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Published:  23 July, 2008

De luxe blended whiskies are facing a challenge on three fronts: from malts, standard blends and their own creaking image. Tom Bruce-Gardyne explores the current pecking order in world Scotch styles, and asks whether the de luxe blend is past its prime

All being well, Pernod Ricard should receive the ex-Seagram's whisky portfolio early this month, when the regulatory authorities in Canada and the United States finally give the go-ahead, some nine months after the deal was struck. On that day Richard Burrows, Pernod's joint MD, will at last get his hands on his long cherished "jewel in the crown" - Chivas Regal. The jewellery analogy has popped up before. A few years ago, consumer research in France equated the name "Chivas Regal" with the image of a diamond-encrusted Rolex. There is something garish in that glint of burnished bronze on the Chivas label. One could almost say it is reminiscent of a gold medallion winking among the chest hairs of 70s man. In a word, the brand is showing its age. Of course, age is what the market for de luxe blends is all about - with the accepted definition being 12 years and above. While Glenfiddich was pioneering the overseas market for single malts in the late 70s, it was criticised in the UK for withdrawing the age statement from the label. In its defence, David Grant maintained that the brand was simply responding to market forces. "The problem was that premium blends were all following Chivas Regal and its 12-year-old age statement. By being an eight-year-old we were being unfavourably compared, even though ours was the only malt." That is the trouble with numbers - they are open to misinterpretation. When Safeway tried grading its whiskies according to how heavily peated they were, consumers thought the rating referred to quality, much to Islay's delight and Speyside's sorrow. Blends of fine vintage Scotch were just what the market wanted in southeast Asia, given the veneration bestowed on old age there; and when this was combined with fancy packaging the results could be spectacular. The independent Glasgow-based blenders Douglas Laing & Co won the Queen's Award for Export in the 80s by taking that Far Eastern trinity of age, golf and luxury to its final conclusion. The result was a steady stream of containers heading east, loaded with 75cl ceramic golf clubs full of vintage McGibbon's whisky. The demise of that market may have been precipitated by the economic meltdown in the region, but no one expects it to return. At the same time, demand for Chivas in crystal and ceramic decanters has virtually died out in Japan, and sales of its Seagram's stablemate, Royal Salute 21-year-old, are said to be severely depressed. What has happened to premium blends in Japan over the last decade is a good example of the downside of cutting tax. In 1989, a combination of the SWA, Maggie Thatcher and the World Trade Organization forced the Japanese to reduce excise duty on Scotch whisky by 45%. Further reductions in 1997 saw the shelf price tumble into line with competing spirits, and an end to years of discrimination. It also turned whisky from being a high-priced, aspirational product into a commodity traded through a raft of cut-price liquor stores that had never existed before. Today you can buy Chivas Regal cheaper on the streets of Tokyo than you can in the airport's duty-free shop. Having said that, brands of de luxe whisky have always been built in the on-trade. As one industry insider puts it: "Anyone visiting Japan was taken to the best bordellos after the top clubs and restaurants. You couldn't help but be impressed by the display of Chivas Regal behind the bar, giving off a very strong expression of sybaritic indulgence." But that was before the 90s' meltdown. "Prior to the crash there was strong demand for anything ostentatious - the more expensive the better," says Luke Tegner of Cutty Sark. "Nowadays, fancy packaging - along with yellow Porsches - is out." To a degree, the relative strength of premium blends in a particular market is a barometer of the market's maturity. Exports to South Korea took off suddenly in the five years from 1988, before embarking on a roller coaster ride of peaks and troughs ever since. Of the whisky shipped there in bottle, over 80% is reckoned to be de luxe blends, but is this proportion bound to slip as the market develops and learns about life beyond blended 12-year-olds? Or, to put it another way, will the growth of single malts be at the expense of premium blends? As Patrick Thomas, managing director of William Grant, told Harpers earlier this year (Harpers, 22 June): "We see there is more to be gained by poaching consumers in the premium end of the blended category and bringing them to Glenfiddich, than trying to develop the premium end of the market." Though if that's what people want, the company has William Grant's 15- and 18-year-old Classic Reserve just in case. The view from major players with a foot in both camps is that there is no reason at all why malt's gain should be at anyone's expense. After all, they would say, the total whisky cake is not a predetermined size, so why can't all sectors grow simultaneously? Yet in markets like Taiwan something rather different is going on. In the country's bottle-keep bars, the Macallan 12-year-old, which was nowhere to be seen before the crash, now claims to be the third bestselling brand among premium-priced Scotch. And, despite its relative lack of advertising dollars, it enjoys 60% of Johnnie Walker's presence on the shelves. To help bridge the gap between malts and premium blends, there is the shared belief in age and the recent re-invention of vatted malts, with the Famous Grouse 12-year-old and Ballantine's Pure Malt both highly successful. Having made the transition, drinkers can go on to explore a whole new world filled with endless possibilities. By comparison, the de luxe sector, dominated by two or three brands that have been around an awful long time, might seem a little dull. Even the product extensions - the older vintages and glitzy packaging - are not all in their first flush of youth. Also, malts do enjoy a more genuine image, being more about inner values such as flavour and provenance than presentation, which helps explain why sales in France have doubled to over a million cases in the last decade. Then there is the question of precisely where the brand managers are going to recruit their next generation of consumers, especially in the United States, where the average drinker of de luxe blends must be getting a little long in the tooth. After a lifetime's loyalty to Chivas Regal, the silvery side of the whisky-drinking fraternity is unlikely to defect, but once the brand comes to look as old as its core consumers the young tend to lose interest. Macallan is on a roll in the US, not just because single malts are hip right now, but also because no one can recall their fathers drinking the stuff. One should not get carried away, however. In 1999, estimated case sales of single malts by Macallan's parent company Edrington (which includes Highland Park) were 279,500. This compares with 3.22 million for Chivas Regal and 3.35 million for Johnnie Walker Black and all its super-de luxe manifestations. Clearly, the current success of malt whisky has to be seen in context and set against the sheer critical mass of these big blends with their massive promotional budgets. They are flagship brands, and even if Chivas has been somewhat adrift and unsure of its fate these last 18 months, it would take a lot more than a few opportunistic hits to send it to the bottom. Peering further into the future, as malts continue to chip away at the top end of the market, the biggest threat to sustaining the premium-blended sector is likely to come from standard blends. UDV is obviously careful to position Johnnie Walker Red Label in such a way that it doesn't cannibalise sales from Black Label, but there's no telling what the competition will do. As each market develops and standard blends become more available, it will create a downward pressure, especially in times of economic depression. Such are the laws of gravity that it is hard to reverse the process when the good times return. Meanwhile, single malts should be better able to withstand such pressure, because they are self-contained and not some sub-species of the entire blended whisky family - at least, that's the theory. Alan Gray of ING Charterhouse believes that there is still very much a market for premium-blended Scotch, and that talk of Chivas Regal's demise is premature to say the least. The fact that it may have wobbled a little from the fallout in the Far East in 1998 and from the uncertainty surrounding the future direction of Seagram's is no reason to write it off. Moving into bed with Pernod may be just what the doctor ordered - a similar move certainly helped re-invigorate Dewar's the day it was taken up by Bacardi. And yet, I can't quite share Alan Gray's faith at least not until that image of medallion man gets out of my head.