The whisky market is in upheaval. In the 1990s, blended whisky producers still dominated the market. Johnnie Walker, Ballantine's and Chivas Regal were among the best-known whisky brands here and around the world. All together, they produced blended whiskies almost without exception. If you wanted a different whisky, you could find Jim Beam, an American bourbon, everywhere.
In the early 90s of the last century, the triumph of single malt whisky began. Of course, there were already a few Glenfiddich, Glenlivet and Glenmorangie. But this new market segment made only slow progress from the 1960s onwards. With the appearance of the Classic Malts of Scotland by the market leader Diageo at the beginning of the 1990s, even the last specialist retailer realised that a new market segment had opened up with the malt whiskies.
The independent bottlers
However, small independent companies in Scotland were quicker than the large whisky distillers. The umbrella term'independent bottlers', abbreviated to UA in the following, refers to companies that bottle their own malt whisky independently of the distillery that produces it. This independence from the producer is reflected in the designation UA. The labels of these bottles primarily show the name of the bottler. The name of the distillery is usually added in smaller letters.
The aim of this article is to shed light on the many, many small bottling companies on the market. Where do they get their whisky from? Are there fundamental differences in quality? How is this seemingly still small industry developing?
Whisky flows in the industry
Nobody bottles whisky just for fun or solely for the pleasure of the consumer. It's about money. The livelihoods of entrepreneurs and their employees' families depend on these bottles. So if we want to know what moves this industry, we have to follow the flow of whisky and money. That sounds harsh and has nothing to do with the physical pleasures that we all seek in malt whisky and don't always find. But if we want good whisky, it's worth taking a look behind the scenes.
| Exported bottles January - June 2003 | Bottles | Value |
|---|---|---|
| Malt whisky | 22 million | 121 million GBP |
| Blended whisky | 274 million | 740 million GBP |
For years we have learnt that malt whisky only accounts for around 5% of total whisky production. However, those days are over. Malt whisky is becoming increasingly strong. The export of malt whisky bottles already accounts for 8% of blended whisky bottles. Let's go a little further. If we assume around 20% malt whisky in the average blended bottle, the malt whisky content in the blends equates to 55 million unsold malt whisky bottles. This means that 40% of the malt whisky produced is sold as pure malt whisky and only 60% of malt whisky production goes into blends.
Whereas in the past it was still possible to afford to bottle only the best casks as single malt whisky, things are very different today. For many distilleries, it's all about the last cask from the last corner of every warehouse. Not a single litre of malt whisky from special distilleries can be dispensed with. That's how much demand has grown. At some distilleries, the tamped clay floor of the warehouses is already clearly visible between the few remaining casks. The current shortage at Lagavulin, Oban, Cardhu and Macallan shows how much malt is already being sold as a single.
We are lucky that the major distilleries have massively improved their production processes and, above all, the quality of their casks in recent years. In the past, only 10 to 20% were outstanding barrels, but today there are only 10 to 20% bad barrels. Mouldy malt, poor distillation, barrels used too often and too long fermentation - these influences no longer exist today. Only the naturally grown wood of a few casks still causes surprises from time to time and leads to poor malt.
Nevertheless, the multiplication of demand for malt whisky is only just keeping pace with the increase in output. The big players in the whisky industry are said to be slow. That may be true. But once the heavy locomotive has got going, nobody can stop it. For over 100 years, the blended whisky industry has been known for swapping malt whisky casks for its many different blends. However, with the big takeover battles and the reduction in the diversity of suppliers that we have seen over the last 10 years or so, this behaviour is slowly coming to an end. Almost everyone now produces their entire whisky portfolio themselves. The smoky malt whisky for Johnnie Walker, for example, comes from the group's own malt whisky distillery Caol Ila. Laphroaig produces Ballantine's from Pernod Ricard for the blend. They no longer want to be reliant on others and therefore ultimately dependent.
