The Macallan’s David Cox on whisky’s rise in Asia

It’s not often that we get to speak to whisky royalty, so when there’s an opportunity we grab at it we do it with both hands – this time it’s the venerable David Cox, Director of Rare & Fine Whiskies at Edrington Group. David has been working in the Scotch whisky industry for over 30 years, and has been with The Macallan – now part of the Edrington Group – since 1998.

Perhaps more importantly, he has been working on the range of super-premium expressions of The Macallan, helping to build the brand by developing relationships with a number of luxury goods and service providers such as Rolls Royce and American Express as well as negotiating the sale of full collections of The Macallan Fine & Rare to collectors and connoisseurs in Asia Pacific, North America and Europe. So you can say he’s quite familiar with the high-end part of the Scotch whisky business.

We ask David about the rise of The Macallan in Asia, and its opportunities and challenges in this part of the world.

[SS] Share with us how Macallan established itself as one of the most iconic Scotch whisky brands around the world. Was it just excellent marketing?

[DC] I’m a firm believer that for any brand to gain any credibility and status you got to have a great product or service. I always tell people that Macallan, for the greater part of its history, is known as a great product and very well known in whisky blending trade, as were most single malts, in the 20th century. It was highly sought-after by blenders for its quality.

It’s really only very recently that Macallan started to market itself; its first advertising appeared in the early 1980s in the UK, a small black-and-white ad. For those who remembered that, it was distinctive and slightly quirky – they told funny little stories about people on their experiences with the Macallan. It started almost like a cult following in the UK.

About the mid 1980s, Macallan started to export and market itself in the United States. We took that advertising campaign to the US and modified it very slightly. And again it was quite targeted; it reached a very literate audience that was, for example, into fly fishing, an elite sport participated by many professionals like doctors and dentists. It started to develop a following very similar to that in the UK. Interestingly the Macallan 18YO was the leading expression in the United States, even more so than the 12YO.

[SS] What about its market penetration into Asia? We understand that the Asia Pacific now comprises around 50% of The Macallan’s total business.

[DC] Around 2000 or 2001, our people in Taiwan saw what was happening in the US and thought the time was right to establish the Macallan brand there. And it followed a similar process – premium pricing that helped place us at the top of the category, and very energetic distributors there who spent a lot of time on branding and educating the consumers. That helped to build the brand from the ground up.

In the year 2000 we were hardly selling anything in this part of the world – maybe a few hundred cases. That was 14 years ago. And in that time it’s exploded, really, in this region. It’s been absolutely phenomenal.

What worked in Taiwan translated very well into many mainland Chinese cities, and we used that model in Hong Kong and Singapore too.

We’ve always followed the same positioning, though; premium pricing, because we’re worth it. We’ve never discounted our product. We’ve always known who we were targeting, and these are people who appreciate something that’s well made and has a long heritage.

[SS] Some critics and industry observers may argue that in recent years Macallan has been focusing more on marketing than it has on product. How would you respond to this?

[DC] That’s an interesting observation. Let me start with the product – no changes there, what we’re doing is producing more of what we’ve always done. We’re increasing our production capabilities with a new distillery, but we’re following exactly the same process we’ve always followed when producing Macallan at a certain quality and taste – Small stills, use our own variety of barley, and use predominantly sherry casks from Spain.

As the brand gets bigger and some of our initiatives that we do around the world get more attention, it’s certainly possible that there are people who think we’re more focused on marketing and not on the product.

“The Macallan Masters Of Photography: Elliott Erwitt Edition” a collaboration boxed set between Macallan and the legendary photographer

One of the things we love to do is to make beautiful things, things that play to the same tastes and pleasures of enjoyment for those who drink Macallan. So we’ve worked with brands like Lalique, working with some of the world’s greatest photographers, working with some of the world’s greatest chefs, working with some of the world’s best automotive car manufacturers like Bentley or Rolls Royce; all these are high-profile collaborations that get us a lot of attention.

But we’re definitely not doing all of this at the expense of the product. The product is the fundamental part of everything we do. You’re still getting exactly same sensory delivery you’ve always gotten from the product. If we compromise on that, in the end everything else we do wouldn’t be worth it.

[SS] You were here last year in Singapore to promote the Sir Peter Blake collaboration. How did that go?

[DC] We only made 250 of those; they sold out really quickly.

I think (the Peter Blake collection) appealed to two different types of people: the Macallan lovers who want to buy anything they can find that’s really rare and limited, and then those Peter Blake fans – who probably are not too numerous in this part of the world, but are present particularly in the UK and parts of Europe and North America – who saw it as a piece of art that just happened to contain some rare Macallan.

