For generations, there were essentially two choices when it came to whisky. For many years, the only real competition to Scotch whisky was its Celtic cousin, Irish whiskey. Then, Irish whiskey took a dive in popularity, allowing Scotch whisky to come to the fore. For around 50 years, Scotch whisky held the number-one spot in the marketplace. You were more likely to see rivalry between the various distilleries rather than any kind of outside influences. Even American bourbon didn’t really touch the whisky market, as it is a very different product with a very different audience.
Then, in 2012, Irish whisky started making a comeback, and bourbon’s appeal grew. Then Japanese whisky happened. And all of a sudden, the marketplace was blown wide open as Japan discovered a taste for whisky. Still, Scotch whisky held its own against all newcomers relatively easily, as overseas production of whisky was regarded as insignificant at best, and poor quality at worst.
But is that still the case? Are the emerging whisky regions snapping at the heels of traditional Scotch Whisky? In this article, we’ll take a look at the current situation and the new markets that are now emerging. We’ll briefly examine the Japanese phenomenon, before taking a longer look at new regions such as India, Taiwan, Australia and England.
We’ll also take a quick look at the rise of flavoured whiskey and how this could attract a whole new demographic, expanding the marketplace for whisky around the world. While whisky in its traditional guise is one of the top five spirits globally, distillers are always looking to appeal to new markets. But could new flavours and new producers enhance or alter the very character of traditional whisky to consumers who previously may not have thought themselves to be whisky drinkers?
We’ll also take a look at what the Scotch whisky distillers are doing to respond to new challenges, or even if they need to, given the huge popularity of traditional Scotch whisky.
The Japanese market
Before we take a more in-depth look at emerging markets for whisky, let’s backtrack for a moment and take a quick look at Japan.
Japan has been a big whisky market for 40 years, and the Japanese desire for authentic Scotch whisky has never really lost pace. High-value labels and collectable Scotch whisky (particularly single malts) continue to grow in popularity in Japan.
While a Japanese domestic whisky existed as far back as the 1939s, it wasn’t until the 1970s that new brands began to grow from distilleries such as Nikka. The Japanese then went on to create its own unique product to provide a product for those who loved whisky, but didn’t have the financial means to pay top money for genuine imported bottles.
Even so, until 2018 there were only three distilleries of any note opening – Nikka, Kirin, and Suntory. Of the three, Suntory was responsible for the revival of Japanese whisky, which partnered with a general increase in interest in Japanese culture, especially its cuisine. This in turn led to a boost for distillers and an emergence of new brands.
The key to Japan’s success is significant investment allowing for substantial upscaling to meet demand. New regulations implemented to protect the authenticity of Japanese whisky have also redefined the product, both nationally and globally. They make a very clear distinction between products that can call themselves ‘Japanese Whisky’ and others that can only be regarded as ‘Whisky from Japan’. This in turn could make authentic Japanese whisky (that which adheres to the new regulations) as highly prized in the collector’s market as some of the high-value Scotch whiskies.
What can other markets learn from the Japanese model? And are they adapting their own whisky production, marketing and export drives to emulate the success of the Japanese? And do they have the capacity to compete on a global stage alongside established producers such as Scotland, Ireland and Japan?
Indian Whisky – Is there room for more producers?
India is one of the largest markets for whisky, but some factors could curtail its global domination. The liquor market in India is largely dominated by well-established spirits producers such as Diageo and Pernod Ricard, so external Scotch distillers have found it difficult to gain traction within the Indian market, especially considering the high import duties levied.
While high import duties have made it difficult for Scotch to penetrate the Indian market, they are not the sole reason for the rise of Indian whisky brands. The Indian government’s push for “Made in India” products has also played a significant role in changing consumer perceptions. This combination of national pride and cost effectiveness has allowed local brands to thrive, bypassing the hefty import duties imposed on Scotch.
There is a caveat though, in that Indian whisky in general hasn’t yet managed to gain the same level of recognition as other international producers, and is not legally considered to be ‘whisky’ based on current EU regulations.
There are, of course exceptions, such as Amrut, which is gaining global recognition and has a reputation for producing premium quality 100% Indian-produced single malts.
For such a large country like India, you would expect its whisky production to be proportionally scaled up. But currently, that isn’t the case, and even Amrut is a relatively small operation in comparison to the Big Scotch whisky distillers.
The issues that Indian whisky faces are logistical when it comes to upscaling production for the international market. Primarily, limited land for the production of ingredients, and far more importantly water shortages, especially in the south where drought is commonplace.
The shortage of casks is also an issue, and limited capital prevents new distilleries from establishing themselves (as well as being able to purchase the barrels they need).
Regulatory issues are also a problem. Combined with the issues listed above, this could make it difficult for the Indian market to replicate the success of the Japanese model any time soon. High import duties of 150% protects the internal Indian market and makes the home-grown variety popular with consumers. But if there is a reduction in those import duties, it could signal a shift of consumer preference back towards authentic Scotch whisky. Only time will tell.
Taiwanese Whisky – the next Far East success story?
Taiwan has a reputation for producing high-quality products. While the whisky industry is still very small, the quality and rarity value of the product may make it infinitely more desirable to specialist collectors and connoisseurs.
Kavalan’s dominance in Taiwan is down to significant investment and has allowed the brand to grandfather its wealth of knowledge and experience in making high-quality whisky into the Taiwanese model. While still ery small when compared to other exporters, Taiwan has the potential to upscale production as well as utilise its existing connections to the food and beverage market.
