Three Current Trends In Whisky And Why They Are Worrysome

by Oliver Klimek on February 12, 2014

The last years have seen quite a change in the fomerly so conservative whisky business. I see three major trends, and I must admit that none of them makes me happy.

1. Garni du Jour

Recently I wrote about the Lindt Syndrome, the ever increasing number of whisky expressions from single distilleries or brands. While this refers to what’s inside the bottle, there is another syndrome whisky is suffering from, this time affecting the things you cannot drink. It is not only about packaging but the entire way many whisky bottlings are presented in the market these days.

In a 1978 interview with Down Beat Magazine, Frank Zappa used the term garni du jour to describe the American music business of the late 1970s:

“There’s so much peripheral stuff that helps them make their analysis of what the music is. Here’s the simplest example: Take any record, stick it in a white jacket and hand it to somebody and let him listen to it. The next day, hand him the same record with a real album cover–with a picture and some type on the back that gives him some key to what the music is. The results are completely different. The way in which the material is presented is equally important as what’s on the record. It’s the GARNI DU JOUR way of life. You go buy a hamburger. If somebody gives you a hamburger on a dish, it means one thing. If somebody gives you a hamburger on a dish with a piece of green stuff and a wrinkled carrot and a radish–even though you don’t eat that stuff–it’s a Deluxe Hamburger. It’s the same piece of dog meat on the inside, but one’s got the GARNI DU JOUR. American have become accustomed to having a GARNI DU JOUR on everything.”

The analogy is not perfect, but I see many parallels with the whisky busniess of the early 2010s here. The whisky by itself is not sufficient anymore. It needs to have a story, or a myth; and name and packaging need to reflect this. Highland Park certainly is the leader in this discipline. They have decided to go full Nordic, starting off with Earl Magnus et. al., continuing with the Travel Retail (don’t get me started…) Warrior series all the way to the range of Valhalla gods who come in their own mock viking boats. Anything mystic or rough will do just fine. Arran Machrie Moor, Bowmore Devil’s Cask, Bowmore Tempest, Talisker Storm, Ardbeg Corryvreckan et cetera ad nauseam.

Another disicpline is inventing fancy new names, preferrably in Gaelic. Leader of the pack here must be Glenmorangie who have made it a tradition to pick names for their whiskies that are almost but not quite different from Hyundai cars.

I could go on and spend a couple of hundred words on citing more examples, from top to bottom shelf, but I will spare you and myself from this.

2. No Age Statement

NAS whiskies have been a pet peeve of whisky geeks for quite a while. Usually the whisky industry defends them with the “This allows us to select the best casks regardless of the age” argument. Honi soit qui mal y pense. Hardly anyone outside believes this anymore, especially since Macallan has turned their entire basic range into NAS bottlings.

Yes, of course there are notable exceptions like the Aberlour A’bunadh or the Balvenie Tun 1401. But especially in Travel Retail (oh no, not again…) NAS bottlings often smack more of cost optimization and problems with dwindling stocks of properly aged whisky than they please the palate.

It should be noted that this is not a specifically Scottish problem. A lot of bourbon whiskies have dropped their age statements as well.

Much has been written about the NAS trend here and by other bloggers, so I will keep this short. But Lukasz (aka Lucas) Dynowiak from the Edinburgh Whisky blog deserves a special mention here. He is not only a whisky blogger but also involved in the PR work for Inver House (or International Beverage to be more exact) who for example produce anCnoc, Balblair and Old Pulteney. Now this looks like a proper conflict of interests. But even he attacks NAS in a recent blog post, and he does it with vigour.

3. Pricing

Another old ‘favourite’. High end prices have gone up like crazy as exemplified by the 2013 Diageo Special Releases. with visible effects on general whisky prices as well. Again, much has been written about it and perhaps you might even be bored by it by now. The interplay of retail price tags, auction results and whisky investment gurus has created a situation which I find more and more explosive. Now that the Chinese newly rich threaten to step back as buyers, the air on Price Peak has become rather thin.

Conclusion

All of the three trends are not exactly to my liking. But when they are combined, things begin to look really worrying. There is nothing bad per se to tell a fairy talestory about a whisky and to wrap it in fancy clothes. But if it is of dubious age and costs more than comparable age statement whiskies, it is probably not only me wondering if the garni du jour serves only as a disguise for what some call a rip-off.

