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Whiskies - UK - August 2010

At £3.6 billion whisky is worth more than any other spirits market in the UK. However, the continued decline of blended whisky, which accounts for 72% of the category’s volume sales, means that in the next five years it will see an 11% decline in real value sales.

  • While the total whisky market is worth £3.6billion, in reality it is three markets rather than one with each distinct segment attracting a different type of drinker.
  • Imported whisky (mostly Bourbon/Tennessee) will be the main driver of growth (up 12%) over the next five years benefiting from its appeal to young drinkers. Heavy brand investment from the likes of Jack Daniel’s has helped demystify the drink and promote its consumption with a mixer.
  • Malt whisky has great potential, but will see slower growth (4%) in volume sales over the next five years. Viewed by consumers as better quality, malt is also seen as more intimidating, and this combined with being a fragmented market has led to confusion among consumers and a failure to attract 35-54 year-olds looking for a more aspirational choice and sophisticated taste.
  • Blended whisky represents almost three quarters of the market but has been in long-term decline in the UK, fuelled by increasing commoditisation in the off-trade. This is in stark contrast to emerging global markets where blended brands such as Johnnie Walker are seen as highly aspirational.
  • Heavy taxation on spirits continues to stifle growth in the category. Unlike most countries, UK taxation is based on Alcohol By Volume (ABV) rather than retail sales price, meaning that premiumisation is crucial for generating sufficient profit margins, something which malt and imported whiskies are better positioned to deliver.
  • Pub revenues continue to decrease and make up only 22% of total whisky sales, meaning the category is over-reliant on the major multiples. Tax-enforced high prices and strict limits on measure sizes are the major barriers of purchase. However, greater availability of quality malts and more emphasis on the ‘theatre of the serve’ would give customers more incentive to choose whisky over another drink type.

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Table of contents

  1. Issues in the Market

      • Definition
        • Abbreviations
        • Future Opportunities

          • Developing the exclusivity of Scotch
            • Combining authenticity with commerce
            • Market in Brief

              • Not one but three markets
                • A failure to premiumise
                  • The problem of taxation
                    • The danger of targeting too young
                      • Overcoming barriers to entry
                      • Internal Market Environment

                        • Key points
                          • Drinking in decline
                            • Figure 1: Trends for UK drinking habits, overall, in home and out of home, 2005-09
                          • Older consumers are being undervalued
                            • Figure 2: Value of different age groups to the alcohol industry, 2009
                          • Blanket targeting of youth may be missing the point
                            • Figure 3: Index of number of different alcohol brands drunk in the past 12 months, by age, 2009
                          • As UK demand declines, global exports go from strength to strength
                            • Figure 4: Trends for value of Scottish whisky exports, 2000-09
                          • The importance of local provenance
                            • Proving premiumisation
                            • Broader Market Environment

                              • Key points
                                • The burden of taxation on spirits
                                  • Figure 5: Latest exercise duty, by major alcohol category, 2010
                                  • Figure 6: A breakdown of taxation on a 75cl bottle of whisky from 2011 onwards
                                • A new government, but same old story for taxation?
                                  • Labelling legislation protects Scotch brand
                                    • High on-trade prices a turn-off
                                      • The good and the bad of tackling below-cost drinking
                                        • Economy remains fragile
                                          • Changes in UK demographic structure can work to whisky’s advantage
                                          • Competitive Context

                                            • Key points
                                              • Few winners in declining alcohol market
                                                • Figure 7: Trends for types of alcohol drunk in past 12 months, 2005-09
                                              • Spirits market currently outperforming wine and beer
                                                • Figure 8: Trends for constant (2005) household final expenditure – spirits, wine and beer, 2005-09
                                            • Strengths and Weaknesses

                                              • Strengths
                                                • Weaknesses
                                                • Who’s Innovating?

