Scottish whisky: by no means on the rocks

Women don't drink it, the young don't get it - but demand for Scotch malt whisky is flourishing. MT visits Islay - home to eight distilleries - to find out what makes such an export winner.

by Matthew Gwyther
Last Updated: 09 Oct 2013

It's a reasonable assumption that, having survived at least 700 years of ups and downs, the Scotch whisky business will make it through the latest global economic hiccup. Scotch has a battle-scarred history: going back centuries, it has endured hefty taxation by moralising, revenue-hungry governments; it has fought off imitators from the US, Japan, Australia, India and even Wales; and most recently, it has been trying to find a way to combat the onslaught of white liquors such as vodka - charging ahead with a 3.5% annual production increase for each of the past 20 years - which are cheaper and easier to produce and more acceptable to the immature palates of the global young.

Whisky also shares with the rest of the alcohol industry the considerable threat of concerns about the effects of drinking on health - although the numbers who can afford to binge-drink their way through a £40 bottle of 12-year-matured single malt are fewer than those who drown their spirits with lashings of Red Bull.

Despite seeing worldwide sales fall off a cliff after the crash of 2008, they are currently surprisingly bullish north of the border. A total of six new distilleries has been constructed in Scotland since 2005, the latest being the mighty Diageo's £40m Roseisle plant, which can pump out 10 million litres per annum. Scotch exports still generate £3.13bn annually for the UK's trade balance, with 87 million cases shipped worldwide in 2009 - it accounts for a cool quarter of our food and drink exports. What's more, due to a process of 'premiumisation' - a move upmarket from blended whiskies to costlier single malts - that total export value has risen by 40% in the past decade. The industry employs 10,300 and contributes £600m each year to the chancellor, a sum for which he should be thankful.

To see the Scotch industry in action, MT crossed the Firth of Clyde from Glasgow and overflew the Mull of Kintyre to land on Islay and visit the distillery at Bowmore (pronounced with the emphasis on the second syllable). As the juddering Saab turboprop approaches the Big Strand of Laggan Bay, you can see three of Bowmore's seven island competitors steaming away below - Laphroaig, Lagavulin and Ardbeg.

With a population of only 3,500, Islay produces 25 million litres of whisky annually - or a quarter of Scotland's malt whisky exports. Its Bowmore whisky is the main cash cow for the Morrison Bowmore (MB) company, one of the host of middle-range players in the Scotch game. All are dwarfed by the Diageo and Pernod Ricard juggernauts. Besides Bowmore single malt, Morrison Bowmore owns the Auchentoshan, Glen Garioch and McClelland's brands. It also has a recently acquired cash-generating sideline in making Drambuie, a sticky sweet liqueur with a cod history dating back to Bonnie Prince Charlie and which is a vital ingredient in the Rusty Nail cocktail.

MB as a company dates back to 1951, but Bowmore is the oldest of the Islay distilleries, having been producing uisge beatha (pronounced 'ooska beh') or the 'water of life' since 1779. In the mid-noughties, MB got out of the less profitable and more dicey business of selling its whisky for blends and concentrated on higher margin single malts. Bowmore single malt stopped appearing in Johnnie Walker or Chivas Regal, 30% of the workforce went and MB re-emerged as a single malt specialist. In 2009, it turned over a shade under £40m, on which it made a modest profit of £2.43m. It hasn't paid a dividend in many years. This probably wasn't a subject of consternation for its owners, however. Since 1994 MB has been a trophy asset of the huge Japanese Suntory food and beverage group. (The balance sheet does include £56.6m-worth of casked whisky, which increases in value by 5% to 7.5% each year.)

The 108 Scottish distilleries are highly prized assets because - together with their 2,500 individual brands - they are classic examples of that heady, intensely value-adding mix of tradition, myth, craft, heritage and authenticity that is very hard to create from scratch without considerable fakery. They are the real McCoy. These are qualities that money alone cannot buy. Such heritage brands exist in the UK in abundance, although as a nation there have been times where we've impatiently lost sight of what makes Rolls-Royce cars, Cadbury or even EMI so valuable. In an increasingly commoditised world, with a Starbucks and a McDonald's on every highway and byway, a unique provenance going a good way back in time is priceless.