This is of course written from the percpective of a whisky geek. But to understand why these trends happen, we need to look at their reflections in the glazed facades of the corporate headquarters.

  • Garni du jour equals “creating demand”
  • NAS equals “coping with demand”
  • Pricing equals “Increasing the profit margin”

We see that this is nothing else than the 101 of running a business. It looks as if the whisky industry has finally found the magic formula for success.

Collectability, or ‘investment grade’ in whisky newspeak , has increasingly become a guideline for many new whisky expressions. Cost and stock optimization is the other. When both come together: Bingo!

But how many of these fancy new whiskies are actually better than their equally or even more cheaply priced age statement ancestors in their boring standard bottles? I dare say more arrows point down than up. Age of stock in NAS whiskies defintely is a factor here, but could it also be that the term ‘quality’ has experienced a shift in meaning? The amount of pleasure the liquid in the glass gives to you is something different than the consistency of the production process. But that is what modern quality management is all about. Just a thought.

Related Post

{ 18 comments… read them below or add one }

Jordan February 12, 2014 at 8:08 pm

As was discussed in Mr. Dyonwiak’s post, this all feels a lot like brands spending their equity. Many of them established well-deserved reputations in the early 2000s because they were padding out their whisky with glut stock. Now as it winds down, they are selling the brand more than the whisky in the bottle.

This is a viable business strategy as long as demand continues. And there are certainly those predicting that the curves will all keep going up. But even taking the growing affluence of developing nations into account, tastes are fickle. There is no guarantee that demand will stay high forever. When you combine that with the enormous investments in production (primarily by Diageo) currently underway, it looks all too likely that the business is setting itself up for another glut. If that day comes, the brands will discover just how much equity they have left with their core customers.

Reply

SK February 12, 2014 at 10:24 pm

Waiting to see what happens when they run out of Nordic gods..

First comment above is also interesting.
You have to factor in the number of new distilleries and the increase in production.

Also how much of this demand will still be there if the economies start rising rates in 2-3 years? will the investors dump their stocks and then the whole market will collapse?

Reply

Alun February 12, 2014 at 10:47 pm

Bravo.
You have hit several nails firmly on the head. Not only that but you have begun to name and shame those who are most to blame for this.

That’s the one step I was disappointed the EWB didn’t take.

Lets hope this gets some traction and the companies at fault quickly realise this once the new money is going towards something more shiny and the whisky bubble goes pop!

Reply

Oliver Philp February 12, 2014 at 11:29 pm

Oliver, the themes that you pick out have been a common factor in conversations I have with my whisky drinking buddies. I’m glad that there now seems to be a proper reaction gathering against the marketing, the slide in quality and the rising prices.

As I see it, high-end malt drinkers are now squeezed between the collectors/investors on one hand and an international market that is driving demand on the other. If we look at the UK market for example, sales of whisky overall are actually collapsing, down 12% in just five years (although the duty escalator is partly to blame). And there is a similar story around Europe. The industry seems quite happy to chase sales in China, India and Brazil at the expense of its traditional markets. And all the while the higher end of the market in malts becomes a circus of declining quality, marketing gimmicks and spivs, creating a feedback loop of ever-rising prices.

At the end of the day whisky is a business like any other, cut-throat and opportunist. For all the marketing bumpf of tradition and integrity we are increasingly being exploited. I fear that those who know the value of good whisky, rather than the price, will be increasingly marginalised the longer these trends continue. It has, perversely, come to the point where I actually hope that the industry is setting itself up for a fall. To expand on your own analogy, the music industry had its own wee coked-up bubble, but even though that burst some time ago it’s still turning out to be a long and difficult journey to reconciliation with the consumer.

Reply

Oliver Klimek February 13, 2014 at 9:30 am

As I wrote, none of the points is really new. But usually the criticism is about single issues only. Here I tried to wrap it up a little, to show that they are only symptoms of a single disease, if you will.

