard’s hand in the Irish segment is broadened significantly with smaller-scale Powers (with a substantial pot still component) and upscale, aged expressions of the pure pot-still Redbreast.
On the other hand, another large global spirits marketer, Diageo, announced it effectively was getting out of the Irish whiskey business, at least for now. Last year Diageo traded the brand Bushmills to Jose Cuervo for full ownership of Don Julio Tequila. Though Bushmills performed well, the global drinks giant wanted a bigger piece of the high-end tequila market. Bushmills should make Cuervo a credible player across most price tiers in the category; its offerings range from its flagship blend to more specialty offerings like Black Bush, which gets its signature deep amber hue from seven-plus years in Oloroso Sherry casks and sweet bourbon barrels. Others in its range include the honey-infused Irish Honey and 10-year-old, 16-year-old and 21-year-old single malt expressions.
While single malt and single pot still Irish whiskeys are satisfying consumers’ desire to trade up, West Cork Distillers’ Kennedy range speaks to another trend that spans most whiskey segments: a bit o’ flavor. In addition to its original blend, Kennedy offers Spiced, Honey, Lime and Chili varieties. M.S. Walker, which imports Kennedy, also introduced the distillery’s West Cork Irish Whiskey brand last year, available in its Original Classic Blend and 10-Year-Old Single Malt.
Another relative newcomer to the U.S. market is Donegal Estates, which importer Star Industries introduced about a year ago. The blend gets its characteristic sweet nose and smooth taste from the four years it spends maturing in bourbon barrels.
Also popular on the market is William Grant USA’s The Knot, which technically isn’t an Irish whiskey—it’s considered a whiskey liqueur, along the lines of a Drambuie or Southern Comfort. The company is clear about whom they are targeting. Marketing material describes it as “a shot drink” and “a real man’s drink that respects the sacred code of real manhood.”
With so much consumer demand for new products and line extensions, the industry has been in a race to ensure that production and logistical infrastructure are up to date. Among Ireland’s new distillery projects, the Walsh family’s facility—slated for completeion in 2016—is notable in that all three types of whiskey (malt, pot and grain) will be made under the same roof for the first time. Their brand, The Irishman, imported by Palm Bay, uses methods from Irish whiskey’s heyday 200 years ago and boasts a diverse array of styles. Expressions in the portfolio include the bargain-priced Founder’s Reserve (SRP $33) and a high-end Cask Strength (108 proof, $150).
Last fall, William Grant & Sons brought distilling back to the town of Tullamore for the first time in six decades when it opened the new $40 million facility to produce its Tullamore D.E.W. brand. The site will help keep up with demand for the Tullamore D.E.W. range, which includes its sherry and bourbon cask-aged original, its 12-year-old Special Reserve; 10-year-old Single Malt; and Phoenix at 55% ABV with a high concentration of pure pot still whiskey.
And, this year, the Teeling Whiskey Company officially will bring whiskey making back to Dublin for the first time in more than 125 years when it opens its newly constructed distillery.
“More exciting things are going to happen because you have more brands investing,” says Castle’s Peña. “The category’s a lot more dynamic than it used to be. It used to be one player, Jameson, but now you have Beam and new brands and new distilleries being opened. Competition is going to be a bit tougher, but I think that’s going to be good for the whole category to get more consumers to switch or to try Irish whiskey.”