Irish Distillers CEO: maturing stock ‘isn’t the issue’

Irish Distillers CEO Anna Malmhake is playing a central role in leading the Irish whiskey category back to greatness. Here, she talks strategy, stock shortages and inter-category competition.

Anna Malmhake, CEO of Irish Distillers, believes Irish whiskey is “righting” its position against Scotch

*This article was initially published in the August 2015 issue of The Spirits Business magazine

In the early 19th century Irish whiskey was the most consumed spirit in the world. Its triple-distilled, smooth character was widely accessible and as a vine-munching pest began destroying France’s brandy production, sales of Irish whiskey soared. At its height there were around 90 distilleries operating in Ireland, but as US Prohibition, civil war and famine hit, the industry collapsed, leaving just two distilleries supplying the world’s Irish whiskey thirst by the mid-1980s. Of course that’s the abridged version of its rise and fall across two centuries.

Now, some 200 years after Irish whiskey was at the top of its game, the category is experiencing a renaissance, riding the wave of consumer demand hitting brown spirits. As the industry eyes some 300% growth to more than 24m cases over the next

15 years, the message booming from Ireland is that there’s no reason the category cannot achieve the same widespread success as Scotch. But with some 85.6 million cases separating the two, there is still a hell of a long way to go.

There are currently around 24 new distilleries expected to open during the next 12 months, and even more brands set to flood the category over the next few years, but according to Bernard Walsh, chairman of the newly-found Irish Whiskey Association (IWA), it has been “the existing players that have driven the global renaissance in Irish whiskey”.

Jameson domination

None would argue that the company leading that revival has been Irish Distillers Pernod Ricard, whose iconic Jameson brand has consistently grown year-on-year to 4.7m cases, up 6% in 2014 (Brand Champions), and accounts for some 70% of the entire category. So strong are its growth predictions too that the company has already invested a whopping €220m in expanding its Irish whiskey distilling, maturation and bottling production over the past few years.

Bridging the sales gap between Irish whiskey and Scotch may seem exhausting for most, but for Anna Malmhake, CEO of Irish Distillers since 2011, the category is already well on its way to catching up.

“Irish whiskey used to be 50 times bigger than Scotch in the early 1800s and we are only now on the road to righting the balance in the worldwide whisky category,” she says. “The wonderful thing of course is that more people around the world are coming into whisky so Irish whiskey growing will be good for Scotch, and Scotch growing will be good for Irish, because it’s all about people being interested in whisky full stop.”

Malmhake joined Irish Distillers at the perfect time, leaving a position as marketing director of the Absolut Company in Stockholm, Sweden, just as the decision had been made to invest significantly in increasing Irish whiskey production.

“I wish I could say I made a heroic, smart move, but I must say the forecasting work had been excellently done, so I was lucky enough to be able to trust and feel really good about them,” she explains. “Right now of course the challenge is for us to keep repeating these forecasts in the event we need to expand again which is of course the question I’m working on. So I hope someone someday will be able to thank me for doing the forecasts well.”

Irish Distillers’ diverse Irish whiskey portfolio is led by Jameson, the category leader

Leading the charge

Malmhake admits that the biggest challenge now is managing the growth of Jameson – and the rest of Irish Distillers’ portfolio – sensibly. As category leader she feels the company has a responsibility to lead the charge for Irish whiskey as a whole, in both new and existing markets. “From our perspective, how to meet increasing demand is an amazing challenge to have – what you’d call a ‘luxury problem’,” she says. But unlike many of her Scotch or Bourbon contemporaries, she claims the issue is less to do with stock management and more about activating Irish Distillers’ brands in new markets, where other whisky categories have historically ruled the roost. “Maturing stock really isn’t the issue; we were able to forecast the demand and expand at the right time to be able to meet it,” she explains. “The challenge is really more about growing the rest of the company at the right speed and in the right places.”

To illustrate her point, Malmhake uses the example of Jameson’s growing army of brand ambassadors that have shot up from 11 to 74 over the last few years, the majority of whom are based in the US – the brand’s core market. Russia and South Africa meanwhile are the brand’s second and third-largest markets respectively.

Despite Bourbon and American whiskey controlling the bulk of whisky sales in the US (19.3m cases sales in 2014), Jameson’s – and other brands’ – work in the country has gained Irish whiskey the title of fastest-growing spirits category for at least the past decade. Between 2002-14, the category grew by 538% to 2.7m cases (Discus), the majority of which was concentrated among the high-end premium and super-premium expressions. Today, Jameson comprises three-quarters of that amount.