Scotch malts are a marketer's dream: niche drinks reserved for those with the money and the taste to appreciate so refined a product. Mike Keiller, Morrison Bowmore's CEO, has been in the whisky business long enough to know this. While he does not have megabucks to spend on marketing, he's happy to ride along on Diageo's coat-tails. 'It goes and conquers new markets, for example in the BRIC countries, by spending many millions marketing Johnnie Walker, which helps consumers learn. Then, with the passage of time, these new drinkers migrate towards us. But it's not easy for a company of our size. India is tough: we just don't have the volume for local distributors, there are very high import taxes and then the high costs of different state regimes.'

China is also an intriguing target: at present, international spirits such as whisky and brandy account for only 1% of the Chinese market.

For MB, it has to be one step at a time. It got burned in South America and withdrew from there. 'For the time being, France is our largest market, one where we can still sell at a good enough price through the supermarket sector. The French love brown spirits and more Scotch is sold in France in one month than Cognac in a year.' France takes 30,000 of Bowmore's 170,000 cases each year, but the largest market is international duty free.

Scotch is a strange business. MB has to distil around twice as much whisky as it sells each year and barley is going up in price. But Keiller doesn't think his Japanese masters are rattled: 'The company is almost certainly worth three times what Suntory paid for it. It thinks of us like gold - a safe haven in an uncertain world.'

When it comes to actually drinking it, whisky - and even more so malt whisky - has its problems. It is astringent and challenging, often medicinal, not everyone's idea of a fun tipple. The taste has to be acquired and few get the hang of it before the age of 30. And there's an even more terrible secret demographic - 95% of the stuff worldwide is consumed by men. Women don't like it. Anyone who finds the solution to this gender conundrum has the key to doubling turnover.

What distinguishes malt whisky and makes it taste of something as opposed to very little (like vodka), is its impurities: the group of assorted alcohols, esters, aldehydes, phenols and acids that are all in a bottle. This is particularly marked with the peaty Islay malts, which are famed for their full-on mix of powerful whiffs and mouth-tingling flavours. When connoisseurs get nose into glass, they can find vanilla, dewy mint, angelica, liquorice, toasted nuts, even raisin oil and North Atlantic surf. On recently sampling an ageing Bowmore, one online taster from the Scotch Malt Whisky Society detected 'a hospital corridor with a peaty wind blowing through the window'.

The huge advantage of this is that the malt whisky fan club, like a religious sect, is tight-knit and fervent. During the summer months, over a million tourists trek and sniff their way across Scotland on the whisky trail that has come to be known as 'Malt Disney'. There's good money to be made from this, with a full tour accompanied by the chief distiller commanding a very high price ticket. MB spent half a million pounds on its Bowmore visitor centre and a million on the one at Auchentoshan, which attracts 25,000 visitors annually. On MT's day of arrival, a group of four enthusiastic Russians had just polished off a bottle of 12-year-old Bowmore for breakfast before a tearful farewell and being bundled into a minibus to take them back to the island's airport.

Eddie Macaffer, the manager at Bowmore, is a distillery lifer, having begun on the malting floor way back in 1966. In those days, they used wooden shovels to turn the barley grains which led some operatives to suffer from 'monkey shoulder'. It's now turned by machine and many distilleries don't even make their own malt themselves. Macaffer runs a tight ship, with a total of only 12 men running the operation, doing three eight-hour shifts. When he started out, the head count was around 30 men. 'That's nothing,' he says quietly. 'Down at Lagavulin (owned by Diageo), they have only one guy in the console room. It's all computerised. I'm still completely hands-on. This place still has heart and life.'

Not that he's opposed to progress. Bowmore has its computers and automation, but the hubble-bubble in the mash tuns and the copper stills is carefully watched and sniffed by humans. Macaffer says Bowmore is uniformly superior to the way it was in the old days and that's chiefly down to the quality of the wood barrels that it imports. Scotch has a vast part of its flavour imparted by its maturation in either ex-bourbon casks from Kentucky or sherry casks from Spain. There is stiff competition for decent used casks, while bad ones - those heavily sulphured or internally damaged - make bad whisky. Malt whisky takes six days to make, but more than ten years to mature and the wood in which it sits is what makes it special. Morrison Bowmore's hogsheads and butts are valued at over £9m and it spent £1.3m on them in 2009.

