Whiskey has stirred, but may be shaken by fickle tastes

Cantillon: Market has matured nicely, but will consumers move onto the next craze?

Alex Chasko of Teeling Whiskey Company: Irish whiskey exports to the US rose 22 per cent in the first six months of this year to €157 million. Photograph: Dave Meehan

Alex Chasko of Teeling Whiskey Company: Irish whiskey exports to the US rose 22 per cent in the first six months of this year to €157 million. Photograph: Dave Meehan

 

About 40 years ago Irish whiskey was the drinks industry’s poor relation. At the end of the 1970s, it was selling fewer than half a million cases – 4.5 million litres a year, much of that to fuel Irish coffees. The number of distilleries here stood at three.

A renaissance, begun when Pernod Ricard bought Irish Distillers in 1988, gained serious momentum over the last decade. Around five years ago, local and international players, including Pernod, William Grant, the Teelings and Illva Saronno (maker of Tia Maria) planned to spend €400 million on expanding and developing existing and new distilleries.

The investment kept on coming. Brown Forman, the US group behind Jack Daniel’s, committed to spending €44 million on a distillery at Slane Castle, the Co Meath pile owned by Lord Henry Mountcharles. In January, Diageo announced that it would invest €25 million on a new facility in Dublin, where it will produce its new whiskey, Roe & Co.

Irish whiskey exports

On Wednesday, the Central Statistics Office confirmed that Irish whiskey exports to the US rose 22 per cent in the first six months of this year to €157 million. Overseas sales in 2016 totalled €256 million, an increase of 18.5 per cent.

The Irish Whiskey Association believes that the industry will sell 12 million cases – 144 million bottles – by 2020. The group says that 16 distilleries now operate in Ireland while a further 16 have planning permission.

This is good news for a signature Irish product. Nevertheless, real risks lie behind the positive figures. Whiskey has to mature – the law requires three years – but even the standard tipple sold in your local is aged seven, while premium brands are left for up to 21 years.

At the same time, consumers are fickle. A craze for gin, which has none of Irish whiskey’s cachet, has firmly replaced the craft beer boom. It is hard to predict what will have caught drinkers’ imaginations when some of those planned distilleries begin selling their products.

Some players will not have the muscle they will need in what’s going to be a crowded market. That means consolidation, if not a complete shake-up, will follow the current expansion, and it is unlikely that everybody will survive.