Australia – whisky from a land down under
Australia is the last country you would expect to have a foothold in the whisky market. But Australian (and Tasmanian) whisky has a strong reputation for quality. In 2014, Sullivans Cove French Oak Single cask won the accolade as the world’s best single malt whisky at the prestigious World Whiskies Award. As this was the first time the prize went to a distillery that wasn’t Scottish or Japanese, it made headlines.
However, because of production costs, Australian whisky may only ever be a small market in the same vein as artisan beers. There were 333 distilleries registered in Australia and Tasmania as of 2021, and while the sector has shown both internal and international growth over the past 30 years, it still has a long way to go to become a major contender.
Where it could become an emerging force, though, is in the variety of whisky that it produces. While much of the Australian distillery output is single malt, other types are being developed by more adventurous producers including rye, blended, and wheat whisky such as Starward Nova, The Gospel’s Legacy Rye, and Lark Symphony No. 1 blended.
Tasmania has the biggest potential to grow a larger whisky producing industry, as the climate on the island is far more conducive to whisky production. It’s no surprise that Sullivans is located in Tasmania, and has won not just that all important best single malt whisky award, but a cabinet full of prizes for its boutique whiskies. Other Tasmanian names to look out for include Starward, Barossa, and Lark.
And that’s the word that is most likely to be associated with many Australian whiskies – boutique. This doesn’t detract from the quality of the product, which is exemplary, and brands such as Starward and Manly would be regarded as more high-end. But as far as world domination of the international whisky market is concerned, Australia simply hasn’t got the level of output or the scalability to become a world leader.
English Whisky – Scotch whisky’s greatest rival?
Whisky was made in England up to the late 19th century. After a break of around a hundred years, it has undergone a bit of a revival in the last 10 years and is becoming a growing market. As of April 2024, there are 55 whisky distilleries listed in England, with a surprisingly large proportion of those in the southeast and southwest of the country. However, there are only four major distilleries that produce any level of volume in the UK, delivering innovative products to market that are particularly favoured by younger whisky drinkers.
These English distilleries are gaining traction, again creating low-volume but high quality runs that piqued the interest of whisky connoisseurs as well as investors.
As with Australia, the scale of English whisky productions is not going to rival the Scottish producers any time soon. But what English whisky lacks in volume, it more than makes up for in quality.
A pact between the four nations of the UK has seen a baseline of standards set so that quality can be maintained as new distilleries come online. England, Ireland, Scotland and Wales are all in agreement that they want to protect the quality and authenticity of whisky making.
As a result, BSI standard BS8636 was brought in on 12th September 2023. It defines such elements as the desired colour, and that the whisky should be matured for at least three years in wooden casks. it also should not contain any additives or be sweetened, and must have an alcohol strength of at least 40% but not ore than 94.8%.
American whisky – more than just bourbon
If there is one thing the American distillery industry is not known for, it’s a single malt. The US market is predominantly bourbon-focused and has been for centuries. Its bourbons have international dominance, with labels such as Wild Turkey drunk all over the world. To the north, Canada has also built up a reputation for producing good quality whisky, but is the American market about to change?
Flavoured bourbons are nothing new, and additives such as black cherry, orange and even cinnamon are commonplace in American brands. But a new flavoured whisky boom may be about to add a few additional spices and flavourings to the mix, including honey and apple (already popular with Jack Daniel’s drinkers).
These initial flavourings have opened up the possibility of more flavours coming out specifically aimed at the American market such as cookie dough, peanut butter, pumpkin spice and chocolate.
These types of flavours are primarily geared towards American tastes as none of the above form a significant influence on the culinary makeup of other cultures. However, Pernod Ricard’s acquisition of the Skrewball brand in 2023 (the best-known peanut butter-flavoured whisky) may mark a more adventurous acceptance of these exotic flavours.
Pernod Ricard certainly has the international reach to introduce a product like Skrewball to a much wider audience. That in itself may signal an opportunity of other distillers to follow suit, especially if the market demonstrates that it is eager to try flavoured whisky in any significant amount.
Is the market changing?
While Scottish (and to a lesser extent Irish) distillers may not be too concerned about losing a significant portion of their market to Indian, Australian and English distillers, what they can learn from these merging whisky producers is what is known in marketing as the art of ‘selling the sizzle’.
New flavours, slick marketing that doesn’t feel dated or aimed at older drinkers, and a more vibrant approach to product development could see whisky from different parts of the world becoming more popular in the coming years.
The regulations (including the new BS 8636 standards) could work in the distillers’ favour as authenticity becomes more highly valued and can be used as a USP in its own right. This won’t prevent further innovation, as growth and development is still possible while adhering to the regulations, and production methods such as utilising finishing casks to a much greater extent could be the next step forward for distillers.
While the exact definition of a Scotch whisky is enshrined in law, that doesn’t mean that the sector is prevented from trying new things to fight back agains the rise of boutique whisky in particular.
Those restrictions define Scotch whisky in its current form and it gives consumers a cast-iron guarantee that the product they’re buying is authentic. It works in the favour of Scotch whisky when we’re talking about a Glenfiddich single malt or a Speyside 20 year-old, for example.
What can Scotch whisky learn from the newcomers?
The changing tastes of consumers are inevitable, and while Scotch whisky has a long-established reputation, it has always found ways to innovate within its defined structure. Rather than shifting towards flavoured whisky, Scotch is more likely to embrace further experimentation with cask finishes. Whisky producers have already led the way in this area, and now we’re even seeing rum brands adopting innovative cask-finishing techniques, such as finishing rum in mezcal casks. This growing trend of experimentation offers Scotch an exciting opportunity to introduce unique and subtle new flavours while remaining true to its heritage.
Until then, though, it will be interesting to watch and see what happens next…