Creative freedom gives Canadian whisky competitive edge
Enjoying looser regulations than their US counterparts means Canada’s whisky distillers are able to experiment more in production, allowing the category to enter a new era of respectability. SB speaks to producers to discover the new wave of innovation washing over the category.
*This feature was originally published in the August 2019 issue of The Spirits Business
After having been disparaged for years, Canadian whisky’s reputation is on the upswing. While spirits fans have long extolled the virtues of Scotch, Irish and American whisk(e)y, Canadian whisky has been left in the doldrums. But a raft of investment from global players, the opening of new artisan distilleries, innovative expressions and, critically, a renewed focus on quality mean the tide is turning.
The history of whisky making in Canada can be traced back to 1769, when the first distillery was built in what is now Quebec. In 1890, Canada became the first country in the world to mandate whisky production. In 2018, Canadian whisky sales rose by 0.4% to 28.3 million nine-litre cases globally, according to IWSR Drinks Market Analysis. In the US – the category’s biggest market – 17.4m nine-litre cases of Canadian whisky were sold, generating nearly US$2 billion in revenue for distillers, according to the Distilled Spirits Council.
“We’re starting to see that Canadian whisky is in a huge renaissance; there’s tons of renewed interest in the category,” says Chris Thompson, North American brand ambassador for Ontario’s Forty Creek. “For decades there were only five or six major players, and now there are around 120 craft distillers operating across Canada. In the past 10 years, everyone’s really stepped up their game and the whiskies have just gotten so much better.”
Most recently, innovation has been a buzzword for the category. “Innovation has been contributing to a renewed respect for Canadian whisky in recent years,” says Kevin Richards, Sazerac’s senior marketing director – whiskey and speciality brands. “As more consumers are drawn to whisk(e)y in general, the category is gaining more attention and new products are gaining critical acclaim.”
Dozens of small Canadian craft distillers are breathing fresh life into the category. One of the pioneers of this second wave of Canadian distilling was Forty Creek, which was launched in 1992 by former winemaker John Hall. “Experimentation is very much at the forefront of what we do,” says Thompson, who adds that the distillery’s master blender, Bill Ashburn, is “working on 30 different things right now”. “We have Cabernet Sauvignon barrels, brandy barrels, Sherry casks, Canadian oak and American oak.”
Barry Bernstein and Barry Stein also joined the small band of Canadian distillers when the pair opened Ontario’s first craft distillery, Still Waters, in 2009. Still Waters produces four whiskies under its Stalk & Barrel label, including two blends, a single malt and a 100% rye whisky. The site is also releasing a new blend in the next few months. “When we started we thought that there was an opportunity to open a craft distillery, especially given what was happening in the US with craft distillers,” recalls Bernstein. “They’re a way ahead of us but we thought there would be an opportunity, that’s why we jumped in and entered the market.”
The category has also benefited from securing some top accolades in the past few years. The sector was thrust into the spotlight in when whisky expert Jim Murray named Diageo’s Canadian whisky Crown Royal Northern Harvest Rye the World’s Best Whisky in his Whisky Bible 2016. The award marked the first time a Canadian whisky had scooped the top title. “It’s brought a whole lot of attention to the category,” Thompson says.
One factor that distinguishes Canadian whisky from other whisk(e)y sectors is its regulations, which offers more freedom to experiment. Distillers in Canada can work with any grain, and they can age it in any kind of barrel – new or used.
“It really separates us from most of the other whisky categories in the world,” adds Thompson. “The Scotch and Bourbon industries are very highly regulated but Canada is the polar opposite. We’re allowed a tremendous amount of freedom to innovate and to do different styles. Some of the most exciting whiskies ever to come out of this country have literally happened in the past three to five years. Those whiskies are really what’s helping to invigorate the category.”
Thompson says that previously the sector “got a bad rap” because of its rule that allowed distillers to add 9.09% of flavour additives. “For years there was a whole bunch of really bad Canadian whiskies that used to add cheap citrus wine to their whiskies, which would lower the overall cost of the product. The serious whisky producers in Canada don’t do an awful lot with that but when they do, they’re usually very respectful of the liquid that goes into their whiskies.”
Canadian whisky distillers so far, it seems, have embraced the country’s relaxed regulations and have taken experimentation up a notch. One producer seeking to change how consumers perceive and experience Canadian whisky is Mark Anthony Wine and Spirits, with its Bearface brand. Launched last October, Bearface Triple Oak has been finished in three types of oak barrels. The single grain whisky is first aged in ex-Bourbon charred American oak barrels for a minimum of seven years. It is then placed in tight-grained French oak ex-wine barrels with more than seven years of use for “high-end Bordeaux-style wines” from Canadian winery Mission Hill. Finally, the liquid is aged in a three-year-old air-dried virgin Hungarian oak cask – a first for the Canadian whisky category.
