Most whisky enthusiasts certainly would have heard of and tasted various expressions from the iconic single malt whisky brands The Macallan or Highland Park, but many of us may not be too familiar with the Edrington Group, the company that owns both brands. Still privately owned, the Glasgow-based company earlier this year announced a major expansion of its international distribution networks, and opened up a Singapore office to take charge of that expansion in this part of the world.
We chat with Geoff Kirk, managing director of The Edrington Group for Southeast Asia, about the company and whisky trends in Asia.
As a start, perhaps you can tell us what Edrington Group does and its place as one of the leading players in the whisky world.
The Edrington Group is probably one of the more interesting or unusual companies within the liquor industry worldwide. As with many of the companies that have a family background, there’s been so much consolidation within the industry that the origins a lot of those family companies have been lost, in a sense.
Edrington was a family business originating back to the mid 1800s as Robertson & Baxter company, and the Robertson family continued the ownership and management all the way through to the 1960s. At that point there were three daughters in the family and none of them got married, so there were no heirs to inherit the company. That wasn’t radically unusual, but it created two key issues. One was the threat of the risk of aggressive acquisition, and the company was being targeted back then by non-Scottish companies. The other was the death duties that would have been due if the company was to break up.
The company was very community-focused and employee-focused – an early stage corporate social responsibility, if you will, decades before the phrase was even coined – so they signed over the rights and ownership of the company to a charitable trust that was created. One of the family farms was called Edrington, so Robertson & Baxter became part of the Edrington Group. That was in 1961.
The Edrington Group has relatively been low key as a corporate identity and as a company. Originally it was more involved in bottling and blending than as a brand owner. It was only been in the last ten or fifteen years the company has been focused on the brand side of the Scotch whisky business. The acquisition of probably one of the better known distillers, Highland Park, ten or fifteen years ago was one of the company’s major steps into brand ownership. At first it was to secure sufficient capacity for the blending and bottling business, but the next element was to secure the front end of the business through branding.
Then the next stage that happened over the last four years was that we’ve decided to take one step further into the market by actually controlling our own distribution.
But the ethos of the company still remains – very employee focused, very supportive of the community.
Perhaps you can share with us a little bit of Edrington Group’s portfolio, and how they play in various markets around the world.
The history of the company obviously very much is into Scotch whiskies – both single malts and blended whiskies – so the portfolio for Edrington will be The Macallan and Highland Park for single malts, and The Famous Grouse and Cutty Sark for blended whiskies. We also have Brugal, a Dominican Republic rum, and also very recently Snow Leopard, a super premium vodka. It’s only been within the last six months that we’ve acquired that brand.
Globally there’s more of a balance if you like; certainly within Asia the major focus has been on The Macallan.
In the United States, The Macallan has been strong, and so is The Famous Grouse and Brugal obviously have a very strong opportunity there. That market is also the biggest one for super premium vodka, so we also do expect Snow Leopard to do well there as well.
The UK and Scandinavia, for instance, is more blended whisky in terms of the focus; consumer demand there is more skewed to blended whiskies.
In Asia very much single malt and more of a brand play than a category play.
The whisky world – both in the single malt and blended categories – has seen some trends emerging over the past decade. In your opinion, what has been some of the most exciting?
Specific to Scotch whisky it’s been more of a challenge than most other spirits in terms of new trends or different ways of presenting because there’s so many legal restrictions around Scotch. You can stretch outside the boundaries, but then it wouldn’t be Scotch whisky, and, in a sense, loses that label and the aspect of heritage that comes with that.
For example, you can’t mess around with the wood as much, the age has to be minimum three years by law. If there’s an age statement on the bottle it has to be the age of the youngest whisky used, unlike cognac, bourbon or rum where they have a lot more flexibility on how they present the liquid.
One of the strongest trends in recent times is the swing towards whiskies without an age statement. The iconic one has been Johnnie Walker‘s Blue Label – although consumer perception is that it’s a 25-year old, there’s actually not been an age statement. And there’s nothing wrong with that.
Recently The Macallan has been on the forefront of leading some development in branding whiskies with no age statement – we have that product now in the duty free channel. In general the acceptance for those have been extremely fast and positive. As long as the liquid within is still alright, Scotch whisky can stretch its own boundaries a little bit.
I guess the bigger trend is in two main areas – super premium development across different brands. For The Macallan we have the Lalique decanters, and the limited-edition series. Another one is the brand associations that are now coming in – some of them may be quite spurious; some of them got a very strong platform and background. For The Macallan, we’ve worked with a number of international photographers in terms of developing something more interesting for the consumer. If we find ourselves limited either by legalities of how you can produce and present Scotch whisky, or by the liquid supply that we have, then we have a different way of reaching different consumers by finding different interests that can be comfortably associated with enjoyment of super premium Scotch whiskies. For us that’s been photography.
The collaboration between The Macallan and Sir Peter Blake was actually pretty well conceived.
That wasn’t just a random selection of somebody who might like The Macallan. That went back to his origins, and also that of the art director involved in the original advertisements for Macallan. The history behind that was just superb.