                                                  • Key points
                                                    • Associating whisky with food
                                                      • Ballantine’s targets on-trade standout
                                                        • Innovating around exclusivity
                                                          • Ready-to-drink whiskies and mixers
                                                          • Market Size Forecast and Segmentation

                                                            • Key points
                                                              • Whisky market is steadily contracting
                                                                • Figure 9: Volume and value sales of the total whisky/whiskey market, 2004-15
                                                                • Figure 10: Volume and value sales of the whisky/whiskey market, by sector, 2004-15
                                                              • Forecast growth for imported and malt
                                                                • Limited gains from investing in UK blended sector
                                                                  • Figure 11: Volume share of the whisky/whiskey market, by sector, 2004-15
                                                                  • Figure 12: Retail sale prices (excluding discounting) of key brands for each whisky segment in Tesco online, August 2010
                                                              • Market Share

                                                                • Key points
                                                                  • Bell’s consolidates position as number one
                                                                    • Fierce competition within the blended sector
                                                                      • Jack Daniel’s continues its ascent
                                                                        • Glenfiddich leapfrogs Glenmorangie
                                                                          • Figure 13: Trends for brand value sales of off-trade whiskies, 2007-09
                                                                      • Companies and Products

                                                                        • Key points
                                                                          • Brown-Forman
                                                                            • Gruppo Campari
                                                                              • Diageo
                                                                                • Edrington Group
                                                                                  • LVMH
                                                                                    • Maxxium
                                                                                      • Pernod Ricard
                                                                                        • Whyte & Mackay
                                                                                        • Brand Communication and Promotion

                                                                                          • Key points
                                                                                            • Whisky outspends vodka on advertising
                                                                                              • Figure 14: Spend per year on above-the-line advertising for the whisky category, 2005-09
                                                                                            • Brown-Forman investing heavily in growing the market for US whiskey
                                                                                              • Figure 15: Total above-the-line spend in the whisky category – Jack Daniel’s and Southern Comfort, 2007-09
                                                                                            • Jack Daniel’s and Southern Comfort targeting youth
                                                                                              • Blended brands battle it out on TV
                                                                                              • Brand Elements

                                                                                                  • Key points
                                                                                                    • Brand map
                                                                                                        • Figure 16: Attitudes towards and purchase of whisky brands, May 2010
                                                                                                      • Brand qualities of whisky brands
                                                                                                        • Provenance a key consideration
                                                                                                          • Figure 17: Personalities of various whisky brands, May 2010
                                                                                                        • Experience of whisky brands
                                                                                                          • Blends most widely consumed
                                                                                                            • Figure 18: Consumer purchase of various whisky brands, May 2010
                                                                                                          • Brand consideration for whisky brands
                                                                                                            • Lesser-known brands most considered
                                                                                                              • Figure 19: Consideration of various whisky brands, May 2010
                                                                                                            • Brand satisfaction for whisky brands
                                                                                                              • Malts most satisfying
                                                                                                                • Figure 20: Satisfaction with various whisky brands, May 2010
                                                                                                              • Brand commitment to whisky brands
                                                                                                                • Jack Daniel’s top choice
                                                                                                                  • Figure 21: Commitment to various whisky brands, May 2010
                                                                                                                • Brand intentions for whisky brands
                                                                                                                  • JD and Glens have best retention
                                                                                                                    • Figure 22: Future purchase intentions for various whisky brands, May 2010
                                                                                                                  • Brand recommendation for whisky brands
                                                                                                                    • Premium means quality, but value for money essential
                                                                                                                      • Figure 23: Recommendation of various whisky brands, May 2010
                                                                                                                    • The Famous Grouse
                                                                                                                      • What the consumer thinks
                                                                                                                        • Figure 24: Attitudes towards The Famous Grouse brand, May 2010
                                                                                                                      • Bell’s
                                                                                                                        • What the consumer thinks
                                                                                                                          • Figure 25: Attitudes towards the Bell’s brand, May 2010
                                                                                                                        • Glenmorangie
                                                                                                                          • What the consumer thinks
                                                                                                                            • Figure 26: Attitudes towards the Glenmorangie brand, May 2010
                                                                                                                          • Chivas Regal
                                                                                                                            • What the consumer thinks
                                                                                                                              • Figure 27: Attitudes towards the Chivas Regal brand, May 2010
                                                                                                                            • Jack Daniel’s
                                                                                                                              • What the consumer thinks
                                                                                                                                • Figure 28: Attitudes towards the Jack Daniel’s brand, May 2010
                                                                                                                            • Channels to Market