“The way we approached it is like when you are cooking and you’re layering flavours,” explains Andres Faustinelli, Bearface’s master blender. “Instead of shipping the wine cask to the distillery, you ship the whisky to the winery, so you completely reverse the approach. You start with a whisky that is mellow and laidback, then you add a layer of richness, dried fruits and acidity.”
Faustinelli believes that innovation “is the biggest opportunity for Canada”, and is planning to release a new line extension each year. “The next innovation is going to be really crazy and challenge a lot of things,” he claims. “It’s always important to challenge the status quo and really trigger discussion in the industry.”
While many producers are embracing this freedom, Still Water’s Bernstein is concerned that the regulations are allowing distillers to create expressions that mislead drinkers. “What’s happening is that as the craft distilling movement is growing in Canada, there are a lot of young distilleries that are anxious to release whisky. Some that have flouted the rules and have released unaged or minimally aged spirits, which aren’t legally whisky but they are calling them that. That causes a lot of confusion in the marketplace. What’s worse is that it gives consumers the wrong idea, especially about small producers.”
Competing against the likes of Scottish, Irish, American and Japanese whisk(e)y is a constant battle. Category giant Canadian Club, owned by Beam Suntory, is attempting to tackle this challenge by recruiting new consumers through its “refreshment” platform. The brand’s Over Beer campaign challenges beer-drinking culture. “It’s a really fun campaign, bold and precocious, because the brand is taking a stand against boring choices. It’s intercepting those beer occasions and getting consumers to wake up from their ‘sleep drinking’ and try Canadian Club and ginger ale,” says Rob Tucker, senior brand manager for Canadian, American and Irish whisk(e)ys at Beam Suntory.
At the higher end of the category, Canadian Club released its Chronicles series, a range of premium expressions, in 2017, starting with a 40-year-old whisky. The expression was the oldest Canadian whisky on the market until the brand released its 41-year-old in 2018, which will be followed by 42-year-old The Dockman whisky this October. Every October, Canadian Club plans to release a new whisky in the range up to 45 years old, when the brand will skip five years and release a 50-year-old, Tucker says.
Although the market is still dominated by the likes of Canadian Club, Wiser’s and Crown Royal, lesser-known players are taking advantage of the burgeoning interest in Canadian whisky, including US spirits group Sazerac. Last year, the Louisiana-headquartered firm completed refurbishments of its Old Montreal Distillery, bringing production of Canadian whisky back to the city for the first time in decades. The site has undergone extensive restoration in the past few years, including the installation of new grain mills, a mash cooker and a still.
The end of 2018 also saw Buffalo Trace owner Sazerac acquire Seagram’s Canadian whiskies – Seagram’s VO, VO Gold, Seagram’s 5 Star and Seagram’s 83 – from Diageo as part of the firm’s sale of 19 non-priority brands.
“We’re very bullish about all of the Seagram’s whiskies we acquired from Diageo and look forward to putting focus back behind them,” says Sazerac’s Richards. “These brands are iconic and enjoy strong awareness among consumers and the trade.”
The category also attracted the attention of Mexican drinks group Becle, owner of Jose Cuervo Tequila, which moved into the sector with the acquisition of Canadian whisky brand Pendleton from Oregon-based Hood River Distillers in February 2018.
More recently, Bourbon giant Heaven Hill completed its acquisition of Black Velvet Canadian whisky from Constellation Brands. The brand is the second biggest-selling Canadian whisky in the world.
Four years earlier, Skyy Vodka owner Campari Group snapped up Forty Creek for €120.5m (US$134m). The Italian drinks firm invested US$5m in the renovation of Forty Creek’s facility in Grimsby, Ontario, in 2017 as part of Campari’s strategy to “make Canada a priority market for investment and innovation”. Thompson adds: “There are two or three innovative expressions from Forty Creek that are in the pipeline, one of which I think will be quite unlike anything anyone in the Canadian whisky industry has ever experienced. That’s hopefully coming out this year.”
The brand’s next limited edition expression, Forty Creek Victory, will launch in September to commemorate the 205th anniversary of the Engagement at the Forty, a confrontation that took place during the War of 1812 – a conflict between the US and the UK.
Playing with the big brands
As for the category’s challenges, Bernstein says: “We’re not trying to compete with the other craft distillers; we’re trying to play with the big brands. That’s challenging for us just because we don’t have the resources. It concerns me for the long term because it’s not clear to me yet how the big brands are going to continue to behave with the craft distillers, and whether or not that will curb innovation.”
However, Bernstein is positive about the category’s future: “I don’t think it’s reached its potential outside of Canada. It’s always been popular in the US but as more of a mixer. That’s changing, and with that comes enormous opportunity.”