The biggest spirits stories of 2018By Nicola Carruthers
Jaw-dropping auction prices, ambitious expansion plans and punitive Bourbon tariffs made for a dramatic year in the spirits world – we look back at the biggest stories to shake the sector in 2018.
Last year, the US found itself embroiled in numerous trade wars, which began in March when US president Donald Trump revealed plans to impose a 25% import duty on steel and a 10% import duty on aluminium.
The UK also hit headlines with the Brexit vote in 2016 – a move which has continued to cause much anguish in 2018.
However, not all news was bad for the industry. Tequila is making waves in the spirits world, with Bacardi’s purchase of ultra-premium Tequila brand Patrón – in a deal worth US$5.1 billion – becoming one of the most talked-about acquisitions of the year.
In the whisk(e)y world, producers are also making significant investments. Jameson producer Irish Distillers announced plans to invest €150 million (US$173.7m) in its Midleton Distillery, maturation site and bottling plant, while Diageo has pledged £150 million (US$215m) on an extensive upgrade of its Scottish visitor centres.
Click through the following pages to discover our pick of the top 10 biggest spirits stories of 2018, in no particular order.
Shattock to step down
It’s all change at the top for Beam Suntory, with CEO Matt Shattock set to step down from his role this year.
In October, the company announced that Albert Baladi, chief operating officer and president – North America, would succeed Shattock, who will remain a member of the firm’s board as non-executive chairman and a member of the Suntory Holdings board. Effective April 2019, Shattock will transition his responsibilities to Baladi.
Shattock has held the position for 10 years, including five since the Beam and Suntory merger. During his tenure, annual sales have grown to US$4.3 billion from US$2bn to date, and he has led the company through a number of transformations.
Industry bids Tom Jago farewell
Sorrow reverberated across the drinks industry in October when news broke that Tom Jago, cofounder of The Last Drop Distillers, had died at the age of 93.
The industry pioneer co-founded The Last Drop Distillers in 2008 with James Espey, a company dedicated to seeking out “the world’s finest, rarest and most exclusive spirits” for bottling.
Prior to this, Jago had worked as the head of innovations at International Distillers & Vintners (IDV) and was involved in the development of brands such as Baileys, Le Piat D’Or, The Classic Malts and Johnnie Walker Blue Label. The Last Drop Distillers thanked Jago for “his brilliance” and “incisive humour”.
Irish Distillers to expand Midleton
Jameson producer Irish Distillers will invest €150 million (US$173.7m) in its Midleton Distillery, maturation site and bottling plant over the next two years to meet demand for its Irish whiskeys.
Of the funds put forward, close to €130m will be used to expand and upgrade the Midleton Distillery and maturation site in Dungourney, County Cork, which will receive eight new warehouses. More than €20m will be used to upgrade the firm’s Fox and Geese bottling site in Dublin.
Conor McQuaid, chairman and CEO of Irish Distillers, said at the time: “This investment will help to allow this growth to continue for years to come. The company is proud to play its role in the Irish drinks industry, which is a hugely important part of the Irish economy.”
Tequila: drink of the year
Tequila is one of the hottest properties in the spirits world, as proven by one of the most talked-about acquisitions of 2018.
The industry was wowed by Bacardi’s purchase of ultra-premium Tequila brand Patrón in January – a deal that valued the brand at US$5.1 billion. Citing IWSR data, Bacardi said the takeover makes it the second biggest spirits firm by value market share in the US, and the leading super-premium spirits company in the country.
According to data from market research provider Euromonitor International, the Tequila category (combined with mezcal) hit 320 million litres in 2017. It seems likely that, after Diageo’s purchase of Casamigos last year, more deals will follow in 2019.
Diageo ploughs cash into tourism
Diageo announced its plan to spend £150 million (US$215m) on an extensive upgrade of its Scottish visitor centres – the biggest single investment in Scotch whisky’s tourism industry to date.
The investment will include a new Johnnie Walker experience in Edinburgh, which will be directly linked to four distilleries representing the ‘four corners of Scotland’ and Scotch whisky’s regional flavour profiles: Glenkinchie (Lowlands), Cardhu (Speyside), Caol Ila (Island), and Clynelish (Highlands).
