During the course of our previous two articles on The Trouble with Irish Whiskey (read part one here, and part two here), we spoke to a number of brand owners and received considerable follow up correspondence from people directly or indirectly involved in the Irish whiskey sector.
Many conversations we had revolved around the Vision for Irish Whiskey report, and given the level of dissatisfaction it seems to have created, we felt it warranted a systematic review and a further in-depth analysis of its vision and success, or lack thereof, to date.
In May 2015, the IWA launched its Vision for Irish Whiskey: a strategy to underpin the sustainable growth of the sector in Ireland, a strategy document that aimed to double Irish whiskey exports by 2020. The document outlined five key pillars to support sustainable growth in the sector. Two of the pillars which featured regularly in our conversations were pillar two (category integrity and promotion), and pillar three (sustainable supply and demand).
One brand owner we spoke to highlighted the systematic errors and lack of industry action by the IWA. He was André Levy of The Wild Geese Whiskey, a brand owner who references himself as “The case study that got cut off”.
The Wild Geese was used as a case study in the strategy document on how to build a brand without the need for a distillery & we have therefore conducted an in-depth interview with Levy. This article sets out to get his opinions across. Not all of our readers will agree with all he has to say, but as the subject of the ‘Vision’ it is worth noting where he feels the wheels are coming off. Certainly, as he recounts his experience, his story is more a case study into how the dominant players dressed up the Vision for Irish Whiskey for public consumption, rather than being a true statement of intent or in the best interest of the Irish Whiskey market itself.
Pillar Two: Category Integrity and Promotion
Irish Whiskey is made from water and whole cereal and then matured in casks, but how Irish is the content within a bottle of Irish Whiskey? Surely to ensure credibility and consistency the Irish whiskey act should be updated to ensure that all cereals used throughout the process come from Ireland.
The outside of the bottle and recent labelling fiascos (Hyde Whiskey and Jameson to name but two) are becoming all too common and risk tainting the reputation of Irish whiskey on a global stage, much more so than having a higher volume of whiskey players in the market.
More realistic concerns to the industry include: questionable or inaccurate labelling and marketing collateral, new distilleries that could not have distilled the aged contents of the bottle, independently bottled whiskey masquerading as a distillery that does not exist, and master distillers simply conjured out of thin air.
Very basic marketing and labelling rules must be applied here, otherwise this may confuse drinkers and create enough uncertainty for them to lose trust in the whole category.
There are no official marketing regulations that protect consumers in Ireland; they do however exist in Scotland where producers may access simple, robust guidelines through the Scottish Whisky Association. The only relevant labelling advice in Ireland is the EU Directive 87/250/EEC on the mandatory inclusion of alcoholic strength.
The technical file is not sufficient protection for Irish Whiskey, it is simply a smoke screen that merely covers one part, the production, and has nothing to do with how the whiskey is presented to the consumer. It’s in this area, open to abuse through either naivety or deception, where the absence of any guidelines of what can and cannot be claimed that needs to be sorted if the country’s burgeoning industry is to earn a reputation of integrity and reliability.
For André Levy, it is pertinent that the Irish whiskey industry maintains its geographical standing and credibility on an international stage. The report itself states that: “The Irish whiskey brand is only as strong as the protection it is given. In the early 1900s the industry was almost irrevocably damaged by the passing off of an inferior product as Irish whiskey, we need to be united on the importance of policing suspected infringements of the Irish whiskey brand and prosecuting them to the full extent of the law.”
Levy’s position on this specific aspect is that the above statement should apply to all players within the industry, irrespective of their size. This is even more true today, as Irish Whiskey is now facing a new threat in the form of Brexit.
The impact of Brexit on the GI for Irish Whiskey means that it is very likely that the second largest distillery on the island of Ireland, Bushmills, will no longer be covered by the GI. Most notably, it will increase the stranglehold on production and supply by the dominant player in the industry, Pernod Ricard, raising even greater issues about unfair competition.
Pillar Three: Sustainable Supply and Demand
“Additional capacity essential to support market growth…”
“Over supply detrimental to quality and value…”
Two sentences taken from the same report, leading to confusion for many as to how the two statements can support each other. What does it mean by over supply in an industry being starved of the product by the dominant players?
Unlike the Scottish wholesale market, Ireland lacks a functioning wholesale whiskey market, resulting in new entrant uncertainties in supply and cost. The wholesale whisky market in Scotland has facilitated the growth of a huge industry, with 5,000 blended whiskies and hundreds of malts. It has enabled firms without a distillery of their own to develop major international brands.
There are a number of significant barriers to entry in Irish whiskey distilling, including the mandatory three year maturation period before the product can be sold. Several companies that have built Irish whiskey brands to date have been undermined by a lack of supply of mature whiskey. The establishment of a wholesale market for bulk Irish whiskey would represent an effective means of encouraging new export oriented Irish whiskey firms. An increase in Irish whiskey brands would yield significant economic benefits in terms of exports, output and employment, at little or no cost to the Exchequer.
The vision document itself outlines that “It should be possible to enter the market without having to build your own distillery. To encourage new entrants, lower risk models, and a more efficient use of capacity, it is important that a properly functioning internal market for bulk mature and immature whiskey develops.”
Indeed, in his written response to a parliamentary question on 28th January 2016, Minister Coveney noted this recommendation by the IWA and encouraged distillers to consider developing the market.
Given this political backing, coupled with the stated support of the IWA for a wholesale market, the IWA must reconsider its position. It is unlikely that it will, as despite Levy’s every efforts to get the IWA to discuss a potential mechanism for the creation of a wholesale market they have refused, citing commercial sensitivities. Levy rejects this as posturing and in defence of the dominant player, saying “We are not discussing pricing but a potential mechanism - something that falls within the IWA’s stated remit of developing the market for Irish Whiskey”.
