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Scotch whisky losing ground to other spirits, says Rabobank

Published:  26 January, 2015

Scotch whisky is losing market share to more innovative spirits categories, Rabobank has warned.

Scotch whisky is losing market share to more innovative spirits categories, Rabobank has warned.

In the latest Rabobank Spirits Quarterly Report for Q1 2015, Scotch whisky is said to be "battling structural changes" which have caused export sales to plummet and a number of firms to rethink their expansion plans.

This has left increased space for other spirits categories, notably rum, to take advantage.

On the whole, the Rabobank says the major spirits companies are achieving mixed results in Europe, with a number report declining sales in core markets, although southern Europe is showing signs of improvement.

Pernod Ricard's most recent  results showed a 1% decline in Europe - with Germany and Poland particularly affected. But it saw a return to growth in Spain for the first time since 2008. Gruppo Campari reported modest growth of 0.8% in Europe (excluding Italy) with a significant decline in Germany, but a solid performance in Central and Eastern Europe.

Meanwhile Scotch whisky was reported to be "battling structural challenges" as exports fell 8.6% in the first three quarters of 2014, compared to a year earlier. Seven out of Scotch's top 10 markets declined - especially the US and Singapore (the main entry point to China).

The report warned that Scotch whisky is "losing share to other, more innovative spirits categories" such as Irish whiskey, Bourbon, rum and gin. Diageo's move to delay production expansion in Scotland suggests the slowdown is not just temporary.

But France showed modest growth in Scotch, while exports to India improved by 20%.

Single malt exports also rose 17% year-on-year in Q3.

The report also heralds the rise of rum - both super-premium and regular variants, which it says is set to take advantage of Scotch whisky's struggles. Diageo's European president recently described Captain Morgan as the growth driver in Europe.

Elsewhere in the world, in China the move away from luxury spirits is still taking its toll, while growth in e-commerce is being driven by "destructive price wars".

The US is continuing to show signs of premiumisation and volume growth, although this is slowing down. The report signals intense pricing pressure in the premium vodka segment, "with Diageo entering the fray and becoming notably more aggressive in its pricing of Smirnoff". Rabobanks picks Cognac and brandy as having "interesting potential" for the year ahead.