Reply

kallaskander February 13, 2014 at 11:29 am

Hi there,

very precise Oliver. I think it started when the boom of the early 2000s took off and the whisky sea we were swimming in, filled in the years before the great crash of 1983 began to reduce its level at frightening pace. Without that whisky ocean we wouldn’t be were we are now.
The first thing happening – quite quietly – was that the range of whiskies in the vatting of standard OB 10 and 12 yo bottlings – all otheres as well never fear – were graduately dropping from a span of 10 – 20 yo to 10 – 15 you or so and below.
The older elements of standard OB whiskies then appeared as an ever increasing number of ever older OB bottlings and with the independent bottlers as ever older bottlings of single casks.
That was a good thing because with that we have seen the best of times in the wisky world because there were never more whiskes out there and in a payable reach of prices before.
Now we are moving to the worst of all whisky times with the combined effects of the trends Oliver described.

I call it marketing by “Buy our story, the bottle of whisky comes free with it” – then there are affordble stories expensive stories and stories that are too expensive even to listen to. In my eyes one of the worst culprits is Edrington Group.

And we have valiant knights that are stemming themselves against the tide like David Stirk or the Glenfarclas Grants and the Symingtons of Sigantory. Examples for qualitiy and price in balance. Everywhere else imbalance is spreading more and more.

And we have ourselves to blame. We the customers swim with the tide. We are silly enough to buy the crazy overpriced stories because of our greed for the free whisky. If we stop that and the first few stories with free whiskies attached will not sell anymore we will have won. It will not happen.

So it goes more and more into the dierection of the whisky / whiskey (let’s not forget them) being a shallow money trench where rogues and pimps run free and good men are dying like dogs. And then having its a negative side as well.

Not to forget that heralds of resistance like Oliver here or many other whisky bloggers or forum members are not much liked in certain interested circles.
Keep up the good work. It is needed.

Greetings
kallaskander

Reply

Oliver Philp February 13, 2014 at 7:06 pm

kallaskander, nice tie in with the Hunter S. Thompson music industry reference. Always attribute your sources though!

You’re right, whisky buyers (not just drinkers) have themselves to blame too. Just today, someone on a forum I frequent was telling us £140 for the 15yo HP Freya is just the ‘going rate’ these days and ‘this price tag is not a problem for me’. I’m reminded of the comedian, Harry Enfield’s character who is always proclaiming himself [sic] ‘considerably richer than yow’. Is this what it’s about now, just a dick-swinging contest? He won’t be laughing when some guy is telling him £300 is just the going rate for a NAS grain!

Reply

kallaskander February 14, 2014 at 10:38 am

Hi there,

I knew the quote started with “The music business…” but I had no idea about Mr Thompson.
He seems to be a wealth of stuff like that.
And that someone on the forum who claims ” £140 for the 15yo HP Freya is just the ‘going rate’ these days” – ask him for whom he is working for.

Greetings
kallaskander

Reply

Jeff February 14, 2014 at 12:42 pm

Today’s whisky IS about “story” – the monster out back, the whirlpool out front, or the stuff that just returned from space – all to distract you from what’s in the glass and the fact that, all the industry’s great “discoveries” notwithstanding (the greatest of which, by far, is that people can be convinced age is irrelevant), the whisky itself isn’t improving, or is in noticeable decline.

And when whisky is about tall tales, instead of its quality, and allowed to be so, whisky is in trouble. Whisky is being damaged by its own popularity, and by the effectiveness of its own marketing, but also by a media that takes on the role of cheerleader, rather than critic, of these trends. Professional reviewers know what’s good for them in the larger sense – they have books and events to sell and cross market – so they’re willing to say very nice things about the current crop of under aged “smoke and mirror” offerings before returning to their bunkered bottles – and their cross marketing. New whisky enthusiasts are the greatest accelerator to declining quality, but this IS in large part due to the way supposedly objective reviewers are influencing their tastes and their developing standards of quality.

By the way, NAS can also mean increasing profit margins, if you can sell younger and younger whiskies at higher and higher prices without ever talking about age.

Reply

Oliver Klimek February 14, 2014 at 8:47 pm

Yes, of course NAS is a profit factor too, but ultimately it is price vs. cost what determines the profit margin, so I expressed it that way. The three factors are very closely related anyway.

Reply

two-bit cowboy February 14, 2014 at 3:29 pm

Your conclusion is brilliant:

“look at their reflections in the glazed facades of the corporate headquarters.

