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Distillers beat Scotch rules with 'spirit drink' expansion

DRINKS companies have become braver about using whisky brands to sell spirit drinks that don't meet strict Scotch whisky rules, as the industry prepares for another year of production expansion.

Ballantine's BOTTLE: Workers put the finishing touches to bottles of the company's  popular Finest and Brasil products. Picture: Wattie Cheung
Ballantine's BOTTLE: Workers put the finishing touches to bottles of the company's popular Finest and Brasil products. Picture: Wattie Cheung

Meanwhile, more marketing heft is being directed to single malts, even as blends remain dominant in the sales mix, as companies seek to establish their whiskies as luxury brands.

This is occurring against a backdrop of expansion in production with Swedish company Grythyttan turning to investors this month seeking £1 million to build a distillery on Orkney.

French spirits giant Pernod Ricard is currently shipping the first bottles of Ballantine's Brasil to target markets in Spain, France and Latin America.

The drink mixes Ballantine's whisky with lime but to meet rules about the use of the term Scotch whisky, which are enshrined in European law, the company describes it as a "spirit drink".

It is targeted at young night-time consumers who already drink Ballantine's Finest with mixers.

Earlier this year, privately owned Edrington used its Famous Grouse brand to launch Ginger Grouse, an alcoholic ginger beer "infused" with its flagship whisky, targeting the Scottish market.

The likes of Drambuie have also long used whisky in liqueur.

Paul Scanlon, commercial director at Chivas Brothers said: "We expect to see continued momentum behind flavoured whiskies and increasing interest behind craft and batch whiskies, with consumers increasingly looking for authentic products that can demonstrate strong roots, heritage and craftsmanship."

The Scotch Whisky Association said: "There is no restriction on using Scotch whisky as a base for new products. Well known Scotch whisky liqueurs have been sold for many years.

"What is essential is that the labelling and marketing of new products based on Scotch whisky make it clear for consumers that they are not Scotch whiskies.

"Ballantine's Brasil is clearly labelled as a 'spirit drink' which is the compulsory sales description if the product does not fall into the category of liqueur."

Industry figures show that single malt whisky, long overshadowed by enormous blend brands such as Diageo's Johnnie Walker and Pernod's Chivas Regal, is gaining in popularity.

In 2012, the last year for which figures are available, exports of single malt whiskies rose 4.5% to £778.1 million. Blended whiskies were up just 0.4% at £3.5bn. Exports of malts have tripled in the past decade while blends are up 75%.

Meanwhile, industry figures show that the higher-end whiskies are growing much faster than cheaper ones.

Industry figures say whisky chimes with a desire for wealthy consumers for refinement and authenticity, expressed through purchases of bespoke clothing and fine cheeses.

This distinguishes it from the conspicuous consumption that characterised the enthusiasm for many branded whiskies.

So Diageo has announced an £18m investment to develop Mortlach as a single malt brand targeted firmly at the luxury goods market. It has also rolled out several new variants of its Talisker single malt from Skye.

Pernod meanwhile, is planning to increase the promotion of Aberlour whisky beyond the French market where it has long held a leading position.

Three years ago the company increased the capacity of the Glenlivet distillery, home to its flagship single malt, by 75%.

"We expect to see the strong demand for single malt whisky to continue throughout 2014, with value growing well ahead of volume due to the relative rarity of single malts," said Mr Scanlon. "More brands will come to the fore with high quality malts like Aberlour capitalising on the market as well as the leading brands such as The Glenlivet."

Pernod's Carron malt whisky distillery on Speyside is expected to be up and running by the end of the year while Diageo has its own plans for a 13m-litre malt whisky distillery in the Highlands.

Meanwhile, smaller distilleries continue to come through.

Glenglassaugh veteran Stuart Nickerson's Shetland Distillery Company has recently sought planning permission.

Further south, on Orkney, Swedish company Grythyttan, has ambitions to establish the Longship Distillery distillery with an associated visitor centre and whisky school.

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