The markets for single malt whisky distilleries have also been largely equalised. Instead of letting Lagavulin and Caol Ila work for the blends, Lagavulin concentrates on the single malt and Caol Ila on the blends. But Caol Ila, just as huge as Laphroaig, can produce for malts and blends at the same time. The aforementioned 10 to 20% of the bad or, let's say, unsuitable casks are sorted out early on for the company's own blends. Within the first three years, it is easy to recognise the few casks that are underperforming.
On the other hand, there are the distilleries from the second division that have not (yet) managed to jump on the single malt bandwagon. They produce almost exclusively for their own blends. Only occasionally do they launch a trial balloon to test the market with new malts, such as Glen Elgin 12Y or Clynelish 14Y (note: the Clynelish seems to have made it).
Caol Ila malt whisky distillery
Let's get a little more specialised and take a look at the Caol Ila distillery. Without exception, it produces very smoky malt whisky, which is then matured in ex-bourbon casks. Just a year ago, blended whisky producers or large independent bottlers could drive to the distillery with a lorry full of 20 or more empty casks and have their smoky malt bottled at a price per litre. But since the summer of 2002, this has come to an end. The owner Diageo has discontinued this 'factory outlet'. Existing contracts with blended whisky producers are being honoured, but no longer extended. There will be no more than contractually agreed. Why?
With its six stills, the distillery can produce around 3 million litres of pure alcohol per year. For a medium-smoked blend, such as Johnnie Walker Red, Diageo requires 5 to 10% heavily smoked malt. If we calculate in standard international 0.75 litre bottles, this corresponds to 81.6 million bottles sold in 2002:
40% Alc. * 0.75l * 7.5% malt * 81.6 million bottles = 1.8 million litres of pure alcohol
That is around 60% of Caol Ila's distilling capacity. If you add Johnnie Walker Black and the major other Diageo blends such as J&B, Caol Ila's capacity is fully utilised. However, Caol Ila Hidden Malts aged 12 and 18 years and the high-proof bottling have now also been launched on the market. For the planned increase in sales of these malts over the next 12 to 18 years, a considerable number of casks have to be permanently set aside.
The Big Four (The Big Four)
This was not unexpected for the foresighted and large independent bottlers (UAs). They stockpiled a large supply of single malts from a wide range of malt whisky distilleries. Four large UAs (The Big Four) have built up stocks of between 10,000 and 20,000 casks over the last few decades (data from 2004): Gordon & MacPhail's (G&M) approx. 17,000 casks, Signatory approx. 12,000, Douglas Laing (DL) approx. 15,000 and Ian MacLeod approx. 20,000.
Only Gordon & MacPhail and Signatory have fully understood the importance of these independent casks and bottle almost exclusively single malts. Douglas Laing is well aware of its treasures and no longer adds old casks to random blends but bottles them in the Old Malt Cask Series and McGibbon's Provenance Series. Nevertheless, they still make significant blended whisky sales. Only the Ian MacLeod company, on the other hand, continues to serve major blended whisky brands, cutting deep into the great cask stock. How much longer can they afford to do this?
The quality of the malts in storage
What about the quality of the malt whiskies in these four large warehouses? The stock of a distillery such as Caol Ila has an average age of just over 1.5 years, as hardly any casks have ever been older than 3 years and their contents have usually subsequently been used in blends. However, significantly older malts are stored at the Big Four. However, this says nothing about the basic quality of these malts. Although these malts were filled directly into the casks of the UAs, 10 or 15 years ago, as mentioned above, the quality standards of the distilleries and the cask management of the UAs were not as good as they are today. So a significant percentage of less good malts are also stored in these four large warehouses, provided they have not already been merged into blended whiskies or sold on.
Here I can hear one or two malt whisky lovers mentally crying out. Why should these malt whiskies be bad? Aren't they just different? Don't they simply have more distillery character and less cask character?
But it's not that simple. Leached casks that have not allowed a malt to mature despite 20 years of storage are only one side of the coin. There are also barrels that have unpleasant wood stains, taste sulphurous, have built up extreme acidity or taste poisonously bitter. Some stink of vomit or urine and others lie dead in the barrel. These odours are not always in the foreground. But once they are noticeable, they are a red rag for many a connoisseur. A great single malt whisky needs a good balance between cask and distillery character.
