Are aged Irish whiskey stocks running low?

As Scotch struggles to supply Asia’s insatiable palate for aged spirits, can Irish whiskey avoid the mistakes of its Celtic cousin? Becky Paskin asks if it’s too late.

Jameson continues to lead growth in the Irish whiskey category

How were the likes of Diageo, Edrington and Pernod Ricard to know 15 years ago that the Asian appetite for extra-aged Scotch would be so insatiable? A sign of wealth and status in emerging Asian middle class society, imported Scotch brands such as Johnnie Walker and The Macallan are in high demand in China, Japan, Thailand and other Asian countries.

Scotch exports grew by 23% in 2011 to £4.2bn, acccording to the Scotch Whisky Association, with direct exports to Singapore – an entry point for much of Asia – rising by 44%. But, as demand increases, the amount of aged whisky – which can’t be replaced by simply turning on a tap – inevitably depletes.

So much so that many Scotch producers, including Edrington-owned The Macallan, are seriously looking at ways around the issue, with the aforementioned removing age statements below 18 years old from its core range completely.

But, while Irish whiskey is not yet seeing similar numbers emerging from Asia, IWSR figures show the category grew to 4.9 million nine-litre cases globally last year and, bolstered by the popularity of Jameson, this is expected to soar to 7.9m cases per year by 2016, begging the question: Is the category in danger of falling into the same trap as Scotch?

Has time run out?
The big four producers – Diageo, Beam, William Grant and Pernod Ricard – claim to have had the foresight to grow their brands in line with what they can feasibly supply, keeping up the pace in established markets such as the US, and taking a measured approach to expansion in emerging markets such as Russia, Eastern Europe and South Africa.

While many are coy about how their stocks of aged whiskey are faring right now, all have identified a potential issue in the future, and have invested significantly in increasing production capacity in line with the anticipated surge in demand to avoid a lull in inventory. But is it too little, too late?

Stocks of Kilbeggan 18 Year Old are limited

Irish investment
Having taken supply from Irish Distillers Pernod Ricard’s Midleton distillery for around 50 years, William Grant’s Tullamore Dew is investing €35m in building its own distillery, which is due for completion in 2014. Likewise, with the departure of Tullamore Dew, Pernod Ricard has similar plans to ramp up production with a €100m investment in increasing capacity at its distillery and a further €100m in expanding its warehouses in Dungourney, County Cork.

Such investments will undoubtedly help secure some confidence in meeting demand for Irish whiskey in the future, particularly if it continues to grow at the same rate, but planning permission and construction takes time. Considering the minimum three years Irish whiskey must be aged for, Pernod and William Grant are looking at waiting at least five years in total before any young whiskey is ready to sell.

“The compounded growth has caught everyone by surprise,” admits Stephen Teeling, global marketing manager for Irish whiskey at Beam, which acquired Cooley earlier this year. “I wouldn’t say we are in danger of running out, but we are switching focus.

“When we were just Cooley we always produced twice as much as we sold, but when you go into a big juggernaut like Beam distribution, all of a sudden we are finding we could be short. We are going to have to lay down a lot more stock to fuel our growth.”

Beam is also investing in increasing production of Cooley’s four main products: Connemara, Greenore, The Tyrconnell and its power brand Kilbeggan, by upping capacity on both its grain and malt distilleries, as well as warehousing. It has also just pumped €70,000 into restoring the ancient waterwheel at the Kilbeggan distillery in County Westmeath, which has begun producing liquid again, albeit on a small scale.

Stock management
Teeling is very aware that Beam needs to manage what stocks it has of aged whiskey carefully, while retaining consumer interest in its brands.

The company has limited stock remaining from its Kilbeggan 18 Year Old blended expression (pictured above), released in April 2011. However, rather than use it to meet demand for that product in particular, Beam is biding its time and preparing it for use in an older, more premium blended expression, Kilbeggan 21 Year Old, due for release in 2013.

“Giving bars and consumers a ladder of products is very important,” claims Teeling. “Part of the renaissance of Irish whiskey is that we do have more different products to show off now. It’s a balancing act, because the 18 Year Old has a phenomenal following, but we have to manage our stocks carefully, particularly around that age.”

Teeling’s concerns about how the category as a whole can provide enough choice to prevent consumer interest transferring to Scotch, or even another spirit classification, are echoed throughout the big four, as well as among the handful of independent distillers beginning to lay roots in Ireland.

The Kilbeggan distillery in County Westmeath is set to become a tourist destination

Premium gap
Teeling’s brother Jack, the former managing director of Cooley before Beam’s takeover and now founder of start-up company The Teeling Whiskey Co (TWC), believes choice plays a vital role in enabling the Irish whiskey category to grow.

“The younger demographic drinking entry-level products from mainstream brands like Jameson and Tullamore Dew need some choice because they won’t stay drinking them their whole lives; they’ll need other things to try,” he says.

TWC already has a stockpile of premium aged and extra-aged whiskey, having acquired the leftover stocks of Celtic Nations, the 8-year-old hybrid whisky from Bruichladdich and Cooley, which has been aged for a further two years and rebranded as Hybrid Edition 1. In January, TWC also intends to release a series of hand-crafted, small-batch bottlings of rare and old Irish whiskeys, including a 21-year-old finished in Sauternes casks, a 25-year-old finished in Burgundy barrels and a 30-year-old finished in Cognac barrels, the latter of which is likely to be a travel retail exclusive.

“We are going after the ‘white noise space’ that we feel is only occupied by Midleton Very Rare at the moment,” explains Jack. “We aren’t trying to go head-to-head with the big guys, but pack up all the alternative niches that are there. There’s a lot of choice of aged Scotch, but when you look at a shelf, there’s little to no presence from Ireland.”

Jack Teeling expects his limited stock of aged whiskey, along with a blended product and a poitin or new make spirit, to see the company through to the erection of his own distillery in the next three to five years.

While the news is undoubtedly exciting for a category that is screaming for more diversity, a raft of other independent distilleries are already gearing up to lay down their first stocks of Irish whiskey in the next few weeks.

Irish distilling boom
Dr Pearse Lyons from Kentucky company Alltech has installed a couple of stills at the Carlow Brewing Company in County Cork, while Oliver Hughes, co-founder of the Dingle Distillery in south-west Ireland, is ready to start producing liquid for a triple-distilled pot still single malt.

Exciting times for Irish whiskey indeed. But although the big four will claim there’s no danger of stocks running low, the fact remains that in the short to medium term there may be a limited amount of aged spirit available. The question is whether it will be an issue.

“If you look at what’s being sold in the Irish category, it’s predominantly blends,” says Teeling. “Potentially, down the line as the premium side of Irish whiskey takes off, which it will, this will be a much bigger discussion. But for the next two years this is going to be more of an issue for Scotch. The amount of premium aged Irish whiskey sold is still quite limited.”

The situation just now seems delicate, and is a balancing act for producers of managing what aged whiskey they currently have, limiting their expansion strategy and availability of extra-aged products, and ramping up production capabilities.

But if the industry can learn from Scotch’s example, avoid the pitfalls and manage stock well, then as demand continues to grow, the category is expected to flourish.

Irish whiskey is yet to make a dent in Asia, but with sales soaring in emerging markets such as Russia and South Africa, it won’t be too long before it emulates Scotch’s success in the Far East.

By the time the stock from Pernod Ricard, William Grant and Beam’s new distilleries ages in around a decade’s time – not to mention that of the independents – the category could see itself fighting more fiercely with its Celtic competitor. sb