One in five Scottish employees is employed directly or indirectly in the Scotch industry - can the same be said in Ireland? The Scotch industry as is stands is between 10 and 17 times as large as the Irish industry. Our sector currently employs less than 750 people in total.
There is a clear opportunity to emulate the success of the Scotch wholesale market, which has facilitated the growth of a huge industry of 5,000 blended whiskies and hundreds of malts and exports that will potentially exceed the value of North Sea Oil.
An efficient and significant supply industry has been established in Scotland to support the whisky industry. Surely the same dominant players who partake in the Scotch wholesale market would like to mirror the success, investment and jobs here in Ireland and call for the creation of a similar market in Ireland? However according to Levy these same players refuse to entertain or discuss the idea of creating such a market in Ireland.
As mentioned, the Vision for Irish Whiskey document used The Wild Geese Whiskey as an example case study for creating a brand without the need for a distillery. Given that all of the majors have refused to supply The Wild Geese with whiskey, Levy considers their use of his experience as a case study a cynical exercise in media and political manipulation.
It’s a matter Levy has studied deeply, including commissioning a report by consultancy firm Compecon to assess the viability of such a market.
“We looked at the infrastructure of the Irish Whiskey and Scottish whisky industries and what was manifest about that report was that the success of the Scottish whisky industry is predicated on one thing only – the availability of a mature wholesale whiskey market,” he said.
The ability to buy whiskey even before you build your distillery – the ability to market your product and generate cash flow before you build your distillery – is what’s driven the growth in the Scottish whisky industry, according to Levy.
It’s a premise that the Irish Whiskey Association agrees with. In the same document in which it lauded Levy as a case study, it pointed out that “A key factor that must emerge if the category is to function efficiently is an effective internal market in both new-make and mature bulk whiskey”.
John Teeling, in the same document, pointed out that Irish whiskey’s “Future potential depends on an active internal market – this must happen”.
So far, though, no such market has appeared.
Background of The Wild Geese Whiskey in the Irish Market – The Case Study That Gets Cut Off
André Levy has been calling for the creation of a wholesale Irish whiskey market, which he believes could help the industry here catch up with its Scottish rival, for many years, yet neither political or industry bodies appear to be giving the concept a second thought.
Levy produces a brand of whiskey called The Wild Geese, which he created by buying stocks of whiskey from other distillers and blending it to his own specifications.
However, Levy has suffered some supply issues in recent years and told FFT.ie that the current ad hoc wholesale market is holding back the growth of Irish Whiskey.
The Wild Geese brand has been forced to defend an avalanche of legal disputes launched by Pernod Richard in recent years, the latter claiming that The Wild Geese brand would threaten their Wild Turkey Bourbon (which they later sold to Campari). The dominant international player has initiated over 50 legal actions against The Wild Geese across several geographies over the past fifteen years. Levy has successfully defended all of these, “Highlighting the lack of substance in PR’s claims of confusion,” as he puts it.
Apart from having been quite costly and time consuming for Levy, who has a fraction of the resources of a multinational giant like Pernod Ricard, the impact of this situation has also made it much harder for him to get access to supplies of Irish whiskey.
Levy is heavily dependent on supply from other distilleries, but recently that supply has dried up. Pernod Ricard refused to supply unless he agreed to a veto over where he could sell his brand, The Wild Geese, in competition with Jameson’s; and Cooley - now owned by Beam Suntory - who he subsequently contracted with, ended its supply agreement in 2014. Levy says that all three distillers have refused to supply him with commercial supplies of mature whiskey, citing their need for all of the whiskey they produce.
Since then, he’s been paying a third party supplier for his whiskey, the same whiskey that the majors claimed they needed for themselves. For that, he pays “Significantly more for the whiskey than our original contract price, making it uncommercial to continue buying in this manner”.
"The Wild Geese has spent 15 years defending its right to its worldwide mark against the dominant player who has done everything to stop The Wild Geese competing in an arena they believe belongs to them," says Levy. He believes that their dominance was once again clearly illustrated with “IDL recently transferring €2.8bn to its partner company Pernod Ricard this year (leaving another €3bn in their accounts), which merely serves to highlight that the Irish Whiskey industry is nothing more than a French deposit account in the ownership of the dominant player”.
For Levy, his story is a long and unpleasant one that highlights the major problem at the core of the so-called Irish whiskey renaissance – a problem which he says could put a massive dent in that resurgence in the next few years.
A final word from Levy
“The reality facing the Irish Whiskey market is that all of the major distilleries on the island of Ireland are owned by multinationals. This dominance limits access to stocks of mature Irish Whiskey which is needed by developing brands to survive and grow. While new distilleries are planned, they are either too small or will not have stocks of mature whiskey for sale for a number of years, by which time many viable whiskey brands will be hampered or may even cease to exist.
“This in turn will be very bad for the image of a successful Irish whiskey sector. This is not something the Irish Whiskey Association or Pernod Ricard or any other of the others talk about particularly, because it’s not in their interest to do so. It’s more in their interest to hype the growth of Irish whiskey. These dominant players have in fact created and moulded their own document which will continue to hinder and lead to the ultimate detriment of the Irish Whiskey sector.”
In the new year we will return to this subject as many of those who have been in contact have asked for an opportunity to get their thoughts and reactions across. For the time being, it suffices to say that we hope this series of pieces has given the IWA some Food for Thought.