AMERICAN WHISKEY: KENTUCKY ON MY MIND

Kentucky on my mind

Australians have long appreciated American whiskey, and Caoimhe Hanrahan-Lawrence sets out to investigate why.

It’s no secret that Australians have a large appetite for American whiskey. According to market research by GlobalData, the US is second only to Scotland in terms of market share of whiskey sold in Australia. The category has seen impressive growth, with the IWSR reporting 11 per cent CAGR growth over the last three years.

Additionally, the Australian market is an incredibly important one for American producers, with the Distilled Spirits Council of the United States (DISCUS) identifying Australia as the third largest export market for American whiskey, worth US$85 million. The numbers are even more impressive on a per capita basis, with the IWSR indicating that Australia is the nation with the highest per capita consumption of US whiskey in the world. The Australian appeal of American whiskey is even more pronounced when it comes to bourbon, as Australia is the second largest export market by value – an impressive feat for a country with a relatively small population.

We’ve seen an increasing interest in smaller batch, more specialty American whiskies.

- Eric Thomson Global Marketing Director Pernod Ricard

Alexandra Clough, spokesperson for Westward Whiskey, said that Australian interest in American whiskey has strengthened and developed.

“Australia is – and always has been – an incredible market for whiskey. Australian consumers have long been fans of the more traditional categories within American whiskey – namely bourbon and rye, and in recent years, we continue to see Australians reaching for more premium whiskies and dynamic craft brands,” Clough remarked.

American appeal

Over the past few years, there has been a trend towards Australians seeking out local labels in the bottle shop, which may be concerning for the international beverage sector. However, John Weifert, founder of Orrsum Spirits, still expects the American whiskey segment to remain popular, due in part to the relative youth of Australian whiskey production.

“A lot of Australian distilleries are putting out some young products right now, but of course will improve with time. With small scale production, it will be hard to compete at similar price points [to US whiskey], but some brands such as Starward and Archie Rose are on a good track!” Weifert commented.

When compared to other popular market sectors such as Scotch and Japanese whisky, the American whiskey sphere is quite distinct, with many describing it as innovative and modern. Though American whiskey is certainly governed by regulations concerning provenance and production, the regulations are less strict than those in Scotland, which allows for more experimentation among American producers.

“American whiskey is to me the most exciting whiskey category. Yes, they have the tradition, but they also have brands pushing the boundaries with experimental grains, cask finishes, etcetera,” said Weifert.

When it comes to Japanese whisky, even though the category has seen incredible popularity internationally, America has more than a century of experience in whiskey-making over Japan, with more defined regional styles and a distinct difference in flavour profiles. Rather than squeezing the market, Eric Thomson, Global Marketing Director for PernodRicard noted that the popularity of Scotch and Japanese whisky is beneficial to American whiskey, as these other categories are leading new consumers to the American whiskey category.

“There’s a generationally new consumer, Gen Zs and millennials coming through and being introduced in the category, but I think we’re seeing whiskey consumers in general coming across American whiskey as they move through things like Scotch whisky and Japanese whisky,” Thomson said.

Stateside styles

As with many beverage sectors, American whiskey is seeing a trend towards premiumisation, with consumers spending more per bottle on average. Rachel Pullicino, marketing manager at Brown-Forman says that this may result in more brand curiosity.

“Mindful consumption is also playing a key role in the way in which consumers interact with brands. Premiumisation has been a significant macro trend for the category in recent years across all liquor segments. In American whiskey we see this play into greater experimentation across brands, trading up to more premium offers, but doing so on fewer occasions as part of managing overall consumption,” Pullicino explained.

However, even though value mainstream and super premium are both in decline, Pullicino expects there will be some customers turning to old favourites due to economic pressures and the rising cost of living.

Within the premium sector, O’Neill predicts that more ultra-small batch and collectible American whiskies will be made available on the Australian market.

“In this super premium space, we’re seeing increased allocations of rare and premium bourbon to help meet the demand of Aussie consumers,” O’Neill explained. Thomson agreed with this prediction, saying that the Australian interest in this section of the market is on the rise.

“Over the course of the last few years, we’ve seen an increasing interest in smaller batch, more specialty American whiskies. I think we’re seeing an evolution of the category from that perspective, more diversity from style as well as an increase in the average price point that consumers are looking for,” Thomson commented.

In particular, premium bourbon has experienced a boost in sales, as it is a popular addition to many consumers’ home bar set up.

“Bourbon, being such a big bold spirit, pairs so well with cocktails. Especially during COVID, we saw a big bump in the premium sector, mostly from people stepping up their cocktail game at home,” said Weifert.

Australia is the nation with the highest per capita consumption of US whiskey in the world.

Though bourbon is not the only style of whiskey the US has to offer, it is certainly the most popular in Australia. DISCUS data indicates that Australians drink 19 million glasses of US whiskey per month, 2.5 times more than is drunk in America. While many whisky drinkers are familiar with the different regions of Scottish whisky, the bourbon category can be seen as monolithic. However, there are actually a number of regional differences within the category.

“We are seeing a diversity. Whether it’s Kentucky, Tennessee, Texas, Virginia, [they] are all starting to carve out their own little niche,” said Thomson.

