Sunday 22 September 2019

Where is Whisky Headed?

Whisky production is something of a gamble. You don't want to produce too little or you'll run out of stock, and you don't want to produce too much - you'll need to sell it at some point! When you choose how many casks to buy or how many casks to fill for a future release you're looking eight, ten, fifteen or twenty years into the future, and taking a gamble on how the market will look when that particular cask or particular whisky is ready for release. If someone were to invent a working crystal ball I'm sure the whisky industry would be a major customer. We're in the middle of a huge whisky boom at the moment, but it can't last forever, and that's been shown quite a few times in the past - sometimes to devastating effect. The tastes and preferences of the masses can change on a whim, and while most of us whisky die-hards will always be there and wouldn't dream about switching to anything else, it's important to remember that we're not enough to sustain an industry. While we're a fast-growing sector at the moment, in the overall scheme of things we're still a small fish in a big pond as far as volume goes. You'd think it would be better to have too much than to not have enough, and you'd be forgiven for thinking that if you were looking at the state of the Japanese whisky industry over the last few years. But that's only true to a certain extent as prices are driven down, profits are cut and compromises are made. It can also lead to a drop in quality, not necessarily by those involved in the initial wave of success, but often by the newcomers who are cashing in on the "boom". And some are really "cashing" in more than others, if you catch my drift - the word greed comes to mind! Some of those newcomers also take shortcuts and compromise their products, or even defraud their customers outright, which can result in the entire local industry being tarnished. A certain Tasmanian distillery comes to mind there, and while its new owners are trying to right the wrongs (and I commend them for it), it's going to take a lot of time and a lot of effort to overcome the past issues. If they can be overcome at all...

Now under new ownership, thankfully...

There have been a surprising number of major crashes in the whisky industry in relatively-recent times, most recently in the early 1980s, and there are many who believe that we're heading towards another in the near future. If you were to look at the long-term performance of whisky on a graph it would resemble a roller coaster, and both the climbs and dives will have gotten steeper every time. We're currently on a very steep climb, probably a record one. New distilleries are popping up all over the planet on an almost-weekly basis, including here in Australia, as interested parties want to get a piece of the pie while it's hot. But the pie may be cooling at a faster rate than many think, and it's quite likely that there will be a few left without a chair when the music stops. Aside from huge investments from the large multi-national corporations, including some new distilleries with astronomical production capacities, we also have a huge influx of small "craft" malt distilleries opening all over the planet, all searching for their unique selling point and attempting to carve out their niche in a market that is very likely heading towards saturation. The current state of the Australian gin industry comes to mind here, where there are dozens-upon-dozens of new brands popping up, with many relying on unique packaging and/or clever marketing to get them in the retailer's doors and onto the customer's shelves. Some are small and independent, and some are only presented as such, including quite a few that arguably do not actually produce their own product, or at least many that do not produce the base ingredient of their own product. And gin can largely get away with that, because it's often re-distilled anyway, but you may be surprised to learn that a similar problem is beginning to affect the whisky scene. Or rather that it's beginning to be uncovered in the whisky scene - it's been happening for years.

In some cases loopholes in the regulations of certain countries are being exploited. A good example is the relatively recent influx of "Japanese" whisky which is not actually Japanese, or at best not 100% Japanese. While I'm sure this sort of thing is happening elsewhere, it does seem particularly prevalent in Japan at the moment, no doubt spurred by the frankly ridiculous demand for "Japanese Scotch" as novice and newcomer consumers - and investors who are already too late - jump on the bandwagon to get their hands on the flavour of the month. For a country with such a deep-rooted belief in being honourable and respectful, there are a surprising amount of companies that in my opinion are not being honest with their customers, either by omission, or by lying outright, or by targeting the ignorant by very closely copying the packaging and designs of successful brands. Or a mix of all three. I'm referring to the "Japanese" blended whiskies that are quickly appearing out of thin air, and are not distilling their own whisky. "So what?", you might think, "that's what independent bottlers do!". And you'd be right, but in this case it's a little different. If you purchased a bottle of whisky that was clearly labelled as Scotch, which actually contained American whisky / whiskey, or you purchased a bottle of Australian whisky that actually contained Scotch whisky, would you be happy with your purchase? Well that is exactly what's happening with many of these "Japanese" products at the moment. Scotch whisky, whether purchased as new make spirit or mature whisky, is being purchased by Japanese companies and shipped to Japan in bulk, and is being sold as Japanese whisky, when in reality it was either not produced in Japan at all, or was only partly-produced in Japan. I'm not going to single out any particular brands here - note that I haven't said "distilleries" - and there are plenty of examples around. Certain "Japanese" brands have been doing this for a long time - particularly those that also own Scotch whisky distilleries - but it's becoming much more prevalent today. Luckily there are plans afoot to get this loophole closed, understandably spearheaded by those respectable companies that were responsible for the current success of Japanese whisky, but until that happens there is a very real danger of the entire industry being damaged by this practice. And that could be very damaging at a time when investments are being made and production is being ramped up to meet massive new demand. This sort of thing has occurred in the Scotch industry in the past, most famously in Campbeltown in the late nineteenth century. At the time that resulted in the region's over twenty distilleries dropping like flies, and massively damaging the town and surrounding areas.