Transatlantic competition

Malmhake is adamant Irish whiskey can reach the heights of Scotch, but can Irish whiskey sweet-talk die-hard Bourbon drinkers, and on home turf too? “When I talk to consumers who have an interest in whisky it’s more the brand that matters to them,” she explains. “Of course they’re very knowledgeable – they know their Irish whisky from their Scotch and Bourbon, but they are more open to good whisky regardless of origin. They may be fond of a particular Bourbon but I rarely come across people who only drink a certain type of whisky.”

Her words echo those of Pernod CEO Alex Ricard who earlier this year explained that the company doesn’t need a Bourbon brand as Jameson fills that consumption occasion requirement. “He’s reasoning from exactly the same perspective,” agrees Malmhake. “A lot of Bourbon consumers in the US are very much into craft brands with a history and that are really open with their production methods. The same people are also attracted to Jameson because of the history of Midleton distillery and the craft. Of course one of the main reasons people are into both Bourbon and Irish whiskey is the variety of it.”

Variety is something the Irish whiskey category was lacking for too long before the recent distilling boom brought about by Beam’s purchase of Cooley distillery in 2012. The entrance of scores of new brands has encouraged Irish Distillers to focus harder on innovation. According to data compiled by The Spirits Business and the Irish Spirits Association, Jameson’s stronghold on the category slowed for the first time in 2014 as new entrants flooded the market. Its share slid by 3% to account for 4.7m cases of the total 7m exported by the Irish whiskey category during the calendar year.

Russia is Jameson’s second-largest market behind the US

Growing sector

Where in the late 20th century the category consisted of Jameson, a handful of blends and a smattering of single pot still expressions (the latter all from Irish Distillers), now consumers are spoilt for choice with the advent of single malts, grain and a variety of cask finishes. With an absence of single malt and grain from its own portfolio, is Irish Distillers in danger of losing further market share to new entrants offering more choice? “You could say that within the next 5-10 years Irish Distillers’ portfolio will produce enough variety for consumers to not get bored for decades,” Malmhake says, noting the recent launches of Green Spot Château Léoville Barton, a red wine barrel-finished single pot still whiskey, Midleton Dair Ghaelach, a single pot still whiskey matured in Irish oak, and Jameson Caskmates, a stout barrel-finished blend. “On the other hand I expect that whisky consumers in general will want to try different styles, and that’s one of the reasons we welcome the new entrants. Some of them have really interesting ideas about how to take its great heritage and push it forward and reinterpret it, and I think it’s brilliant.”

Irish Distillers has such faith in the growth of the category, and its brands, that despite completing the renovation of its new still house at Midleton in 2013, it already intends to double its distilling capacity by an additional three stills within the next two years.

Drop in third party demand

Demand for its own brands is so great that third party supply is “becoming less and less of our entire turnover”. However if the category is to grow and compete against the likes of Scotch and Bourbon, Malmhake admits a huge education job lies ahead. “That’s why we started our academy down at Midleton,” she says. “We run courses for the trade from all over the world on Irish whiskey history, its production, what makes it unique and so on. In a year at least 1,000 people have gone through it, and of course these are people who go back home and write about it and talk about it.”

The establishment of the Irish Whiskey Association in 2014 – of which Irish Distillers was a founder – goes a long way to helping the company and the rest of the industry educate consumers about the category. The IWA’s frankly optimistic prediction that the category will grow by 300% over the next 15 years is what Malmhake calls “a very conservative estimate”. Certainly Diageo wasn’t aware that demand for Scotch whisky would decline when they invested £1bn in production, so what makes Irish Distillers so certain it can trust these figures? “Let me put it like this – if you take the short term history from the end of the 1980s and the fact that premium international Irish whiskey is about 6% of the category, then on top of that the style of whisky that both new consumers and connoisseurs of whisky appreciate, honestly I can’t fault those predictions,” she explains.

With such optimism, that 85.6m case gap between Irish whiskey and Scotch appears miniscule, although, in the short-term at least, any gains will be made at the standard-premium end as new distillers grow their inventories of mature stock. In the meantime, the onus to grow the category’s value remains in the hands of Irish Distillers.