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Published:  23 July, 2008

The recent change on the malt whisky leadership board has raised some interesting questions. Tom Bruce-Gardyne delves a little deeper

At some point in the last 18 months, Glenmorangie quietly slipped past Glenfiddich to become the biggest-selling single-malt whisky in Britain. During 2002 we were nip and tuck for leadership, but certainly by this year they had overtaken us in terms of volume,' concedes Steve Gater, marketing controller at Glenfiddich's UK distributor, First Drinks Brands. Having been in second place for so long behind the seemingly invincible stag, were the guys at Glenmorangie dancing in the streets at this historic news? Well not, it seems, Jim Cook, the company's UK sales director, who says that beating Glenfiddich was never part of some great gameplan. And neither do the folk at William Grant & Sons seem unduly downcast, for the truth is both brands are still growing nicely. According to AC Nielsen, the two malts increased sales by 16% in the 12 months to July this year in the off-trade and now account for just over a third of the market. But to return to the question of how Glenmorangie stormed ahead, Glenfiddich puts a lot of it down to its rival's aggressive litre promotion at the end of last year. They were the only people to do a big litre deal with Sainsbury's last Christmas, which delivered something in the region of 5,000 additional cases and bolstered their lead position,' claims Steve Gater. Yes, but it was no more deep-cut than what was happening in the rest of the market,' Cook retorts, before adding that the reason they went for bigger bottles was that Sainsbury's Christmas spirits deal was all based on litres. Glenfiddich clearly had the option to follow suit, and it will be interesting to see what they do this time. As of July, according to AC Nielsen, the UK malt market stood at just over 5 million cases with a value of 172 million, up 5% on the previous 12 months. There is, therefore, plenty of room for the big two to coexist in harmony, especially when the market appears to be polarising in favour of mainstream brands. A few years back, the rise of single malts in Britain appeared to be largely driven by the profusion of new offerings that spilled on to the shelves. Thus, the category was fragmenting as fast as it was growing, such that individual brands quite often stood still. Added to this was a determined push by the supermarkets to develop their own-label malts that would deliver consistent sales, unlike the big brands, which shot off the shelves on promotion and otherwise gathered dust. Own-label, to quote Nielsen again, has shrunk by 6% to 370,000 cases since last summer and now accounts for less than a tenth of the UK off-trade. The picture is much the same at Sainsbury's according to spirits buyer, Henry Stephenson. I think there seems to be a move in the market towards brands as the brands are promoting harder above and below the line, and that is helping to pull people in. Also you can offer a really interesting story with a brand.' At Tesco they have dispensed with own-label malt altogether. It seems they realised that a significant number of shoppers were put off the idea of buying it as a gift, and wanted a brand' instead. So out went Tesco Islay malt, for example, and in its place came Ardnave, a 12-year-old, non-chill-filtered malt that sells for 15.49 and has the slightly higher strength of 43% ABV. The spirits buyer, Ian Targett, describes it as an entry-level malt, but a good way to get into Islay'. Like its Highland and Speyside equivalents, it carries the words Specially selected for Tesco', but since this is printed on a removable neck collar, the gift-giver can avoid any possible embarrassment.

Becoming more experimental Further evidence of a polarising market comes from the International Wine & Spirit Record. They put the share of the top five malts in 2002 at almost exactly 50% with Diageo's Classic Malts in third position followed by The Macallan and Laphroaig. Yet Stephenson insists there is definitely a place for the esoteric fringe. I think people trade into malts through the big brands that have a big above-the-line spend - your Glenfiddichs and Glenmorangies. But once they get in and get interested in the category, they want to learn more and become more experimental. So some of the more esoteric brands play a pretty important role in keeping people's interest and having something to trade around.' Interestingly enough, the first thing Stephenson told me about was how he had recently secured a listing for Springbank in the top 110 Sainsbury's as ranked by whisky sales. One wonders quite how the news was greeted by the specialist independents who have been carrying a torch for Springbank for years, but for the supermarket chain it does give it that extra bit of credibility. It also means they can now offer a malt from every region, a job that was originally the role of Diageo's Classic Malts. Though the special plinth that held the Classic Six was aimed at independents and the on-trade, it was always intended to keep the range together wherever it was sold. Unfortunately some of the six have been a victim of their own success, so much so, that one or two are now only available on allocation. Sainsbury's lists Talisker, Dalwhinnie and Glenkinchie, but has no Oban or Cragganmore. It does have some dwindling stocks of Lagavulin, but clearly this is precious stuff that cannot be price-promoted in any circumstances. Even 5p off would be unthinkable. By the sound of it, Diageo has found a better partner in Oddbins, where they have been able to work together to shift lovers of Lagavulin on to the company's other Islay malt, Caol Ila. Having sold small amounts of Caol Ila 15-year-old in the past, Oddbins' whisky buyer Grant Rammage launched the 12-year-old last Christmas and says it has been a startling success. I'm just impressed with how much we sold against Lagavulin. Despite not price-promoting it, we are almost selling as much Lagavulin as we were, and we are also selling a lot of Caol Ila.' The current short supply of Lagavulin makes an interesting case study. It has forced the major retailers to concede that a premium spirit can be sold like a grand cru wine in that it is not available at the turn of a tap. More to the point, as Oddbins proved, it can sell perfectly well at the standard list price. When I put this to Ian Targett, spirits buyer at Tesco, he agreed that certain malts do have their own fan club', but the trouble was 60% of the malt whisky he sold was bought as gifts. So while the actual drinker might be a true aficionado and none too bothered about the cost, the bearer of the gifts was extremely interested in special offers. As it happens, Targett doesn't have to worry about Lagavulin because he has none.