In Scotland, whisky is that drink you have a single dram of when you’re at the nearby pub. In Asia, consumption of Scotch works very differently – in bars this part of the world, a table of drinkers can finish a bottle (or more) in a single night. Should that be the way to treat whiskies, though?
Personally no, but we can’t and don’t dictate how and when consumers drink. We present the brand and liquid the best way we can, but we acknowledge and accept the different social and business cultures there are around the world and the different consumption styles that happen because of that.
It’s very different in Asia from Europe, particularly. In the UK it’s virtually all social consumption, whereas in Asia it’s much more focused towards business entertainment. It’s starting to change recently, but it’s normally still a bottle on the table, the host buys, and everybody drinks the same drink. And there’s the ganbei element to go along with that, as well.
But particularly for the super premium and the single malt categories, it’s beginning to swing from predominantly business entertainment consumption towards social consumption. That’s been one of the more subtle changes in the industry.
Just about 18 months ago I was in Zouk – I don’t often go there – and while we were talking to the management I turned around and there was a group of young Asian ladies, aged maybe in their late twenties or early thirties with a bottle of The Macallan on the table. You could not see that anywhere in Europe, or even in America. But you see it in Singapore, you see it in Hong Kong – that’s very much an Asian thing.
In the UK, an on-premise (restaurant or bar) can’t leave a consumer in control of how much they drink, because it is their responsibility to make sure someone doesn’t drink too much and have to stop serving them if they go beyond a certain level.
I agree that there can be the show element in Asia (of leaving a bottle on the table) – communicating what a consumer appreciates or associates with, the same way what they wear shows off how they want to present themselves to others. But taste definitely comes into it – there are not too many people out there who would continue to drink something they simply do not like.
The liquid is important.
According to the Scotch Whisky Association, Scotch whisky exports have increased in value to a record $4.3 billion in 2012, despite a 5% reduction in volume.You mentioned earlier about the development of super premium categories, but do you think there are other factors coming into play?
Globally, if we assess the numbers, the volume base of Scotch consumption has been in its traditional markets – America, Europe etc. But if we look at the economy of the world in relation to those markets – the United States has been through a little of a rocky patch, the UK to a strong degree, and southern Europe has been affected very deeply.
The slight decrease in volume has come from the traditional markets, which inherently are lower value anyway. Where the volume has been lost, it hasn’t been in the very expensive blended or single malt categories – most of it has been lost at the relatively entry level or lower-priced segments of the market. But when it comes to quality malt or grain whiskies from distillers, that volume has been increasing quite significantly.
Demand in Asia over the past decade has been growing a lot. There’s also the dynamic of natural supply and demand; there are limited stocks in the industry. Asia tends to prefer minimum 12-year old and up; there is less flexibility on the part of the whisky maker or master blender on what they simply can deliver. For single malts, there is an absolute restriction. For The Macallan, we rely on our predecessors did 12 years ago, and there’s no other way around it. It’s the same for Glenlivet, Laphroaig, Lagavulin and all other iconic whiskies – they will have the same restrictions. It’s all about what these companies have done 12, 15 or 25 years ago, and how they’ve managed their stock profiles over the years.
There’s a trend of entire casks purchased by independent bottlers and presented as certain expressions, and some distillers even sell whole casks to private investors. What are your thoughts on this?
There’s pros and cons to that. Pros for the consumer, because it provides a little bit more variety. There can be cons because they sometimes can be misrepresented, either inadvertently or actively.
Historically for the distilleries or the companies that own them is that there may be a contract with these independent bottlers so that the Douglas Laings or Gordon MacPhails have an ongoing supply with the contracted distillery to produce a certain number of casks per year. As soon as they are filled, they sell them. They may store them onsite at the distillery, or these companies may take them away to store somewhere else.
That independent bottler effectively owns that cask as it’s their whisky. So they can declare the distillery that the cask was distilled at, but they shouldn’t use the branding specifically. The whisky makers can legitimately say that they haven’t been assessing them ever since the new spirit entered the casks. And every cask is different – the independent bottlers may have specified the kind of cask they want, whether it is American oak seasoned with bourbon or Spanish oak seasoned with Pedro Ximénez to create specific differentiations, but we’re not nosing or tasting that cask every year or every three years like we do with our own stocks. It may have our whisky’s DNA, but we’ve not assessed the style of that single cask or chosen when it’s best matured, when it’s bottled or at what strength it’s bottled.
So yes, while you can identify which distillery the spirit has been distilled at, but you cannot say that’s a The Macallan, or a Highland Park. It’s not the same thing.
As for private ownership of casks, my personal recommendation is that anyone who chooses to invest in it should expect to drink it. Expect to bottle it for yourself. If you find the value is there when the time comes and you choose to sell it, great. But I would not recommend investing in whisky for investment’s sake, if say, the choice is between a cask, or stocks and shares, or a house. Don’t go for new spirit or whisky because you have no idea what quality that cask is going to present, whether that specific distillery is under demand as single malt whisky or a blended whisky.
If anyone was going to invest in whisky, it should be in a known entity – it could be an old whisky, aged whisky or rare whisky that has an established secondary price on the auction market. You pretty much know what you’re buying, you know the quality, you know the reputation.
I wouldn’t go speculative on whiskies at all!