CHAPTER THREE

On-trade outlets

Asset 3

As we have seen elsewhere in the category, there has been a move towards a premium offering as consumers have traded up.

Drinks-led pub sales

Whisky is the third-biggest category in the traditional UK pub, despite a year-on-year fall in volumes and value sold overall – down 5.5% in volume between 2017 and 2018 and by 2.8% in value over the same period.

There are structural issues at play. Traditional pubs and sports bars have been closing over the last ten years – traditional heartland for whisky and particularly for blends – as there has been a move to food-led offerings in the pub sector.

This is reflected in the falls in sales for blended whisky, which are particularly steep in these outlets at 9.1% in value terms. The wider impact on the on-trade has been felt across the piece as these “wet-led” pubs hold 47% of on-trade blends sales. Falls seen in the value of sales of Irish whiskey are similarly skewed towards these outlets.

However, there has been an increase in the value of American whiskey and of Scotch single malt. Just as we have seen elsewhere in the category, there has been a move towards a premium offering – consumers have traded up as they have in their drinks choices more widely (standard lager being a strong example of this, which has lost ground to world beers and craft).

There has also been an impact on the whisky category from the continuing rise of gin in the UK. There was an 89.2% increase in the value of gin sold and there is almost certainly a degree of switching behaviour as drinkers have shifted away from whisky (particularly blends) towards this white spirit.

00

Blended whisky

fall in 2018 sales value 

-9.1%

Note: Segmentation here is based on recalculation of CGA groupings

Drinks-led pubs: Wet-led pubs and sports & social clubs
Food-led: Food-led pubs and restaurants
Bars: Circuit bars and café wine bars

Food-led sales

Sales of whisky in food-led outlets have fallen over the last 12 months. Overall they were down 1.7% in value terms between 2017 and 2018.

Blended Scotch whisky – which makes up a substantial proportion of overall sales in volume and value terms – posted the biggest losses, as sales values dropped by 9.1% in the last 12 months. American whiskey too posted drops, down by 1.9% in value terms.

There have been a number of restaurant closures due to oversupply and tough trading conditions, which have undoubtedly had an impact. Growth is casual dining outlets has delivered a strong result result for spirits as a whole, as attractive cocktail menus persuade consumers to trade-up from beer and wine. But whisky has been unable to capitalise to the same extent – perhaps due to less menu space and outlet-backing as gin, vodka and rum have been more of a focus.

However, there is opportunity for a return to growth in the future if mainstream outlets begin to embrace whisky serves such as the highball (already a popular trend amongst high-end and influencer outlets according to bartender research)
as an accompaniment to food.

Sales of Scotch single malts, however, rose by 5.1% in value terms even though volumes were flat. In top-end restaurants in particular there has been a renewed interest in the whisky menu and premium single malts have made a strong play – offering a perfect post-dinner experience and the opportunity to sample expressions that might otherwise be unaffordable (evidenced by an increase in sales of 8% in single malts at the top-end of the restaurant market).

In common with whisky as a whole, there has been some shift towards higher-priced options across the board – evidenced by the fact that sales values fell less steeply than volumes.

The star performer in UK food-led outlets was Irish whiskey as sales values in 2018 rose by 12.5% compared to value in 2017. There has been a focus on pairing with food by the Irish brand leader which is likely to have driven this growth.

00

Scotch single malt

food-led value growth

+5.1%

Irish whiskey

food-led value growth

+12.5%

All whiskies

food-led volume growth

-6.7%

Whisky has been impacted by the rise of gin, reflecting a change in consumer habits. 81% of hotel guests drank gin in 2018 (compared to just 61% in 2017), while 45% of hotel consumers were whisky drinkers (up 1% on the year before). This becomes evident in the value of gin sales, which rose 31.1% year-on-year to reach £147.8 million, a similar level to vodka, which it looks likely to eclipse as the biggest seller in hotels during the year to come.

Bars

In common with the market as a whole, bar sales have been challenging.

As a whole, whisky sales were down 7.8% in the UK’s bars in 2018 (compared to 2017) in volume terms. They fell to £315.1 million during this period (a 4.8% fall)
in value terms.

Again, in common with other categories, this was heavily influenced by a fall in the sales of blended Scotch, where sales were down by 7.9% in 2018 in value
terms (and 10.5% in volume).

The fact that the American category dropped (by 6.0% in value between 2017 and 2018) meant that historic growth in whisky as
a whole was reversed in 2018.

Irish whiskey – perhaps being used as an alternative to bourbon – saw particularly strong growth in 2018 as sales rose 8.5% to £24.6 million.

Single malts posted a small dip in total value of sales – down 1.8% in 2018.

In common with other on-trade outlets, gin posted the strongest growth year-on-year in bars – as the value of sales rose from £267.4 million in 2017 to top £406.7 million in 2018.

This lifted the value of gin sales above the value of whisky sales for the first time and, the evidence suggests, also meant that some drinkers who might have chosen whisky in the past switched to gin or gin-based cocktails – contributing to decline in the
dark spirit overall.

00

Irish whiskey

bar sales growth

+9%

Hotels

There was a good performance in value terms across hotels for whisky as the category grew by 1.3% to £140.3 million in 2018 (despite a 4.2% drop in volumes).

Overall, volume has been affected by hotel closures over the past year (there were 5% fewer hotels in 2018 than a year before), but the value of whisky is still growing in this important segment.

The fall seen elsewhere in Scottish blends was a modest 2.8% in value terms in hotels, while Scotch single malts and American whiskey (which make up a greater proportion of total value of all whisky sold than elsewhere in the on-trade) both showed strong growth – up 2.1% and 3.4% in value terms, respectively.

These whiskies have attracted wealthy tourists and business travellers (hotels see a greater share of super-premium sales than any other segment) and this is a vital engine of growth in the category overall.

Whisky has also been impacted by the rise of gin, as hotels have adapted to offer a much wider range of the white spirit, with minimal increases in whisky ranging overall.

This change is reflected in consumer habits, as 81% of hotel guests drank gin in 2018 (compared to just 61% in 2017), while 45% of hotel consumers were whisky drinkers (up 1% on the year before).

This becomes evident in the value of gin sales, which rose 31.1% year-on-year to reach £147.8 million, a similar level to vodka which it looks likely to eclipse as the biggest seller in hotels during the year to come.

00

All whiskies

hotel sales growth

+1.3%

£140m value