Ten news stories that rocked the spirits world in 2017By Nicola Carruthers
Fake whisky, mega-mergers and groundbreaking lawsuits made for an eventful year in the spirits industry – but which were the biggest stories to shake the sector in 2017?
One story to hit the headlines in the last 12 months was the revival of not one, but three iconic closed distilleries, while one of the biggest drinks firms in the world payed a whopping US$1 billion to buy a Tequila brand from a famous actor.
A years-long saga between Diageo and Vijay Mallya also continued to make waves in the industry, and an investigation into the authenticity of a fake Macallan 1878 took the attention of the drinks world.
Click through the following pages to discover our pick of the top 10 biggest spirits stories of 2017.
Cannabis enjoys a starring role
Last year, a Euromonitor analyst predicted that cannabis-based drinks were set to become the “biggest disruptor that ever was” in the US drinks market. It seems Constellation Brands was paying attention, and the US firm made a move into the sector with the acquisition of a minority stake in cannabis producer Canopy Growth Corporation.
In October, the Svedka vodka maker announced it was to pay C$245 million (US$191m) for a 9.9% equity stake in the Ontario, Canada-based firm.
The companies plan to develop and market cannabis-based beverages.
Canopy Growth will use Constellation’s investment to fund its international expansion, new product developments and research. The deal is expected to be completed in the third quarter of Constellation’s fiscal 2018 period.
Three ‘lost’ distilleries come back to life
One of the biggest stories to make headlines in the whisky world this year was the revival of three ‘lost’ single malt distilleries – Port Ellen, Brora and Rosebank – announced in October.
Port Ellen and Brora, two of the most highly collectible whiskies in the industry, will start distillation once again after drinks giant Diageo pledged a £35 million (US$46m) investment to open the closed sites. The cult names will begin distilling again by 2020, with Diageo considering 12-year-old whiskies as the “benchmark” from the distilleries.
Announced one day later, Ian Macleod Distillers entered into a binding agreement with Scottish Canals to purchase the Rosebank distillery in Falkirk, and separately acquired the Rosebank trademark and the distillery’s existing casks from Diageo.
Leonard Russell, Ian Macleod’s managing director, told The Spirits Business in November that he will “produce Rosebank Lowland single malt in exactly the same way as it is known”, with plans to launch a “limited-edition bottling at around 25-30 years, probably next year”.
Firms’ merger to form super company
Just a year after the creation of US$17.5 billion giant Southern Glazer’s Wine & Spirits, the biggest wholesalers in the US market – Republic National Distributing Company and Breakthru Beverage Group – announced plans to merge and form a US$12bn company.
Republic and Breakthru have signed a letter of intent to combine their assets and operations, which they claim will allow “greater focus on innovation and differentiation”. Beyond offering suppliers an enhanced geographic footprint, RNDC and Breakthru plan to invest in technologies that will “enhance all areas of their business”, including supply chain management, e-commerce, digital marketing and operational efficiency.
Mallya saga continues with Diageo action
The latest twist in a years-long saga between Diageo and former United Spirits chairman Vijay Mallya has resulted in Diageo suing the billionaire tycoon for at least US$180 million.
The drinks giant is taking legal action to reclaim US$40m paid to Mallya in severance when he stepped down as chairman of United Spirits in February 2016. Diageo is also seeking about US$141m from Watson Limited, a company associated with Mallya.
Diageo has amassed a majority stake in United Spirits since it first purchased a shareholding in 2013. An internal battle raged on for months after an inquiry alleged that the company had diverted funds to other firms affiliated with Mallya.
Minimum unit pricing set for Scotland
The UK Supreme Court’s approval of minimum unit pricing (MUP) in Scotland sent shockwaves through the industry and beyond in November.
The ruling concluded a lengthy legal battle from drinks trade groups. The Scotch Whisky Association took its case against MUP to the UK’s highest court following initial approval of the legislation in 2012.
Scottish health secretary Shona Robison will soon announce the government’s “next steps” in implementing MUP. MSPs have agreed to set a 50 pence-per-unit price on alcohol “as quickly as possible”.
Fake whisky hits the headlines
Whisky counterfeiting is not new, however the resurgence of interest in old and rare bottlings means that bogus brands are becoming more refined, and producers are keen to crack down on the lucrative – and potentially deadly – whisky fakes.
A recent investigation into the authenticity of a Macallan 1878, sold for US$10,000 at a hotel in Switzerland, made headlines after it was exposed as a fake.
Also this year, a fake whisky-bottling operation was discovered in a house in London, described by Whisky.Auction’s director, Isabel Graham-Yooll, as an operation “never seen on such a scale before”.
Cognac revives around the world
After finally recovering from declines prompted by the Chinese government’s austerity drive, global Cognac exports reached their highest level in both volume and value terms in 2016, the Bureau National Interprofessionnel du Cognac confirmed.
Volume climbed by 6% and value by 6.8% in the 2016 calendar year, resulting in a turnover of €2.76 billion (now US$3.2bn).
The Cognac industry now accounts for more than 20% of French wine and spirits exports, the trade group said. In total, 179.1m bottles of Cognac were shipped globally, approximately 20m more than in 2012.
In 2013, the Chinese government’s anti-extravagance measures induced a crisis, which saw value sales fall by 10% in 2013/14.
Old quality Cognac drove the revival, with volumes up by 11.7% and values 8.3% higher. VS, which accounts for half of all Cognac sales, posted 9.6% volume gains last year.
Tequila goes stratospheric with Clooney acquisition
Tequila has been making waves, with a number of key players now tapping into the category.
In June, Diageo agreed to acquire George Clooney’s ultra-premium Casamigos Tequila brand for US$1 billion, significantly increasing its presence in the fast-growing sector.
It’s no surprise, given that super-premium Tequila sales in the US have shot up by 706% since 2002, Distilled Spirits Council data shows. The past couple of years have seen an array of investments, including the addition of Cenote Tequila to SPI Group’s portfolio and LVMH’s super-premium line Volcan de mi Tierra.
Sadness of death of whisky expert Dr Jim Swan
In February this year the industry was informed of the sad news that renowned whisky expert and consultant Dr Jim Swan had died.
During his career, which spanned 35 years, Swan consulted on all aspects of whisky production for distilleries such as Kavalan in Taiwan, The Cotswolds Distillery and Penderyn in Wales.
More recently, Swan formed part of the team pioneering the construction of Lindores Abbey Distillery in Fife, where he was described as “the ultimate whisky troubleshooter”.
Founders Drew and Helen McKenzie Smith said: “Jim’s passion for the return of Scotch whisky to Lindores Abbey was infectious, and his counsel to us as distillery founders inspirational.”
Rum firms hit by hurricanes
Hurricanes Irma and Maria, which tore across the Caribbean in September, affected some of the biggest rum players in the region.
Beam Suntory’s US Virgin Island-based Cruzan Rum distillery suspended operations for three weeks. Some warehouses were damaged during category-five cyclone Maria, which caused catastrophic damage across the Caribbean last month, but rum supply was not affected.
Meanwhile, Destilería Serrallés, the maker of Don Q rum, located in Ponce, Puerto Rico, was back in production after shutting down for several weeks. The Casa Bacardi visitor centre in Puerto Rico closed in the weeks following Hurricane Maria so repairs could be made and while staff helped provide relief to the community.