...where distraction is the main attraction.

Tuesday, October 1, 2013

A Diageo boycott: The Whisky

Yesterday, the non-whisky brands.
Tomorrow, the "why?".

Here's the pressure point.  The whisky.  The distilleries fully owned by Diageo produce 38% of all of Scotland's malt whisky.  Their top selling blend, Johnnie Walker, is not only the largest Scotch blend (with more market share than the next three brands combined), but Johnnie Walker alone sold more than twice the LPA (liters of pure alcohol) of the entirety of the single malt market in 2011, 69.7M versus 34.7M.

So if a person was considering never again purchasing Diageo products, his Scotch choices would be significantly reduced.

Let's start with the blends:

Blended Scotch Whisky
Bailie Nicol Jarvie (via LVMH)
Dimple Pinch
Johnnie Walker
Vat 69
White Horse
Windsor Premier

Many of these aren't available in the US.  For the ones available here: White Horse isn't terrible, while Buchanan's, J&B, and Dimple Pinch are decent for cocktails/highballs.  But their absence would not be felt here at home.

That leaves Johnnie Walker.  I have done PLENTY of posts about JW.  Black Label was one of my starter whiskies and was, until last year, the go-to home blend.  But it was last year's news about the termination of Green and Gold Labels that had started my boycott talk.

For more about this particular act of Diageo's whisky killing, here's a link to my original post.  Here's a teeny bit of the issue I took:

In an interview with the major wine & spirits journal, Shanken News Daily, Diageo's Head of Whisky Outreach (really) says:
“As we reviewed the brand offering, we found that the range wasn’t meeting consumer needs and providing the best consumer journey through the range as far as taste profiles and price points.”
The revamp was meant to spread out the Johnnie Walker portfolio’s pricing in order to better motivate consumers to move up the brand ladder.
The whole "consumer needs" reference is cute.  The actual "needs" are Diageo's malt needs.  They are investing hundreds of millions of GBP to expand their malt production in order to fulfill the blends needed by emerging markets.  At the same time, Green Label was their only all malt blend (or blended malt).  Without cheap grain whisky mixed in, Green Label had a much lower profit margin than regular blends.

Per the Malt Whisky Yearbook, Diageo released 220,000 cases of Green Label in 2009.  That's 1,980,000 liters of malt whisky.  That same quantity of malt whisky could be spread out to 550,000 cases of grain-light or 733,000 cases of grain-heavy blended whisky.  There's a quick way to triple one's blend production, spread out the malt.

Meanwhile, to "motivate customers" and tend to consumers "needs" and "journey", Diageo replaced a 15-year-old 100% malt blend with a no-age-statement (read: much younger) 30-40% malt blend, at the same price point (from Green to Gold Reserve, $60).  Then they traded out the old regular Gold Label for Platinum Label, swapping an 18-year-old blend for an 18-year-old blend at a $20-$30 higher price point.

To sum that rant from a year-and-a-half ago, even though PR content is usually mostly untrue, Diageo's PR was particularly insulting to this "consumer" and "customer".  Plus, I really like Green Label.  And my disappointment was only heightened by the dipsy corporate message.

All this malt talk leads me to the Diageo distillery count!
Included: The recently absorbed United Spirits facilities. The LVMH distilleries, of which Diageo owns 34%.
Not included: The closed distilleries.

The open distilleries
Blair Athol
Caol Ila
Glen Elgin
Glen Ord
Glen Spey
Royal Lochnagar

The United Spirits distilleries

The LVMH distilleries

There are a lot of great distilleries on this list, including a number of my favorites.  Diageo owns so much super malt that it would be so hard to part with many of these.  I guess I'm lucky(?) they bottle almost none of these historic high-quality products as single malts.

Remember that Whisky Outreach gentleman from Diageo I'd mentioned in the blend section above?  Well, he also laid out this whopper at the 2011 World Whiskies Conference:
"Diageo is a blended whisky company. Diageo does not make single malts for me to enjoy. We do not make single malts for the aficionado to enjoy. We make single malts for our blending team."
As I mentioned in an earlier post, the first and last sentences are true.  The ones in the middle are, well......

Diageo is in the single malt business, but they don't commit much to it, thus their success is limited.  "Aficionados" do enjoy Talisker, Lagavulin, Caol Ila, Clynelish, Cragganmore, and the rest of their Classic Malts series.  Sadly, those "Classic Malts" make up only 1/3 of their distilleries.  And those "Classics" get but one regular bottling each.

They also turn out Special Releases, Rare Malts, Managers Selections, Distillers Editions, and other limited bottlings.  So, again, they are in the business of making single malts for "aficionados".  They just don't commit much malt or other resources to it.

While much of the rest of the single malt world is focusing more and more on higher ABV, non-chillfiltered, and uncolored whiskies, Diageo continues to turn out watered down and heavily filtered malt full of industrial caramel colorant.  Thus they're not even bottling a good version of their product.  At the same time -- due to their emerging market needs/desires -- Diageo has cut off cask access to independent bottlers, making it impossible for "aficionados" to access better (or at least, alternative) quality versions of this malt whisky.

Here comes the kicker:  Maybe they should get more serious about the single malt market.  In 2012, the US was the largest export market for Scotch whisky.  Its revenue was almost that of the second and third largest markets combined.  And this big export market has seen massive growth in its single malt sales.  In 2000, single malts made up 7% of the US's total Scotch volume.  Now it is at 15%, a nifty little growth of around 114%.

Meanwhile, Diageo North America showed only 1.3% in volume sales growth last year, while the rest of the market grew by 3.5%.  That means they were slacking everyone else by over 63% in annual volume growth rate.

So maybe a little commitment to the quickly growing single malt category in this largest of export markets wouldn't hurt.

I can dream, can't I?

In the end, I would miss Talisker, Clynelish, and Lagavulin the most.  It's just......I wish Diageo would make it harder for me to go.