Garni du jour equals “creating demand”
NAS equals “coping with demand”
Pricing equals “Increasing the profit margin” ”

I’m not an economist, but would add this thought to your the last line. The demand has grown and stocks have dwindled (your first two points) so prices can easily be raised till the supply and demand sort of reach equilibrium. If the usual ebb and flow were the only players in the market things would likely even out, although the prices would still rise to reach that point. But we have acclaimed journalists (for lack of a better term) who write books or publish magazines that deliver “the best of YEAR” lists of whiskies that tilt the balance somewhat. The geeks see the lists and say, “pshaw,” but the listed whiskies still fly off shop shelves and sometimes at crazy prices.

Here’s a great article from a few days ago that’s on point:

http://www.thedrinksbusiness.com/2014/02/scotch-struggles-to-meet-demand/

Reply

Jeff February 14, 2014 at 8:27 pm

With all due respect, you use the term “journalist”, but it’s not really for the lack of a better one: marketer. As Dominic Roskrow wrote (http://thewhiskytastingclub.co.uk/Blogs/domblog/2011/06/20/new-vs-old-media/):

“Let’s make one thing clear. What whisky writers do is not journalism. Not even close. The best definition of journalism I’ve ever heard is ‘someone writing something that someone somewhere doesn’t want written or someone else to read’. Accepting free flights, accommodation, food and premium whisky from the people you are writing about and then printing nice stories about them isn’t journalism – it’s marketing.”

Put in that context, the role of these writers and their “best of/awards” lists quickly becomes clear: to help move product by shaping opinion – and clearly it works.

Reply

Oliver Klimek February 14, 2014 at 8:49 pm

This is opening a whole other can of worms. Not a new one, though ;)

Reply

two-bit cowboy February 14, 2014 at 11:27 pm

Fair point, Jeff.

I hadn’t read DR’s bit before. Thanks for sharing it; I chuckled all the way through.

Reply

Billy February 17, 2014 at 9:20 am

I see the pricing also as ‘bringing profits inhouse’ as well as just simply increasing them. It’s definitely not for all bottles, but for many releases it must be galling for a producer to see them sell out in seconds at their RRP, only to go for significantly more on the secondary market a short time later. Unfortunately these price hikes then have a knock-on effect across the rest of the market – in an ideal world with a ‘rational’ market this will bounce around and settle an equilibrium, but economists still disagree whether the markets are rational…

Reply

Jeff February 17, 2014 at 12:04 pm

The issue I have with that is that it’s primarily the secondary market’s profits on “special release/limited run” expressions which producers, evidently, find so “galling” – the hypocrisy being, of course, that it’s the industry which came up with that selling angle in the first place to vastly increase ITS profit margins on those expressions by appealing to collectors on the basis of scarcity (?), all the while knowing full well that subsequent price speculation on such items is unavoidable. So now the industry’s (new?) idea of “bringing profits inhouse” is presented as a “war” on price speculation, while all it is really is just more profit taking, driving the secondary market even higher.

Reply

kallaskander February 17, 2014 at 1:53 pm

Hi there,

I did not ask for that – honest!

http://www.thespiritsbusiness.com/2014/02/william-grant-ceo-on-the-bright-future-of-scotch/

“These days, you need a great quality liquid in great quality packaging. People don’t just drink the liquid, they drink the story. These days, in a massively competitive environment, there’s a need to add value to a product.

“It’s about what’s in the glass, but it’s also about the heritage of the brand. These elements mean that brands stay relevant and interest remains high.”

An added value for the producers to collect. Who cares about the consumer?

Greetings
kallaskander

Reply

Jeff February 17, 2014 at 2:26 pm

“These days, you need a great quality liquid in great quality packaging. People don’t just drink the liquid, they drink the story. These days, in a massively competitive environment, there’s a need to add value to a product.”
vs.
“Our sole focus isn’t on quarterly results. It’s about doing the right thing and building the business without dancing to the tune of other companies”.
vs.
“Of course, this is not to say that results don’t matter in some way or that we can relax, we just focus on what we see as important for the future of the business.”

So, to summarize, we’re in a life-and-death struggle against other companies, but we don’t worry about what other companies are doing, even though we do because stockholders will starting canning people if we don’t make comparable moves with comparable results.

And saying this sort of stuff is worth how much, plus stock options?

Reply

Leave a Comment

{ 1 trackback }

Previous post:

Next post: