The Industry
General
Distillation probably started in China then made its way to the West (11th or 12th centuries) via the Middle East, via Moors or soldiers returning from the Crusades. Irish were likely to have made it before the Scots.
Scotch/Scots/Scottish whisky must be distilled in Scotland and matured for at least 3 years. Scottish malt whisky is made from malted barley, in a pot still. It is bottled at no less than 40% alcohol. No additives are allowed except for water and caramel colouring. Most Scotch whiskies are made from barley that’s dried over peat smoke.
Irish whiskey is distilled to less than 94.8% alcohol and aged for at least three years in wooden barrels. By law, whiskey can only be called Irish whiskey if it follows this process and is made in Ireland. Most Irish whiskeys are distilled from barley that’s dried in kilns (ie: unpeated malt). Pure pot-still is particularly Irish, and uses a significant proportion of unmalted barley. Other Irish features include preference for blending grains in the mash tun and triple distillation.
American whiskeys blend the grains rather than the whiskey. 'Straight' whiskey means the defining grain is more than 51% of the grist. Straight corn is 80% corn with balance of malted barley and other grains. 'Bourbon', must be made in the USA, is made from a mash of at least 51% corn, distilled to 80% alcohol, combined with water, entered into an unused charred oak barrel, aged in that barrel and then bottled at no less than 40% alcohol.
Original USA whiskey was straight rye produced in Maryland and Pennsylvania. The main form now is Kentuky bourbon, made from corn/maize with small amount of rye or wheat and barley malt. Tennessee whiskey is bourbon made in Tennessee and filtered through sugar-maple charcoal, also called 'sour mash' (not unique to Tennessee). Other Blended American whiskey is a mix of 20% American whiskey and 80% neutral spirit. Matured in new oak with characteristic of vanilla sweetness.
Malt kiln roofs in Scotland origianlly designed by Charles Chree Doig, 1889 for the Dailuaine distillery, to improve drying process. Knockando, Cardhu, Laphroaig and Lagavulin still have Doig pagoda roofs.
The Industry in Scotland - Scottish whisky class
Scottish Whisky Association maintains the reputation of the industry (jobs, culture, tourism) and the quailty of product; Overseas regulations; formed 17 April 1942 and members represents 95% of production in Scotland = over 2500 brands globally.
Scottish Whiskey Regulations 2009 define and regulate production, labelling, packaging and advertsing of whisky in Scotland.
2009 Regulations define five categories of whisky:
1) Single Malt Scotch Whisky (SMW): distilled in a single distillery from water, malted barley and yeast without addition of other cereals; made by batch distillation in a pot still; can't contain any added substances except water and plain caramel colouring (E150A); can only be matured in an excise warehouse in oak casks no larger than 700 litres for a min. of 3 years.
2) Single Grain Scotch Whisky (SGW): distilled in a single distillery from water, malted barley and yeast, with or without whole grains or other cereals (malted or unmalted). Does not comply with definition of SMW.
3) Blended Malt Scotch Whisky (BMW): blend of SMW's which have been distilled at more than 1 distillery.
4) Blended Grain Scotch Whisky (BGW): blend of SGW's which have been distilled at more that 1 distillery.
5) Blended Scotch Whisky (BSW): blend of 1 or more SMW with 1 or more SGW.
Five recognised regions in Scotland:
1) Lowlands: south of the Highland Line (runs Firth of Clyde through Stirling to Firth of Foray).
2) Highlands: north of the Highland Line.
3) Speyside: wards of Buckie, Elgin City, Fochabers, Forres, Keith and Cullin.
4) Islay: Isle of Isley in Argyll.
5) Campbeltown: south of Kintyre ward of Argyll and Bute Council
Rules relating to labelling:
- An offence to label, package, sell, advertise or promote any drink as Scotch whisky or Scotch if it is not Scotch whisky.
- If there is an age statement on a bottle, the age must of of the youngest whisky used in the bottle.
- Must be at least 40% ABV
- Components of a label - Distillery/Brand name; Region; category of whisky; volume; alcohol cntent; age statement.
Rules relating to pricing:
- Final price of a bottle must account for cost of distribution, production, warehousing, packaging, marketing, salaries, trade margins, taxes, duty.
- 74% tax os 3/4 spent on scotch in the UK goes to HM Treasury.
- VAt is charges on the duty itself and on the final selling price.
- International duty varies so affects expoert costs.
Impact of ageing on cash flow - most brands sell whisky at 10, 12 or 15 years which is a long time to wait to recoup production costs. Some new distilleries turn their stills to producing gin to balance cash flow (doesn't require aging).
Exports:
- Exports make up 90%+ shares of Scottish sales.
- There is a difference between value and volume of exports. SMW is higher value product than BSW.
- Scotch whisky is nearly 80% of Scottish food/drink exports and c.25% of UK food/drink exports.
- USA largest by value and France is by volume. Also exports to Spain / Singapore / Germany / Taiwan / Sth Africa / India.
- In value it's about £3.3bn of UK ecomony, an increase of 21% since 2008. Gross Added Value c.£5.5bn as it supports c.40,300 jobs in UK.
Threats
Minimum pricing:
- Minimum Pricing Unit for alcohol was introduced by Scot. gov't 1 May 2018.
- Scottish Whisky Ass'n was opposed as there is no strong evidence to support the idea that min. pricing reduces alcohol related harm.
- 25-30% of sales in Scotland could be hit, mainly affecting 'own label' brands.
- Could also lead to copycat measures overseas and decreasing sales.
Large fall in 2020 exports after record highs of 2019:
- 2020 exports fell 20% YoY due to Covid19 closing global trade and US tariffs on SMW.
- HMRC exports decreased 29% by value, 24% by volume during Jan-May 2020.
- SMW continue to rise as a proportion of total sales. Premiumisation is a trend - where you drink less but a better product.
- Prestise marketing of SMW and rising awareness of emerging markets is boosting markets.
Brexit and US tariffs:
- Dec 2020 Brexit deal allows UK to make it's own trade deals with global markets. [Too early to tell how this will impact in long term.]
- Currently US 25% tariff on SMW (not BSW) has been suspended for 4 months from 2021. Tariffs caused SMW exports to fall 35% Oct 2019-Nov 2020. Exports decreased 34% by value and 19% by volume Jan-May 2020.
Conterfeiting - takes profits and can damage image.
Competition from other spirits inc. irish whisy, gin, rum.
Discrimination against Scotch in some markets. High import tariffs and local taxes reduce sales. The Scottish industry want a level palying field not the removal of tariffs.
Sustainability - SW Assn released a sust. strategy in Jan 2021, pledging to achieve net-zero carbon emissions in its operations by 2040. 5 yr ahead of Soct. Govt target and 10yrs ahead of the UK target. This follows on from cutting greenhouse gas emmisions 34% from 2008-2018.
A growing industry:
- 34 new malt whisky distilleries opening since 2000. Late 2020 saw 134 distileries in Scotland.
- Non scotch whisky production increased eg: NZ, India, Sweden, Sth Africa.
- Should get through the current threats with technological improvements and competitve marketing.
COVID19 on the industry
(From blog by Richard Woodard.)
Industry (bottlers and distilleries) is decreased in capacity with workplaces complying with Food Standards guidance from Scot. gov't. Distilleries have given over their production to making hand sanitiser for NHS and this is expectd to continue, eg: Chivas Bths does it pro bono. SW Assn have a hand sanitiser portal and pledges have hit 1.4 litres of ethanol a week = 12 mill, 500ml, bottles a month.
Diageo report 17% decrease in net sales. Johnnie Walker (world's best seller) down 22% revenues - company was negatively impacted by exposeure to travel retail and on-trade channels, which had problems due to pandemic. Although 'Sir Edward's', blend owned by French La Martiniquaise Bardinet, have tapped into increased demand of French market. They also own Cutty and this brand has suffered.
There has been trading up - using money not spent eating out to treat yourself at shops or online.
Pantry loading in the pandemic means buying larger bottles than usual eg: Dewars 1.75lt bottles increased in sales in US.
Trend for lower price blended (also followed the 2008 economic crash) and the opposite of the premiumisation effect.
Could threaten future on craft distilleries and young firms lacking fund reserves which are more reliant on tourism, pubs and bars.
Tourism - 2018 were 2 mill+ visits to distilleries (6.1% more than 2017 and 56% up from 2010). Visitors spent £68.3mill (12.2% up from 2017 and 150% up from 2010). Has been great investment in hands on tours and visitor centres and technology. The forseeable future means less local visitors and lack of overseas visitors.
Events have been curtailed eg: tastings and launches postponed. Virtual tastings are now trending as are online masterclasses. Distillery exclusives have been hit but they are offering other products eg: Talisker offers at home whisky and oyster pairing packs. Some profits from online initiatives are going to local charities eg: Fisherman's Mission.
Terminology
In Scotland it's spelt 'whisky', in Ireland'whiskey'. A-Z Scotch Whisky (pdf)
'Grain whisky' is made of wheat, corn or unmalted barley distilled in a column still.
- Although some malted barley will be used to provide enzymes for mashing and are legally required if produced in Ireland or Scotland.
- Results in higher percentage of alcohol by volume but less flavourful than that from a pot still.
- Scotland and Ireland is used mainly for blending with malt / pot still whisky to create blended whiskies- adds volume and lightness.
Cask strength are bottled without any water added. If the whisky is bottled from a single cask it will be noted on the label. A bottling can be made from a variety of distillation runs and cask types.
'Foreshots' - unwanted falovours and methanol, produced as part of distillation.
'Feints' - impure spirits, produced as part of distillation.
'Angel's Share' - each year 1-2% evaporates as it matures eg: end of a 20yr period may lose up to 40% of volume.