The lure of the exotic world' The big excitement at Tesco was Father's Day, when, thanks to a wide range of special offers and 5 off top-selling lines, the supermarket claims to have increased sales of its malts by 60% on last year. The same full-throttle promotional blitz is to be expected this Christmas, and Targett is determined that not one shopper will escape to a rival store because they are offering better deals on malts. His most interesting initiative this year has been the idea of guest malts that were launched in June in time for Father's Day. Originally it was planned to have four: Balvennie Double Wood, The Glenfiddich '84 Reserve, Isle of Jura and a special bottling of Glen Moray. In the event, Glen Moray did not make the grade. Normally each guest malt is given a six-month listing, though if it does particularly well it will become a permanent feature. At some point it has to endure a deep-cut promotion to make it accessible to shoppers who would not normally stray into such an exotic world. The plan is to rotate the guest malts and replace them with others, and according to Targett the distillers are beating a path to his door to bombard him with suggestions. To return to Oddbins, the chain used to claim it had 10% of the retail malt market compared to just 3% of the overall off-trade. That figure may have reduced a little given the way the supermarkets have muscled in on the territory. In the 12 months to August, Tesco claims to have enjoyed double-digit growth, while rival Sainsbury's puts its own MAT increase for the same period at 16%. Nevertheless, the specialist chain still punches above its weight on malts. The encouraging thing for me', says Rammage, is that we are selling more malt, and we are selling it a higher average price. We are growing very strongly in the range above the standard 10- and 12-year-olds. That's the most exciting thing for me - the fact that at the 25-30 level we are seeing really good growth.' In other words, if the grocers want to focus on the mainstream malts and slash prices to drive volume, that can only add to the gap between Oddbins and the supermarkets.

A free spirit Other malts that have done particularly well over the last 12 months, according to Rammage, have been Aberlour, Auchentoshan, the Classic Malts and Bowmore. Clearly Islay remains the most dynamic region - a fact that will be boosted this Christmas by being the first to market with the cask-strength Ardbeg Uigedal, as of mid-October, and launching the new Bowmore 25-year-old. But one continued success story is of course Bruichladdich. With its maverick marketing exemplified by its Clachan a Choin motto (the dog's bollocks' in Gaelic), Bruichladdich was just the sort of free spirit made for Oddbins. Sales are described as still very strong', despite the fact we still haven't done any price-promotion, which is great. So it must be down to some good support from them on tastings and a lot of goodwill from the staff, who seem to absolutely love Bruichladdich.' While new ownership under Castel has clearly had an impact on the breadth of wines carried by Oddbins, the range of malts has survived pretty well intact. Rammage reckons the French are stuck with the idea that malt is one of our core areas and that it is something we believe people come to us for rather than see it as a convenience. So we continue to promote malt throughout the year and it gets its fair share of the promotional slots that are going.' Back among the mainstream brands, Steve Gater of First Drinks Brands accepts that Glenmorangie has certainly been innovative in terms of finishes' and that it got those products to market quicker than we did'. However, he questions how much further the wood-finish revolution can go. We believe there is a danger that you can launch too many of these things, and to be honest I think Glenmorangie is dangerously close to being at that level. Research we've seen suggests that it is confusing to consumers and that it doesn't make it any easier to buy malt whisky. So, from a category perspective, it is very important that we keep things as simple as possible.' For its part, Glenfiddich launched the peated Caoran Reserve a year ago and achieved sales of 2,500 cases in its first three months. Other than that, its relatively new 21-year-old Havana Reserve is aimed very much at the specialist trade with a price tag of 60. Maybe this gave Glenmorangie the idea for its Golden rum cask finish to accompany its Burgundy wood finish - the two latest graduates to come out of Scotland's most famous finishing school. At Sainsbury's, Henry Stephenson wonders how much further these extensions can go - a point I put to Jim Cook. It will go as far as the consumer wants it to go, but it is something we research constantly.'