'The whisky game is a waiting game,' says Macaffer who, incidentally, no longer drinks himself. 'It doesn't start to come into its own until it has been in the barrel for 12 years, but really it's 17 to 22 years when it properly matures.' During that long period, approximately 2% of the whisky evaporates annually through the wood, thus further concentrating the flavour. This is the booze 'lost to the angels' (Customs & Excise allows distillers to write off this percentage).

Down in the dark storage warehouse with the waves of the North Atlantic lapping against the walls outside are Bowmore's precious treasures: just under 20,000 casks, including a 1991 cask given in honour of Suntory boss Keizo Saji, who persuaded his compatriots to change their tipple from sake to whisky, and who died in 1999. Near it sits an even more valuable barrel, filled with whisky from 1957 with the now defunct Sherriff's brand name stencilled on the lid. That must be worth getting on for a quarter of a million pounds. Special releases of seriously old stuff are carefully handled. A bottle of Gold Bowmore from 1964 will set you back £3,128. However, a 157-year-old bottle of Bowmore went for £29,400 in 2007, a world record auction price for a bottle of Scotch. The distillery itself - no doubt more concerned about such mundane but pressing matters as filling the hole in its pension deficit and replacing the roof on its Glasgow plant - fell by the wayside in the bidding.

The value of what Macaffer and his fellow Ileachs make is keenly felt - not least in these times of public spending cutbacks. 'There's only one area of the UK that produces more tax per head than Islay through its whiskies,' Macaffer muses, 'and that's the City of London.'

He's very keen to drive me out of Bowmore and into the peaty hinterland to see his distillery's water source. Whisky production consumes vast quantities of water, not just to make the liquor but also to cool down the stills and help the alcohol condense. (They are so frugal with their energy that the distillery even uses its waste heat to warm the water in the Bowmore municipal swimming baths next door.)

Back in 1825, it was decided that what the distillery required was its own canal, or 'lade'. By 1837, it was finally completed. It rises in the burns and brooks of the hillocks of Baron Bruno Schroder's estate. (A scion of the banking family, Schroder has been linked with Islay since 1937, when his father bought the estate. His Pilatus PC-12, which can carry six passengers, luggage and dogs from London to Islay, is the sole aeroplane left at the island airport at night.) Taking a diversion from the River Lossit, the lade is quite a feat of engineering as it meanders its way down the gentlest of slopes to the coast. The direct route as the crow flies between its beginning and the distillery is about half its nine mile length.

As a young man in the mid-1960s, one of Macaffer's summer tasks was to keep the lade free from the fouling effects of leaves, fallen branches and weed. 'Last June, we had a long dry spell of 14 weeks and the water dried up. We had to suspend production for a while,' he notes as he removes leaves from the sluice.

It was a temporary hiccup and Bowmore was quickly back to producing its quota of 43,000 litres of alcohol to go into the barrels each week. Bowmore will be distilling for a good long while yet and its markets look fairly secure. Once converted, those who enjoy whisky only err occasionally. And then they regret it. Humphrey Bogart's last words were: 'I should never have switched from Scotch to martinis.'


Although few Scots shout about the fact, whisky is simply distilled beer. Minus the hops. All Islay whisky is 'malt', which means it is made from malted barley. To be defined as a 'single malt', it must come from a lone distillery, not be a mix from more than one location. Bowmore's barley comes from the Scottish Lowlands because Islay is insufficiently clement. It uses 104 tons of the grain each week.

The malting of barley occurs when the grains are tricked into thinking spring has arrived by first sprinkling them with water and then warming them. This fools the barley into germinating and creating a small rootlet. At the same time the warming turns the starch into sugar, which the yeast can then feast on to create the alcohol.

Islay malts' USP is the involvement of peat in their production. For well over a thousand years, peat was the traditional fuel on Islay, because there are few trees and no coal. Peat was always used to heat and dry the malt, which arrests the germination process, and it burns very smokily. The peatiness of a particular malt is measured in parts per million of phenols.

The dry malt is then milled into grist before it begins its trips through mash tuns, underbacks and washbacks before the process of distillation commences.

Readers who are interested in the further technicalities of Islay distilling will enjoy Andrew Jefford's excellent and evocative Peat Smoke and Spirit: A portrait of Islay and its whiskies, published by MT's Masterclass series book publisher, Headline, in 2005.

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