Some of the regional differences are due to local legislation surrounding bourbon distilling, such as between Kentucky and Tennessee, whereas other differences are cultural. As Kentucky is the traditional heartland of bourbon, it has a different distilling history to newer regions such as Texas, which is noticeable through the kinds of products being produced in those regions. Of course, there are also differences in ingredients and brewing conditions, which change the product in often surprising ways.

“Terroir is also of importance - consumers want to know where these whiskies are made, what’s unique about the regions and ingredients, and how that affects the final flavour and taste,” Clough emphasised.

Rye whiskey has also seen an increase in popularity due to the cocktail trend, as well as benefiting from an increased interest in craft labels. Rye whiskey was the most popular spirit in America prior to Prohibition, after which the American palate adjusted to lighter Canadian whiskies. Pullicino highlighted the importance of American whiskey in many classic cocktails as another beneficial factor.

“The role of whiskey-based cocktails continues to garner interest, including traditional cocktails like the Old Fashioned and the Whiskey Sour. […] Cocktails are also a great way to drive recruitment and trial into whiskey, opening up the category to non-traditional whisky drinkers,” she said.

Clough also highlighted the rising popularity of American single malt whiskies.

“Australia has also been a strong market for single malts of the world; while Scotland’s single malts have long had a presence in Australia, single malts from Japan, Australia, Ireland, Taiwan, and America are also growing,” she said.

Searching for special

While many American whiskey brands have become household names, consumers are increasingly on the lookout for craft brands within the space. The craft trend is primarily driven by younger consumers, who tend to be more adventurous in their drinks choices, but the interest in craft labels is present across all age demographics.

Thomson said that this interest in new labels and styles is bolstered by the growing awareness of regional styles of American whiskey and bourbon.

“There are some regional differences, but I think that there’s a diversity and style as well that’s new. As new whiskies come onto the market, I think Australian consumers will be really interested in discovering that everything isn’t this ubiquitous category of quote-unquote ‘Bourbon’ that we’ve historically assumed it was,” he continued.

Craft consumers are particularly interested in exploring the different styles and techniques that make up the American whiskey space. For this reason, stocking a range of smaller brands is key in maintaining the interest of a curious consumer.

“People want to see new interesting things on the shelves,” Weifert explained.

Thomson spoke of the importance of educating staff about the product range, especially when it comes to craft styles.

“Probably the biggest tip is utilising the resources available from companies like Pernod to help train their staff. I think one of the great things that we have, in Australia is that we have a lot of retailers that really invest in staff training, leaning on suppliers and our ambassador programs to help educate their store staff. When consumers come in and they don’t know what they’re looking for, the staff in the store have the opportunity to walk them through the differences in the brands.”

Even with the trend towards craft and premium styles, classic American labels will remain important to the off premise.

“Due to the size of the category, North American whiskey is a key traffic driver for retailers. […] Consumers are also fiercely loyal to the category and will often walk away in search of their desired product if it is not available. As a result, it’s important to ensure that the right range and presence is maintained for these products so that they are easy to find and shop,” Pullicino advised.

“There is always a heartland American whiskey/bourbon consumer that continues to drink the same styles,” agreed Thomson.

As such, producers generally agree that classic labels still require prominent shelf space to attract customers who are loyal to specific brands.

A new generation

A growing section of the market is whiskey liqueurs, which use a whiskey base and add flavours such as honey, apple, cinnamon, or peanut butter, softening the sometimes intense flavours of traditional whiskey. Whiskey liqueurs are particularly popular among young people, who are seeking out different labels to what their parents drink, according to Jack O’Neill, brand manager for SouthTrade International.

“Flavoured whiskies are an approachable entry point for younger consumers new to whiskey as they offer fun and delicious flavours that are more palatable than straight whiskey,” O’Neill explained.

The approachable flavours also make whiskey liqueurs a popular social drink.

“Flavoured whiskies like Fireball and Sheep Dog are great shot brands, as well as mixing, which makes them a great choice for a night out having a round of shots with friends,” continued O’Neill.

The whiskey liqueur sector is more developed in America than many other countries, but Australians have proven to be fast adopters of the products. However, there are differences in Australian and American palates, and O’Neill pointed out that some flavours do not translate well to an Australian market.

“I think we’re definitely a fast follower. [The US is] leading the way in innovation, and then if it appeals to the Australian market, it doesn’t take long before it takes off here,” O’Neill noted.

Even though whiskey liqueurs can provide markedly different flavour profiles, O’Neill sees it as an entryway for young adults to enter the broader whiskey market. For this reason, he suggests shelving whiskey liqueurs alongside whiskies, rather than with liqueurs. He also advises against placing whiskey liqueurs on the bottom shelf, to avoid the implication that whiskey liqueurs are an unpopular choice.

“We see these brands as a gateway to traditional bourbon, bringing consumers along their journey with whiskey,” he added.

The role of staff

American whiskey is a broad and growing category that can appeal to a wide range of customers, from the most discerning Scotch drinker to the category newcomer. Due to the category’s diversity, it is often insufficient to organise products by style or state. While shelf separation can be useful for consumers looking for new or preferred products, it is also vital that staff are educated on the differences and similarities between products in store, so as to properly direct customers to the products that best suit their personal tastes.