After years of growth, wine and spirits sales have been declining. In the 12-month span ending August 2024, the alcoholic beverage industry as a whole experienced a 6% decline (“The Post-Covid Decline Of Wines And Spirits Sales Is Accelerating”, Forbes, October 10, 2004). While the spirits category has fared somewhat better than wine, down only 3.9%, the overall trend has many in the business sounding alarms. Whisky has been no exception, experiencing varying levels of decline across all tiers, including premium.
The factors behind the downturn range from financial (ongoing economic uncertainty and inflation to social (health concerns and demographics) to competition (legalization of marijuana). In particular, younger people–for whom all three factors play a significant role–are drinking less.
So what does this mean for that unique subset of the whisky marketplace, independent bottling? In the short term, independent bottlers should weather the storm better than the industry as a whole. Indeed, they might actually benefit.
To understand why first requires some historical perspective. Independent bottlers have always done well when they can soak up excess stock distilleries can’t sell themselves. They exploded after the Whisky Loch of the late 1970s and early 1980s, buying up overproduced whisky, almost all of which had been intended for blends, and then, for all intents and purposes, creating the single malt market segment. Distilleries at the time simply did not sell single malt.
But with the recent long whisky boom, the availability of casks has been a growing–and alarming–concern for independent bottlers, quite the opposite of the Whisky Loch. Distillers have had no problems selling everything they produce, either to blenders (usually long-term supply contracts) or themselves as official bottling single malts. With no need to sell to brokers or independent bottlers, cask supply has dwindled and prices soared.
Until recently. In the last few months, the overall downturn has suddenly opened up the cask market for independent bottlers in both supply and availability, which in turn means more bottlings they can bring to market and at lower price points. One would think that the overall downturn would counteract the benefits bestowed upon independent bottlers by the opening up of the cask market with decreased sales. In the short term, however, that will not necessarily be the case because of the special nature of the independent bottler consumer.
Independent bottlers do not attract casual drinkers. Their consumers are true whisky fans, the aficionados always looking for new, unique drinking experiences. These are the people for whom whisky is part of their lifestyle. Obviously, individual financial hardship can keep anyone from purchasing, but short of that, these are customers committed to the independent bottling market segment–at the same time that they tend not to be committed to any specific bottler, since they like to sample and experiment. The lower bottle prices afforded bottlers by increased cask availability will help keep these customers happy in the face of global economic concerns.
Of course, in the long term, independent bottlers will feel the pain just the same as everybody else. If the downturn lasts a long time, whether from continued economic uncertainty or changing social norms in regards to alcohol, fewer drinkers overall translates to fewer drinkers that proceed to develop more advanced palettes, experiment with different bottlings, and spend more per bottle–the natural progression of neophyte whisky drinkers to the aficionados that become independent bottler consumers.
The best the independent bottling industry can hope for in that situation is to maintain its market share, although losses in line with the rest of the whisky segment are more the likely outcome. Larger, more established independent bottlers will survive, due to volume, brand recognition, and the fact that many now own their own distilleries, thus changing their business model from that of the traditional, strictly defined independent bottler. But the smaller, newer companies without those built-in advantages could be in for real hardship and even failure.
Let’s hope the whisky marketplace doesn’t come to that.
