Whisky Business

For the foreseeable future their main battleground will continue to be Europe, the largest market for Scotch with exports, now worth $1.4 billion annually. For reasons nobody has been able to fathom (unless they've actually tasted ouzo), the Greeks drink more Scotch per capita than anyone else. Equally surprising, the French buy more whisky in a month than Cognac in a year. France remains the largest importer in volume terms, but higher margins make Spain's market more lucrative. Last year it was the world's top market for Scotch in value terms with sales worth $460 million. And for a business keen to downplay its tweed-'n'-tartan image and appeal to a new generation of drinkers, the good news is that Spain's aficionados are young. Scotch Whisky Association spokesman Campbell Evans notes that 65% of Spain's public whisky consumption takes place between midnight and 4 a.m. "Even allowing for how late the Spanish stay up," he says, "that suggests it's the young clubbers drinking Scotch."

The big challenge facing the industry is to find the next Spain. Hopes are high that the coming wave of E.U. entrants from Eastern Europe will repeat the Spanish success story. This, as Good points out, was triggered by Spain's E.U. accession when "tariffs came down and growth took off." Pending E.U. enlargement, however, the hot market is South Korea, where last year sales swelled over 20% to reach $256 million. Edrington has just inked a $25.6 million-a-year deal to sell premium whiskies blended specially for the Korean market under the Lancelot label. "It's a market that sells on quality," says Good, whose company plans to charge around $355 a bottle for the 30-year-old version of its Lancelot range. "The Koreans don't balk at paying top prices for top Scotch."

Although the future of Scotch will be determined by the performance of its basic, blended brands, there's good money to be made from the single malts — as Glenmorangie's expansion can attest. Global enthusiasm for pure malt whisky has enabled the market to grow from practically zero in the 1960s, when almost all malt whisky was sold to the big blenders, to one worth $373.5 million in sales last year. "Malt whisky," says Good, "seems to attract younger, more upscale drinkers — and they also deliver wider profit margins. It's a winning combination." Although malt whisky currently represents only 5.9% of total bottled Scotch whisky sales, Good predicts its share will climb even in markets like the U.S. and Japan, where overall whisky sales have declined steadily over the past decade. "Malts and premium brands are the way we need to go," says Good.

If proof were needed, it is to be found on the sleepy Hebridean island of Islay off the west coast of Scotland, home to Caol Ila among others malts, and where five years ago Glenmorangie gave the kiss of life to a sleeping beauty known as the Ardbeg distillery. Closed for much of the 1980s and shut down again in 1996, Ardbeg is now producing at full capacity. And over in Brittany even the French are seeking a slice of the action: although it can't be called Scotch, the Warenghem distillery has been producing a blended "Breton" whisky for the past 15 years and has now launched its own malt, dubbed Armorik. What could be next, a Glenburgundy?