Brown-Forman wages battle for Irish whiskey

Brown-Forman has belatedly joined the Irish whiskey rush with its acquisition of Ireland’s Slane Castle Brand, but is by no means guaranteed success, writes Jeremy Cunnington, senior alcoholic drinks analyst at Euromonitor.

Slane Castle in Ireland, home to Slane Castle Irish Whiskey Limited

Like many of its international rivals Brown-Forman has moved into Irish whiskey with its US$50 million acquisition of the Slane Castle brand. Despite the historic dynamic growth of the category, something that is expected to continue in the future, the company is by no means guaranteed success and faces a number of major challenges to do so.

The major challenge will be to develop a brand almost from scratch in a highly competitive category. Due to Brown-Forman’s lateness to the category it missed out on the few relatively sizeable independent brands. It will thus have to compete against not only established brands, most notably Jameson which dominates the category it will have to compete against numerous start ups with over another 20 mainly small scale distilleries, excluding the Slane Castle one, either being built or having planning permission at the end of 2014.

Narrow based dynamism

A key factor in rise of new distilleries has been the rapid growth of the category which is expected to continue. Between 2009-2014 Irish whiskey grew by 10% CAGR (22million litres), but the increase was driven by Jameson brand which accounted for 70% of all Irish whiskey growth globally and predominantly took place in the US. Both trends are expected to continue with volumes up a further 5% CAGR (15mn litres) between 2014-2019.

While Brown-Forman’s Pernod Ricard has done this with the Jameson brand by developing the brand’s Irishness and for high energy drinking occasions, in the on-trade. Due to the brand’s approachable taste it has successfully targeted younger US consumers who traditionally drank bourbon/other US whiskey on these occasions and persuaded them to move to it instead.
This success has not rubbed off on existing brands, as Diageo in particular has found to its cost with Bushmills, as consumers do not focus on the fact that it is Irish, they look for a drink or brand that fits a particular occasion. As a consequence with Jameson monopolising the high energy space other Irish whiskey producers have needed to develop their own separate identities for their own brands.

Premium and above niche

It is thus good to see that, with the company’s reference to Woodford Reserve and premium and its super-premium focus in the press release, Brown-Forman seems to be doing this. This indicates the company’s focus will be less on going head to head with Jameson but at the high end of the category, which is currently very under developed.

Nevertheless, even there Brown-Forman will face tough competition. William Grant with its strongly established Tullamore Dew brand has already started to focus on the upper end of the market by positioning it as more of a sipping brand in lower energy surroundings and but putting it at a higher price than Jameson. This has started to bear dividends in the US where Tullamore Dew has increased its category share by just under a percentage point between 2012-2014.

While Brown-Forman with is distribution and financial strength and brand building knowledge should allow Slane Castle Irish whiskies to stand out from the plethora of new start-ups, going up against the more established players and brands will be tougher. To succeed, it will require a well-crafted image from the start and years of sustained investment.