Irish whiskey needs more strong brands

Now is the time for Irish whiskey to emerge from Jameson’s shadow says alcoholic beverages analyst Jeremy Cunnington

Jeremy Cunnington Euromonitor International

In 2012, Pernod Ricard’s Jameson brand increased its share in Irish whiskey by a further two percentage points to reach 62% of the 49 million litre category. For one brand to have such dominance is not healthy for a category as its prospects rely heavily on that one brand. If Irish whiskey is ever to become a major category it will need more strong brands.

Now, with three other major international companies involved in the category and willing to back their brands, there is a chance that Irish whiskey can become more than just Jameson’s category.

Competition heats up

Since 2010, Jameson has faced more competition. In 2010, William Grant bought Tullamore Dew. In 2011, Diageo increased its focus on Bushmills by making it one of its priority brands, while Beam bought the small but only remaining independent Irish whiskey distiller Cooley at the start of 2012.

Jameson has seen very strong growth in terms of both volume sales and share. The brand increased its volume share by 14 percentage points over 2003-2012 in a category that grew by 83% over the same period.

This performance was fuelled by strong marketing campaigns which helped drive growth in key markets such as the US and South Africa. However, this was partly due to circumstances as the company lacked a major blended Scotch portfolio on which to focus until 2005, and so focused its attentions on developing Jameson.

At the same time, it has also had the advantage of limited competition, with no serious rivals in many markets. Until 2010, second-placed Tullamore Dew was owned by small Irish player C&C, whose focus was on cider and soft drinks, while Bushmills was not a major focus for Diageo for many years.

Possible tough times ahead for Jameson

Jameson will obviously still benefit from first mover advantage in many key large markets, as has been witnessed in other whisky categories. In bourbon/other US whiskey, for example, first mover Jack Daniel’s comfortably leads the category. However, with the right promotional strategy and support, other brands could potentially gain a substantial share in key markets.

Within the next few years Jameson should come under far more pressure in its key growth market of the US, particularly from Bushmills and Beam’s Kilbeggan. Diageo’s Bushmills brand is also likely to pose strong competition in Russia, South Africa and the nascent Mexican market, all countries in which the company has a strong presence. This could help sustain growth in the category over the longer term.

However, it will not just be in fast growing markets that Jameson will face a threat to its dominant position. William Grant will focus on the mature French and UK markets in which it has strong distribution and in which it could revive category growth. William Grant should also benefit from Tullamore Dew’s leading position in Germany and many Eastern European countries, some of which (Germany, the Czech Republic) are expected to see strong growth.

Nevertheless, to truly emerge from Jameson’s shadow and reduce reliance on the brand for category growth, rivals will have to focus on developing new markets, just as C&C did in the early part of the century. Diageo, with its greater resources and distribution, is best placed to do this, perhaps by focusing on Latin America and Africa, regions in which it is strong, but do not rule out William Grant with its track record of success.

11 June 2013