Is Japanese whisky a victim of its own success?

Age-statement Japanese whiskies are being withdrawn due to stock shortages, putting pressure on retailers. But with consumer interest at an all-time high, could the category become a victim of its own success? The Spirits Business investigates.

*This feature was originally published in the January 2019 issue of The Spirits Business

It has been 15 years since Sukhinder Singh became enamoured by Japanese whisky. The co­founder of retailer The Whisky Exchange can be credited with introducing the UK to Japan’s now highly coveted spirit. “Suntory said, ‘we want to launch in the UK but we don’t really know what to do; we’d like your help because nobody really knows Japanese whisky’,” recalls Singh, who was “hugely impressed” by the offerings. At the time, there were only two expressions to launch: Hibiki 17 and Yamazaki 12. A miniature bottle was sent out with every order of any liquid from The Whisky Exchange – a highly uncommon marketing tactic for the time – with the promise of a discount if consumers liked what they tried and bought more.

“Within six months of promoting it on the website, we found one in every 10 orders had a bottle of Japanese whisky in it,” says Singh. “And that was just the two brands – no Nikka, that was it. We controlled Japanese whisky in the UK for a good three or four years, then they started bringing competition.” Little did he know Japanese whisky’s popularity was about to explode.

A PENCHANT FOR JAPANESE WHISKY

While Japan was preoccupied with Scotch single malts, the UK, other parts of Asia and Europe were developing a penchant for Japanese whisky. As the category’s success began to snowball, Suntory decided to expand its distribution footprint beyond The Whisky Exchange – “and rightly so”, says Singh. Japan’s attention also picked up and resulted in fresh favourability of the Highball cocktail. Kakubin was the whisky of choice, and “sales started growing insanely”, Singh adds. Yamazaki and Hakushu stocks were earmarked for Kakubin, putting pressure on single malts, which unfortunately were unable to keep up with demand.

Then the awards started rolling in. When author Jim Murray named no­-age-­statement (NAS) Yamazaki Single Malt Sherry Cask 2013 the “best whisky in the world” in his Whisky Bible 2015, while Scotch brands failed to make it into the top five, a consumer frenzy for Japanese whisky ensued. Year on year, the category continues to excel in blind tastings and is showered with awards, which Singh says “keep it in the limelight”, and its popularity is yet to dwindle.

So much so that brands have struggled to keep aged expressions available, and several have been discontinued. In 2015, Nikka decided to pull a number of its age-­statement whiskies. A letter to the company’s importers explained that stocks from its Yoichi and Miyagikyo distilleries were under pressure. A total of 14 products were delisted in all markets – including Japan – and comprised all single malt Yoichi and Miyagikyo whiskies, the Tsuru 17 Years Old ceramic bottle, Tsuru 17 Years Old glass decanter, G&G White, Black Nikka 8 Year Old and Malt Club. NAS expressions were brought in as replacements, but it will still be some time before mature stocks are ready for release.

“We still have restrictions of supply,” explains Emiko Kaji, Nikka Whisky international business development manager. “Although we are distilling at full capacity, we do not have enough whisky well matured yet. Most products are highly allocated in all markets. We do not have any tangible plan to reintroduce new age statements.”

Nikka pulled a number of its age statements in 2015

Last year, Suntory’s hand was also forced to call time on two of its aged whiskies because of supply constraints: Hibiki 17 Year Old and Hakushu 12 Year Old. From this year, the two variants will be withdrawn from certain markets, and overall availability will be limited over the next few years.

A spokesperson for Beam Suntory said at the time of the announcement: “As demand for our Japanese whisky portfolio continues to increase, Suntory has made strong investments to increase production capacity and ensure we are primed for continued long­-term growth and category leadership.”

Consequently, retailers and distributors alike are keenly feeling the strain on supplies – and it seems consumers truly do want what they can’t have.

“We had a significant rise in the number of people coming to us for these bottles and the sell price rose significantly overnight,” says Makiyo Masa, founder and director of online platform Dekantā. “There was an immediate impact on the price of these particular expressions, but there was also a rise in demand for other whiskies with an age statement. It is thought that other Japanese whiskies with age statements will also be discontinued in the near future, so they too have become highly collectible items.”