The group plans to create a ‘Johnnie Walker tour of Scotland’ to encourage tourists to travel to Edinburgh and rural Scottish locations. The Edinburgh visitor centre will become a new ‘hub’ for Diageo’s business in Scotland. Ivan Menezes, CEO of Diageo, said: “Scotch is at the heart of Diageo, and this new investment reinforces our ongoing commitment to growing our Scotch whisky brands.”
First whisky for £1 million at auction
The only bottle of 1926 Macallan featuring a hand-painted design by artist Michael Dillon became the first whisky to sell for more than £1 million.
Sold through auction house Christie’s in London last month for £1.2 million (US$1.5m), the 60-year-old single malt was described as the “holy grail” of Scotch whisky.
Only 40 bottles of The Macallan 1926 were released in 1986 following a 60year maturation period in Sherry-seasoned oak casks, each with a £20,000 price tag. One was given to Irish artist Michael Dillon to design, while 12 were given to Peter Blake and another 12 to Valerio Adami.
The last world record for the most expensive bottle of whisky was set by The Macallan Valerio Adami 1926, which sold in Edinburgh in October 2017.
Bourbon hit by tit-for-tat tariffs
The Bourbon industry has become the target of punitive tariffs in response to the Trump administration’s aggressive stance on international trade.
The EU introduced retaliatory tariffs on €2.8 billion (US$3.3bn) worth of US products in June, including a 25% hike on American whiskey duty. In July, Canada slapped a 10% tariff on the spirit, while China imposed a 25% charge.
The moves were in response to US president Donald Trump’s decision this year to impose tariffs of 25% for steel and 10% for aluminium imported into the US. The duties were raised on 1 June, affecting the EU, Canada, Mexico and India.
The US has challenged the introduction of tariffs by China, the EU, Canada, Mexico and Turkey, and filed five disputes with the World Trade Organization (WTO) in July, arguing the tariffs were unjustified and illegal.
Drinks companies go to pot
In October, Canada became the second nation, after Uruguay, to legalise recreational cannabis, prompting more players in the alcohol industry to make moves into the sector.
A recent report claimed sales of cannabis-based food and drinks in North America could hit US$4 billion by 2022.
In August 2018, Constellation Brands invested an extra US$4bn in Canopy Growth Corporation, which it first invested in 2017. Other drinks giants have been rumoured to be exploring cannabis partnerships, while distributors Southern Glazer’s and Breakthru moved into the market last year.
Brexit continues to cause anguish
The Brexit vote sent shockwaves through the industry in June 2016, and as the UK’s departure from the EU neared, it remained a hot topic for the international spirits trade in 2018.
In November, the UK government published a draft withdrawal agreement, which has been agreed “at negotiators level”. Under the terms, geographical indicator (GI) protections would continue to be honoured by the UK.
The Wine and Spirit Trade Association (WSTA) has repeated its warnings against a ‘no deal’ scenario, stating it would have a “catastrophic impact” on its members. Miles Beale, chief executive of the WSTA, said: “A ‘no deal’ Brexit presents a multitude of difficulties that are outside of [businesses’] control. We need more time to digest the proposed deal.”
The Scotch Whisky Association also said no deal would “cause the Scotch whisky industry considerable difficulties, and would force cost and complexity into production, distribution and exporting”. But it said that while the draft agreement is a “compromise”, it is a “positive step towards business certainty”.
Conviviality crash leaves sector reeling
The Conviviality crash of March 2018 will be remembered as one of the most dramatic collapses to have taken place in the UK drinks industry. Troubles at the wholesaler and distributor surfaced when it suspended trading of its shares after identifying a £30 million (US$42m) unpaid tax bill due on 29 March 2018.
The company issued three profit warnings in just one month and CEO Diana Hunter resigned with immediate effect as Conviviality struggled to raise £125m to keep the company afloat, but was unsuccessful in sourcing the funds. In April last year, C&C Group, with backing from AB InBev, bought Conviviality Direct. This was swiftly followed by the sale of Conviviality’s retail arm to Bestway Direct Limited for £7.25m.