                                                                                                                              • Key points
                                                                                                                                • On-trade plays a secondary role
                                                                                                                                  • Figure 29: Trends for segmentation of value and volume sales between off-trade and on-trade, 2007-09
                                                                                                                                • Whisky is an important product for supermarkets, particularly at Xmas
                                                                                                                                  • Figure 30: Trends for volume sales of whisky, by distribution channel, 2007 and 2009
                                                                                                                              • Consumer Usage of Whisky

                                                                                                                                • Key points
                                                                                                                                  • One in four are whisky drinkers
                                                                                                                                    • Figure 31: Trends for types of whisky/whiskey drunk in past 12 months, 2005-09
                                                                                                                                  • Demographic variations emphasise differences between sub-categories
                                                                                                                                      • Figure 32: Index of penetration for different types of whisky/whiskey drunk in past 12 months, by gender, age and socio-economic group, 2009
                                                                                                                                    • Missing out on the key 35-54 demographic
                                                                                                                                    • Consumer Attitudes towards Drinking Whisky

                                                                                                                                      • Key points
                                                                                                                                        • Whisky lacks a prominent occasion
                                                                                                                                          • Figure 33: Attitudes towards drinking whisky/bourbon or Tennessee whiskey, May 2010
                                                                                                                                          • Figure 34: Those who regularly drink different types of alcohol, by alcohol type, May 2008
                                                                                                                                        • Highlighting the importance of associating itself with food…
                                                                                                                                          • …and cocktails
                                                                                                                                            • Re-connecting with a new generation with different drinking occasions
                                                                                                                                              • Focusing on those private, masculine moments
                                                                                                                                                  • Figure 35: Net difference in attitudes towards drinking whisky – under-45s versus over-45s, May 2010
                                                                                                                                                • Surprisingly mild attitudes towards on-trade prices
                                                                                                                                                  • Malt whisky is all about independence and maturity…
                                                                                                                                                    • Figure 36: How attitudes towards drinking differ among different types of whisky drinkers, May 2010
                                                                                                                                                  • …while bourbon/Tennessee whiskey is about being sociable
                                                                                                                                                  • Consumer Attitudes – Barriers to Whisky Consumption

                                                                                                                                                    • Key points
                                                                                                                                                      • Strong taste more of a barrier to entry than ‘old man’ perception
                                                                                                                                                        • Figure 37: Perceptions of whisky – those who have drunk it in the past year versus those who have not, May 2010
                                                                                                                                                      • A lack of product appreciation even among whisky drinkers
                                                                                                                                                          • Figure 38: Perceptions of whisky, by drinkers of each type, May 2010
                                                                                                                                                        • Moving away from ‘neat whisky’ snobbery
                                                                                                                                                            • Figure 39: Net difference between perceptions of whisky – under-45s versus over-45s, May 2010
                                                                                                                                                            • Figure 40: Net difference between perceptions of whisky – under-45s versus over-45s, May 2010
                                                                                                                                                        • Appendix

                                                                                                                                                          • Consumer research
                                                                                                                                                            • Advertising data
                                                                                                                                                              • Focus groups
                                                                                                                                                              • Appendix – Internal Market Environment

                                                                                                                                                                  • Figure 41: Trends in the age structure of the UK population, 2005-15
                                                                                                                                                                  • Figure 42: Brand repertoire of alcoholic drinks, 2005-09
                                                                                                                                                                  • Figure 43: Brand repertoire of alcoholic drinks, by age, 2009
                                                                                                                                                                  • Figure 44: Trends for agreement with ‘I buy goods produced in my own country whenever I can’, 2005-09
                                                                                                                                                              • Appendix – Broader Market Environment