This sort of thing isn't unique to Japan of course, it's commonplace in many established whisky industries, particularly in Ireland and America, where those brands are often referred to as non-distiller producers. The difference is that those brands generally don't claim to be distilling their products, and they're sourcing spirit that is at least made in the same region or at least the same country, and spirit that complies with the relevant regulations of that country. There have been a few that essentially mislead their customers by claiming to make their own whisky, again either by omission or by misleading wording (calling themselves a distillery when they did not make their own product) - including one recent and deservedly controversial example in mainland Australia - but the vaguery of the whisky regulations in some parts of the world doesn't help. There's also the bigger question of when whisky is actually 'made'. Is it made when it comes off the still as new make spirit, where it cannot legally be called whisky? Or is it made when it has spent two or three years (depending on local regulations) maturing in casks? It's almost a "the chicken or the egg" question. In my opinion the answer is the egg, or rather the new make spirit, because the eventual result cannot exist without that first stage, and if the initial requirements (particularly the permitted cereal grains and the maximum distillation strength) are not met, then the end product after those two or three years of maturation is still not whisky. Which again reminds me of the very-shady past practices of that certain Tasmanian distillery...

So what to do about all of this? In my mind there's no question that stronger regulations are needed, particularly in these relatively "new world" whisky producing nations, as a first step. Then those regulations need to be actively enforced. And that's ranging from the base ingredients (preferably cereal grains) permitted, to any additives permitted (preferably none!), to labelling requirements and country of origin requirements. The majority of the quality producers around the world tend to follow the Scotch whisky regulations anyway, so why not simply copy those regulations and implement them in these new world countries? That would help to weed out some of the shady types, and help the local industries regulate themselves, with a little help from regulatory bodies or customs oversight needed (but no increased duty rates, thank you very much). It would also put the international whisky producers on an even playing field with what will always be the dominant team in the game. And don't think that such a move would stifle innovation. Even those Scotch whisky regulations, the most recent version of which was implemented by the Scotch Whisky Association in 2009, can be amended - as they were just this year with regards to permitted cask types. Even without the amendments, the potential for innovation within those regulations is almost limitless. And they still do what they were intended to do, which is to ensure that Scotch whisky produced in Scotland is actually whisky, and they're protecting the entire Scotch whisky industry from potential risks and potential damage in the process. I'd even argue that those regulations help form the backbone of the industry. And a strong backbone is crucial for supporting both short- and long-term growth. So where's the harm in that?

As for the rest, until those crystal balls finally hit the market we'll just have to enjoy the climb, savour the fresh air and enjoy the views from these new heights. I don't see things slowing down just yet, but what goes up...



  1. In 1876 a book was published called 'Truths About Whisky' by the 4 largest whisky distilleries of the time;
    John Jameson & Sons, Bow St, Dublin
    William Jameson & Co, Marrowbone Lane, Dublin
    John Power & Sons, John's Lane, Dublin
    George Roe & Co, Thomas St, Dublin.
    In the book they railed against a new invention - the Coffey or Patent Still - that was beginning to threaten their pre-eminent position.
    The only true whisky in their eyes was what we now call 'single pot still' - preferably Dublin made - the output from Coffey stills was described as 'sham whisky'.
    Tales of nefarious underhand practices and dubious manufacturing ploys abounded.
    Demands for tighter regulation were loudly proclaimed.
    It's remarkable how similar your blog is to that publication.
    Nearly 150 years later those 4 distilleries are museum pieces.
    Irish Whiskey is only now recovering by embracing that 'sham whisky' - it's what we call 'blended whisky'.
    Scotland took to blended whisky with gusto - the consumers lapped it up and propelled Scotch to pole position.
    It seems to me you are echoing the sentiments of the book by labeling the emerging nations output as 'sham whisky' and the only true whisky as Scotch.
    I'd read a bit of history to see how that went.

    1. Sorry for the delayed response. You a bit off the mark there to be honest, I could care less where a whisky is made, or if it is blended or not, or what grains it is made from, provided it is well-made and follows some basic regulations. If those Irish distillers had been using Scotch whisky and labelling it as Irish whiskey, then yes that would be the case, because that is then sham whisky (as you say) in my opinion. Likewise if something was labelled Scotch whisky but contained Irish whiskey.


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