The Big Four and the small UAs
When we talk about UAs, a dozen or so names come to mind that have not been mentioned in this article. But not all that glitters is really gold. We don't want to mention any names here either - it would be favouring or devaluing individual companies. We therefore only mention the four big ones with their own warehouses and not the many small ones.
Here are representative top bottles from these four suppliers:
Hide and seek
Behind these many unnamed small labels, however, there is also a lot of window-dressing and hide-and-seek. In addition to the large and well-known label, each of the big four has at least one other bottle label, which suggests a larger number of market suppliers than there really are.
The best-known and larger series among the many small UAs are precisely these second bottlings. Spirit of Scotland = G&M, McGibbon's = Douglas Laing, Dun Bheagan = Ian MacLeod and Dun Eideen = Signatory. The volume remaining after these series is really small.
Whisky Broker
So where do the malts from the many unnamed small bottlers come from? And what about the bottlings from whisky associations, whisky clubs and private individuals? As a matter of principle, those responsible write on every bottle that this cask has been carefully selected and contains only the finest malts. But is that true? Let's be honest - anyone would do this. Isn't it just marketing gossip?
You can never buy single, selected good casks directly from the distillery, even if some marketing professionals like to claim this. This has always been impossible. Only the distilleries themselves choose freely from these stocks for their top products, such as Macallan 25 years or Glenrothes 1971.
Where do these old casks come from? In principle, there are two sources for these malts. In the past, distilleries used to sell their surplus malt whisky casks to the numerous small blended whisky producers via brokers. And these brokers were happy to divert the odd cask to the small UAs for a significant premium. Easy money, as the English say!
So far, this has been the only opportunity to sample a malt from the legendary Kininvie distillery. Although the producer had put a token amount of another malt into this very light-coloured refill cask for devaluation, it was still bottled as a vatted malt. Like the owners of this distillery Wm. Grant & Sons distillery, who wanted to prevent exactly this, reacted afterwards is anyone's guess.
The second option is to purchase casks from former master distillers who received whisky casks as part of their payment. Preferably as a bonus at the end of the year. This is the ideal source for top quality malts! However, these casks are extremely rare and very hard to find on the market.
As a result of this and the standardisation efforts of the big players in the industry, the profession of whisky broker has declined sharply. Why should the big industry pay a broker when it no longer needs one?
The few remaining brokers in the market face two problems. The number of casks has fallen sharply, as many of the large producers have stopped selling whisky altogether. And the average quality of malt whiskies has also declined due to the better negative selection of distilleries. On the customer side of these brokers, however, demand has risen sharply. There are too many small UAs on the market that urgently need casks.
In this 'seller's market', brokers have changed the rules in their own favour in recent years. They almost no longer offer advance samples of their barrels for inspection. Even individual barrels, which they call stock-picking, can no longer be purchased. Instead, brokers bundle several barrels into larger lots and offer these lots to their best customers first. Good, bad, small and large barrels from well-known and unknown distilleries are lumped together. If the top customers reject a lot, it moves further and further down the market. At first glance, this 'not being able to try' looks disastrous. However, it allows even the smallest UAs at the bottom to get a better barrel. But only if those further up the 'food chain' do not pay the prices demanded.
As all these casks are not traded at blend raw material prices but at higher single malt prices, it is not possible for the individual UA to mix a blindly purchased bad cask into a blend. The financial loss would be too great. So these casks are traded down the 'food chain' one by one ('sold') and ultimately all bottled. Connoisseurs must approach individual barrels on the market with great caution. There are also rumours circulating that the available samples did not correspond to the later contents of the bottles. However, only angry buyers have told us about this. We have no proof of this.