                                                                                                                                                                  • Figure 45: Total adult population trends, by age, 2004-14
                                                                                                                                                                  • Figure 46: GDP, PDI, consumer expenditure and savings, at constant 2010 prices, 2005-15
                                                                                                                                                                  • Figure 47: Forecast adult population trends, by socio-economic group, 2005-15
                                                                                                                                                              • Appendix – Competitive Context

                                                                                                                                                                  • Figure 48: Types of alcohol drunk, by demographics, 2009
                                                                                                                                                                  • Figure 49: Types of alcohol drunk, by demographics, 2009
                                                                                                                                                                  • Figure 50: Types of alcohol drunk, by demographics, 2009
                                                                                                                                                              • Appendix – Brand Communication

                                                                                                                                                                  • Figure 51: Top ten spending advertisers for whisky, 2007-09*
                                                                                                                                                                  • Figure 52: Top ten spending brands for whisky, 2007-09*
                                                                                                                                                              • Appendix – Consumer Usage

                                                                                                                                                                  • Figure 53: Types of whisky/whiskey drunk, by demographics, 2009
                                                                                                                                                                  • Figure 54: Frequency of drinking scotch whisky (other than malt), by demographics, 2009
                                                                                                                                                                  • Figure 55: Frequency of drinking malt whisky, by demographics, 2009
                                                                                                                                                                  • Figure 56: Frequency of drinking other whiskey and bourbon, by demographics, 2009
                                                                                                                                                              • Appendix – Consumer Attitudes towards Whisky

                                                                                                                                                                  • Figure 57: Most popular attitudes towards drinking whisky, by demographics, May 2010
                                                                                                                                                                  • Figure 58: Next most popular attitudes towards drinking whisky, by demographics, May 2010
                                                                                                                                                                  • Figure 59: Net difference in attitudes towards drinking whisky, by gender, May 2010
                                                                                                                                                              • Appendix – Barriers to Whisky Consumption

                                                                                                                                                                  • Figure 60: Most popular attitudes towards whisky, by demographics, May 2010
                                                                                                                                                                  • Figure 61: Next most popular attitudes towards whisky, by demographics, May 2010
                                                                                                                                                                  • Figure 62: Net difference between perceptions of whisky, by gender, May 2010

                                                                                                                                                              Companies Covered

                                                                                                                                                              • Asda Group Ltd
                                                                                                                                                              • Bacardi-Martini Ltd
                                                                                                                                                              • Beam Global Spirits & Wine
                                                                                                                                                              • British Beer and Pub Association
                                                                                                                                                              • Campari Group
                                                                                                                                                              • Diageo Plc
                                                                                                                                                              • Diageo UK
                                                                                                                                                              • Glenmorangie plc
                                                                                                                                                              • Government Actuary's Department (GAD)
                                                                                                                                                              • J. Sainsbury
                                                                                                                                                              • Kantar Media
                                                                                                                                                              • LVMH Moët Hennessy Louis Vuitton SA
                                                                                                                                                              • Marks & Spencer
                                                                                                                                                              • Office for National Statistics
                                                                                                                                                              • Outdoor Advertising Association of Great Britain
                                                                                                                                                              • Pernod Ricard
                                                                                                                                                              • Royal National Lifeboat Institution
                                                                                                                                                              • Scotch Whisky Association (SWA)
                                                                                                                                                              • The North British Distillery Company Limited
                                                                                                                                                              • Waitrose
                                                                                                                                                              • Whyte & Mackay Ltd
                                                                                                                                                              • Wine and Spirit Association (The)
                                                                                                                                                              • Wm Morrison Supermarkets

                                                                                                                                                              Whiskies - UK - August 2010

                                                                                                                                                              US $2,570.96 (Excl.Tax)