“The Macallan Sir Peter Blake Celebrate Eight Decades” is a limited-edition collaboration whisky set between the whisky maker and the father of British pop art Sir Peter Blake

But much as the Macallan lovers would want to get their hands on and drink each those vintages in the miniature bottles, but people realize that once you open one bottle you compromise the integrity of the entire piece of art. My guess is that people bought it to keep it as part of their collection for the rest of their lives, or auction it off later.

The project was such a fun thing to do because Sir Peter is such an interesting man; for Macallan it’s almost like we’re letting our hair down and not something we usually do. He certainly enjoyed doing it.

[SS] Interestingly rare, limited edition and vintage whiskies are especially prized in this part of the world – for example, out of the four Macallan Imperiale M ever made two were archived by Macallan, one was sold to a private Asian collector, with the remaining one auctioned at a sky-high price in Hong Kong, probably to an Asian bidder. Why do you think there’s this trend in this part of the world?

[DC] If you take that particular decanter, there are only ever those 4 that were made by Lalique. Making that decanter was technically difficult, it’s the biggest decanter they have ever made. I’m not sure if I got it wrong but it was something like 11 kilograms worth of crystal, and according to Lalique it was on the absolutely outer bounds, if you like, of how one can make a decanter of that size. They made dozens of these before they finally got one right. The fact they got one made at all was a bit of a triumph. And the whisky that goes into that contains some of our oldest whiskies, including some that was distilled in the 1940s. Four in the world, and we’re not making any more.

The 6-litre ‘Imperiale’ The Macallan M Constantine

The fact that it sold for over US$630,000 was a surprise; we were absolutely amazed and delighted. But what it shows is there is a growing appreciation for rare whiskies and rare single malts in this part of the world.

The trend in auctions, whether you’re talking about whisky auctions in Scotland or even online, also show that rare single malts are popping up with increasing frequency. I can’t see that slowing down in the near future.

[SS] What do you think are the biggest opportunity and also the biggest challenge for Macallan in Asia?

[DC] The fundamental challenge is supply. If you look at what happened with the demand in the Asia Pacific markets in the last 12-14 years, and let’s assume for the sake of argument that a similar growth pattern for single malts starts to establish itself in Latin America – which for a long long time been a strong market for blended Scotch whiskies 12 years old – where there are now signs single malts are being more appreciated.

The question is, how do we cope with an explosion in demand in Mexico and Brazil, whilst also accommodating for increasing growth in this part of the world?

The only way we can begin to start addressing this – we’ll never be able to totally address it, and certainly not in the foreseeable future all the demand for Macallan so it’s by necessity always going to be limited, and by allocation (for different markets) – is to increase our capacity. We’ve got a major plan to invest 100 million pounds to build a new distillery at the Macallan. But this capacity will not come on-stream until 2017; so if you fast forward 12 years it’s only 2029 when we’re going to start seeing (whiskies produced from this new distillery) in the market. We’re in the wood for very, very long time.

But back to your question, there’s no doubt that the issue of supply is the biggest challenge we’ve got, and it is for all single malt whisky makers – how are we going to be able to meet demand in the future? All we can say is that we’ll do our best, but we’ll never be able to satisfy all the demand we anticipate is coming in the next few years.

The difference now is the geographical spread of our business. We used to say before that if America sneezed, in Britain we would catch a cold. It’s different now – we’ve got Asia and Russia as strong markets, and we’ve got Africa, India and Latin America that’s beginning to get stronger. We’re less vulnerable to downturns in specific markets. We’re more optimistic now; we can see sustained growth moving forward.

[SS] Are there any observations or challenges that you find are unique to this region?

[DC] The difference in Asia is the propensity to drink the best you can possibly afford, which is a bit different in Europe which is a little bit more economy-minded in many respects. And that plays very well to the way that Macallan is positioned.

Brand visibility is very much stronger in Asia with its bottle culture (where entire bottles are purchased and placed on tables), unlike in Europe where the bottle itself is mostly hidden behind the bar.

One challenge that’s coming up in Asia is the issue with counterfeiting – while we’re not quite affected yet we’re starting to look at how to carefully protect our brand.

[SS] The Scotch whisky industry is facing an increasing amount of competition from whisky/whiskey makers from other parts of the world, with Japanese and even Australian whiskies winning awards and entering into the consideration set of the global consumer. What are your thoughts on this?

[DC] I think it’s good in that it will expand interest in whisky. In Scotland alone there are multiple applications for micro-distilleries, so whether you look at micro-distilleries in Scotland or Tasmania in Australia, or Japanese whiskies and American craft bourbons, it’s all bubbling up and showing us there’s a very vibrant sector here.

If you go back to the wine world, once upon a time, wine was all focused around France, Italy and Spain. Then along came new world wines from Australia, New Zealand, and Chile, and what that did was increase the appreciation for wine. There’s a parallel here.

So we don’t see that as a threat at all; in fact I think it is very positive, and it reminds the larger brands like ourselves how important the product is.