There are worse positions to be in than to have consumers the world over clambering to get their hands on your whisky. But as demand continues to outstrip supply, is Japanese whisky at risk of becoming a victim of its own success?

“I think what Japan is trying to do is to put more expressions into the market and to get people not only looking to drink aged stock,” says Dawn Davies MW, head buyer at UK trade supplier Speciality Drinks. “That’s the real problem: aged stock. I don’t think people are looking so much at age as they are at style; they want Japanese.

“So unless quality drops I don’t think it’s a case of the category being a victim. People are excited to see it, and as long as the liquid tastes good, consumers will be loyal.”

Excitement for Japanese whisky has seeped through to the on-­trade, with bars desperate to increase their offerings and entice fans into their venues. “We can’t keep up with them,” says Davies. “We have to ration out everything. We very much have to allocate everything because demand is so great – everyone wants Japanese whisky, but you’ve got to be loyal to the people who’ve always had it.”

It looks like there’ll be no slowdown in Japanese whisky’s popularity; with the Rugby World Cup set to take place in Japan this year, and the Olympics in 2020, the world will be watching what the country can do. Therefore quality has never been so paramount.

“There has never been greater dynamism in terms of whisky being distilled worldwide,” says Marcin Miller, founding partner of The Kyoto Distillery and Number One Drinks, known for its Karuizawa bottlings. “Unless Japanese whisky maintains a reputation for top quality liquid, there is a distinct danger that consumers will look elsewhere. Will promiscuous whisky consumers pay top dollar for Japanese NAS whisky or ‘Japanese whisky’ when there is a lot of positive noise about whiskies from Taiwan, India, New Zealand, Australia?” It’s a fair point to raise.

The limited edition Murasaki Geishas

TENUOUS LINK

By ‘Japanese whisky’, Miller is referring to the practice of whisky from outside of the country being imported, bottled and sold under the guise of ‘Japanese whisky’ when the liquid’s link to Japan is tenuous at best. It’s a problem that Speciality Drinks’ Davies says she has also encountered when approached by new brands looking to secure distribution. She envisions a backlash against such bottlings that aren’t Japanese as consumer knowledge grows.

Has Japanese whisky reached a point where a geographical indication (GI) is necessary to protect its reputation, then? There is consensus across the board. “It is extremely important because at the moment the regulations are so loose almost anything goes,” stresses Stefan Van Eycken, author of Japanese whisky book Whisky Rising. “The problem is, without regulations, we’re talking about ethics. I can’t tell you how many times I have had to tell people who asked me about a particular ‘Japanese whisky’ that they hadn’t seen before that it was maybe legally ‘Japanese’, but not in terms of actual contents and what most people would understand as being ‘Japanese’ – at least distilled and aged in Japan.”

However, he is doubtful this will come to fruition in the near future. “Too many producers have a vested interest in keeping their internal kitchen closed so, yes, I think a GI is desperately needed, but no, I don’t think it will happen any time soon.”

Miller is equally as keen to see a Japanese whisky GI status established to increase transparency in the category. “It’s extraordinary to hear neophytes extolling the virtues of some Japanese whisky or other when they’d turn their nose up at the same liquid if it was more appropriately packaged as a bottle of Scotch, Irish, American or Canadian whisky,” he says. “There is no problem with bottles of Japanese whisky containing other whiskies – the practice has a long and illustrious tradition – but it should be labelled and described as such to prevent consumer embarrassment.”

YOUNG WAVE OF PRODUCERS

Since the turn of the millennium, new Japanese whisky distilleries, such as Chichibu, have been joining the fold and garnering greater attention for the category, and an even younger wave of producers, such as peated malt whisky maker Akkeshi Distillery, is poised to provide more dynamism in the sector. With Japanese whisky in such fierce demand, additional stocks – provided quality prevails – will be welcome relief, not just for brands but distributors, retailers and consumers too.

“In 2017 and 2018, Japanese whisky was up there in my Christmas sales and there were a couple in the top­10 selling whiskies,” says Singh. “If I had more stock they would probably be in the top two positions. But my feeling is it will be another three to five years until age statements come back. For the next three years, I can see pressures will maintain.” Japanese whisky’s full potential is evidently still to be seen.