All-round provider
In the meantime, the original task of the brokers has been taken over by the four large UAs themselves. They not only sell barrels to the small UAs - they also fill them for them. They create labels and outer cartons and also store the bottles again tax-free. Customs clearance and despatch take place exactly when the bottles are really needed on the market. They have gone from being a UA to a 'full service provider'.
What is not communicated by the independent bottlers and brokers is the negative selection of barrels when they are distributed from the top to the bottom of the market. What can no longer be sold in the end is offered on the private market by whisky clubs and private companies. The very last remainder is then sent abroad and thus also to us. These offers then regularly flutter across our desk and into the waste paper basket.
The overall situation seems pretty hopeless for the small UAs on the market. The four large cask warehouses are getting emptier and emptier and the blockade by the large whisky companies means that there are few supplies available.
Until now, we didn't really care that there was no independent Glenfiddich from 1994 onwards. The general lack of Glenmorangie on the UA market didn't really bother us either. But if we don't get any more Ardbegs, Caol Ilas, Bowmores or Linkwoods in the future, then that's a bitter pill to swallow.
Are the malt whisky sources for the UAs drying up?
The four major UAs have recognised this and are trying to get the most out of their barrels. Less full-bodied casks are transferred to fresh casks or finished, i.e. matured, in special casks. However, the general tenor among UAs is moving away from independent bottlings. Three of the 'Big Four' have already bought their own distilleries and are trying to become fully-fledged single malt whisky producers. They don't want to put their entire future on the independent bottling map.
Not all single malt whisky sources have dried up yet. However, here is the list of whisky companies that we know have already stopped releasing casks:
- Glenmorangie plc (Glenmorangie, Glen Moray, Ardbeg)
- Wm. Grant & Sons (Glenfiddich, Balvenie, Kininvie)
- Diageo (Lagavulin, Caol Ila, ... more than 40 distilleries, you can find the list here)
- J. & G. Grant (Glenfarclas)
- Highland Distillers (Macallan, Highland Park, Glenturret)
- Springbank
Malt whiskies from selected Pernod Ricard distilleries are still available. However, the more success this number 2 will have on the world market, the more the supply of casks to UAs will decline. They will also need them themselves in the future.
Outlook
How should we consumers behave? What should we buy and what not? Can we influence the market in any way? What should we be wary of?
We don't want to give any specific advice on your shopping behaviour, as we don't know your tastes. Nevertheless, we dare to make a few basic statements.
- Single cask whiskies from the 'Big Four' are certainly excellently selected. However, the rarer the distillery (e.g. Port Ellen, Glen Albyn or Imperial), the more risky their selection will be in terms of flavour.
- Limited original bottlings are usually of above-average quality. This also includes the cross-distillery series such as the Flora & Fauna series.
- Caution should be exercised with less well-known independent bottlers. Especially when it comes to pale yellow, light-coloured whiskies aged over 12 years. In most cases, these casks are refilled casks that were sent on their way to the blenders during the last run due to a lack of cask character. The advice here is: only buy after tasting!
- You should exercise particular caution with bottlings that are already very rare. If you decide to buy a bottle of Kinclaith or North Port from an unknown bottler today, you should really consider whether you want to open this bottle. It may well be suitable as an investment.
Even if it all sounds very sad, unfair and oligopolistic. Nevertheless, I would like to give a positive outlook at the end of the article.
Four independent bottlers have bought their own distilleries in recent years (Murray McDavid = Bruichladdich; Gordon & MacPhail's = Benromach; Signatory = Edradour and Ian MacLeod = Glengoyne) and two new malt whisky distilleries went into operation in 2005/6 (Glengyle, Ladybank). In addition, there are four further independent distilleries: Arran, Speyside, Glenfarclas and Springbank. Even though the prices of these distilleries are naturally orientated towards the major distilleries, they can certainly be counted as independent bottlers. Glenfarclas has a great warehouse from which new bottlings are constantly being released. Only Springbank is currently a little short of money. But the current 12 to 15-year-old bottlings are on the rise again. Speyside launched its first 12-year-old in autumn 2003 and Arran is already offering malts from 1995.