'Malted barley' AKA 'malt'.
Nosing and Tasting:
- In a well rounded whiskey alcohol should be warming, not burning.
- Adding water - some amount of dilution helps your nose and tongue smell and taste more of the flavours because it counteracts the alcohol's numbing of your senses.
- Use a tulip shaped glass, or sherry copita, without decoration (to see colour)
- Neat whiskey can numb the palate but can drink water afterwards.
- Colour - hold glass against white paper or wall. Pale, golden colour suggests aged in bourbon casks. Darker suggest sherry.
- Nose - can experience sweetnes of malt, smokiness of peat fire, saltiness from sea air
- Taste - taste neat to get impression of the body - rich, creamy, firm, smooth or soft? Then add a little water to see change in aromas and flavours. Have a little water between sips
- Finish - consider aftertaste, does it linger?
Typical aromas and flavours:
- Grain - hard grain, grassiness, lemon grass
- Rock and water - soft, clean, iron, passion fruit, chalky, scorched earth
- Peat - smoky, fragrant, tar, burnt grass
- Flowers and heather - violets, heather, honey, ferns
- Fermentation - strawberries, citrus fruit, pears, apples
- Oak - apples, raisins, apricots, vanilla, coconut
- Wind and sea - salt, brine, sand, seaweed
How to Read a Whiskey Label Without Embarrassing Yourself
Other Industry Facts
Indian whisky with Shilton Almeida. India is a huge whisky-drinking nation. In fact, in terms of quantity, more whisky is consumed in India than anywhere else in the world. Eight of the 10 bestselling whiskies in the world are Indian, and its domestic market alone is larger than the global market for both Scottish and US whiskies combined. But the majority of whisky being produced in India wouldn't qualify as whisky under EU regulations. Most Indian whisky is made with molasses, so similar to rum. However, there are some exceptions to that rule. Amrut is one, and also Paul John, which began producing single-malt whisky in 2009, and launched in 2012. Paul John Indian Single Malt has been awarded the Liquid Gold Award, and the world's third-best whisky for their expression Mithuna in Jim Murray's whisky Bible, and Best Indian Single Malt by the World Whisky Awards.
Canadian whisky with Davin de Kergommeaux. anada has been producing whisky for over two centuries. Canadian whisky outsold bourbon in the United States from the 1860s until 2010, and today, many of the top selling whiskies in America, are actually Canadian. But Canadian whisky is terribly misunderstood, and today I'd like to address some of the misconceptions. I'm delighted to be joined by Davin De Kergommeaux. Davin has been writing about whisky for over 20 years, as well as presenting seminars, tasting workshops, and judging international whisky competitions. In 2009, Davin founded the Canadian Whisky Awards, celebrating the very best in whiskey from Canada. He is the author of Canadian Whisky, The New Portable Expert, and the recently published, The Definitive Guide to Canadian Distilleries.
Canadian whisky with Don Livermore. Today we're speaking to Dr Don Livermore, Master Blender from Hiram Walker. Hiram Walker is the largest distillery in North America, distilling 180,000 litres of alcohol every 24 hours, and operating 24 hours a day, and 25 days a month. Producing products that include vodka, rum and Canadian whisky. They have 14 maturation warehouses storing 1.6 million barrels of spirits. Hiram Walker, an American grocer and vinegar distiller, is remembered for some crucial innovations in Canadian production, including the first multi column distillation, the first temperature-controlled warehouses, and is one of the first creators of brand names. Don Livermore, working as Master Blender at Hiram Walker is responsible for some of Canada's best known whisky brands, including Lot 40, Pike Creek and JP Wiser's.
American whiskey with Hans Offringa. Today we're looking at the history of American whiskey. As European colonists began arriving in America, they brought with them their knowledge of distillation. They carried rye and barley seeds with them, and while barley didn't grow well in this new environment, rye thrived. Farmers found that making whiskey worked well alongside running a farm. During the quieter months, they used the grain they had grown to make whiskey, feeding the spent grain to their animals. Navigating us through the turbulent history of American whiskey is Hans Offringa. Hans is an author and journalist who has been writing about whiskey for the last 30 years. He is contributing editor for Whisky Magazine in Europe and its sister publication, American Whiskey. He is a Keeper of the Quaich, Lifetime International Ambassador of the Spirit of Speyside Whisky Festival, Honorary Ambassador of the Scotch Malt Whisky Society, and Patron of the Whisky Festival North Netherlands. Among many books on whiskey, Hans has written A Field Guide to Whisky, Bourbon & Blues, and Still Stories. For Bourbon & Blues, which was launched at the Kentucky Bourbon Festival, Hans received the title of Kentucky Colonel from the Governor and Secretary of State.
Trading
Whiskey Trader - my spreadsheet
Buying - look for the aged whiskies including bottle, year and cask details.
Selling - check what Asia and USA are doing and sell on their timeline.
Look at the San Francisco awards.
