Whisky makers in high spirits

Drinkers are shifting their tastes ever more upmarket

By James Arnold BBC News Online business staff

"Love makes the world go round? Not at all. Whisky makes it go round twice as fast."

As Compton MacKenzie made clear in his book Whisky Galore, the spirit casts a powerful spell over its aficionados.

Yesterday's breed of whisky drinker

And today, those aficionados are as likely to live in Osaka or Oporto as in Orkney or Oban.

Scotch whisky exports have soared in the past few years, and last year exceeded 1 billion bottles for the first time.

But can a famously proud and idiosyncratic industry keep on satisfying an ever-wider spread of international palates - and can it keep on making money in the process?

Whisky gets frisky

Scotch whisky is, of course, very much an acquired taste.

Until not that long ago, that taste was mainly acquired in the UK, the Celtic diaspora - mainly the US, Canada, Australia and new Zealand - a few ex-colonial outposts and, bizarrely, Japan.

Now, however, France and Spain are numbers one and two, and the top 10 is packed with names such as South Korea, Venezuela and Greece, scarcely known for their love of things Caledonian.

The main impetus taking export sales beyond the billion-bottle mark last year was extraordinary growth in resurgent Korea and - perhaps more surprisingly - in recession-hit Japan, where whisky-tippling leapt by one-third year on year.

A trendier tipple

But Scotch distillers say their success owes more to canny marketing than Japanese sorrows.

Outside the UK and the Celtic world, whisky is advertised without the bagpipes, tartan, heather and the rest of its traditional flummery.

Scottishness is no longer the main selling-point

"Scottishness is a positive for us, but we don't want to major on it," somewhat bafflingly says Simon Erlanger, sales director at Glenmorangie.

Instead, a focus on whisky's virtues as a mixer has helped draw a younger, hipper crowd in key markets such as Spain.

Allied Domecq, for example, advertises its Ballantine's Scotch as a clubbers' tipple, complete with flashy interactive websites, text messages, racy cocktail ideas - and not a sporran in sight.

"Young consumers are far less interested in history, and far more interested in image," agrees Ian Good, chairman of the Scotch Whisky Association and boss of the Edrington Group, makers of Famous Grouse, Highland Park and the Macallan among others.

Mae Khong on the rocks, anyone?

It can't have hurt, either, that Scotch brands face somewhat toothless competition.

One of Suntory's many products

Scotland is far from the only whisky producer in the world, but it seems to be the only one to have learnt much about branding.

The world's top-selling whisky is a Thai brand called Mae Khong, wildly popular at home but anonymous abroad.

Suntory, the Japanese firm that makes the world's number-two whisky, has more marketing nous but displays a worrying lack of focus.

"We are also involved in pharmaceuticals, restaurant operation, sports, music and film, resort development, publishing, and information services," its website announces.

Whisky-soaked Britons

All this has helped fuel impressive results at leading distillers.

Glenmorangie, for example, recently unveiled a 12% increase in both turnover and profits, and announced investments to boost output.

Its shares have doubled in value over the past two years.

What, no tartan?

But the business still has its troubles.

The most immediate is its home UK market, which accounts for some 10% of global sales.

According to Mr Good, the British market is "mature" - a polite way of saying "dead as a duck".

"Our consumer profile in Britain and the US is getting older, and the product has a pretty old-fashioned image," he admits.

Billions of boozers

That need not matter much, if growth elsewhere were likely to continue unchecked.

But it is hard to see where further international opportunities can be found.

Currently, the big distillers are greedily eyeing India and China, the two most populous - and therefore in theory most promising - markets.

Edrington recently announced plans to sell its Famous Grouse whisky in China.

"If we can persuade the Chinese to swap cognac, which is very popular, for whisky then the opportunities could be astronomical," Mr Good said at the time.

"You can export there for a while, but then someone will start producing the stuff locally and your market disappears," he says.

Thinking global, staying local

In the longer term, the big distillers will have to juggle their status as thrusting multinationals with the small-town virtues of patience, tradition, craftsmanship and ethnic pride that characterise the whisky business.

British whisky drinkers insist on the best

Purists already worry that the need to produce drinkers in Spain, rather than Speyside, will inevitably lead to a rapid charge downmarket.

"You can legally sell whisky as Scotch if it has been aged just three years, so why wait 17?" asks one Scots whisky-lover.

And serving some 200 markets worldwide will become increasingly complicated.

The drink has widely different market positions around the world: Asian markets value top-of-the-range malts, while the French consumer demands dirt-cheap firewater from the hypermarche.

Malt makes money

But the industry may have one card up its sleeve.

Only a tiny proportion of whisky sold worldwide is fancy single-malt - retailing at $30 a bottle and upwards - as against the cheap blended stuff.

Abandoning tradition could be a mistake

But that proportion is growing fast, says Simon Erlanger, whose firm is the only big distiller to focus entirely on the premium product.

"We are seeing growth in every single market around the world," he says.

Even in "mature" Britain, where volume sales have been stagnant for years, finicky drinkers are shifting their tastes upmarket.

"They may be drinking less, but they're drinking better," Mr Erlanger says.