Commercial Spirits Intelligence No.3

The rise and fall and rise again of Irish whiskey

Dec 2, 2022

As people who have worked in and around the spirits industry for many years, we found that there was a lack of good, public, research on the trends in the spirits industry. Whether it’s trends in wood, or distillery capacity, or M&A activity - many of the existing research providers speak to a specific niche when we wanted a whole-market analysis. In this newsletter we leverage our experience, contacts and market intel to provide meaningful analysis that speaks to relevant issues for you.

The rise and fall and rise again of Irish Whiskey

Following on from our first article on the evolution of Scotch whisky, it felt only right to take a similar look at the development of whiskey distilling in Ireland. Much has been trailed about the recent boom, but some historical context is always useful.

The monks of Ireland are thought to have brought back the knowledge of alcohol distillation from their travels across Europe in the 14th Century. The first records of distilling are from 1405. This early adoption allowed expertise to develop, and this was spread into Scotland at some point thereafter.

Throughout the 18th and 19th centuries, there were hundreds of distilleries that opened and closed across Ireland. Even more illegal versions were operating during this time too Most have since disappeared without a trace. By way of example, the excise records for 1800 are thought to list 40 distilleries operating in Dublin alone. Of these many distilleries, a distillery in the vicinity of today’s Bushmills was the first to be granted a license in 1608. Bushmills, as we know them today, was officially recognised in 1784 and have remained pretty much in continuous operation.

In addition to its pot still expertise, Ireland was at the forefront of continuous distillation. Following on from early French designs In 1830, Irishman Aeneas Coffey patented the two-column, continuous distillation apparatus which bears his name, versions of which are now ubiquitous across the distilling industries. The still allowed for the production of alcoholic spirits with an ethanol content of greater than 90%. This technology was exported to their neighbours and allowed the Scots to start big volume production of grain whisky.

By the end of the 18th Century, there are thought to have been 2,000 distilleries operating across Ireland. The export position was further boosted in 1872 when the Phylloxera crisis impacted the French cognac trade (allowing expansion by other spirit types).

So, the Irish were at the forefront of whisky production for a long time but what happened to this pole position? A series of unfortunate events took place that decimated the industry and pushed it into a steep decline.

1.       The advent of the Irish temperance movement reduced the domestic consumption of alcohol in the 19th century. This resulted in fewer domestic drinkers.
2.       The Irish war of independence in 1919 and the subsequent partition of the country in 1921 had a huge impact on trade. The British government introduced trade embargos with many commonwealth countries.
3.       The introduction of Prohibition in the USA in 1920 was also a nail in the coffin of Irish whiskey. The USA had become a huge export market for the product. This lasted until 1933.
4.       While all this was going on the Scots had developed blended whisky using the technology designed by Aeneas Coffey to make grain whisky which was blended with malt whisky. This became hugely popular and eroded Irish Whiskey’s market share.

During and after these events many distilleries closed, and the production of Irish spirit went into freefall. By 1966 there were only a handful of distilleries left in operation. Powers, Jameson and Cork decided to join forces and became known as the Irish Distillers Company. They acquired Bushmills in the early 1970s and closed the three distilleries south of the border in favour of the new Midleton production facility that now sits outside Cork. This meant that were now only 2 distilleries operating in Ireland in the later 1970s and both were owned by the same company.

Pernod Ricard acquired Irish Distillers in 1988 following a hostile approach by Grand Met/Allied/Guinness.

In 2005 Pernod launched an ambitious takeover bid for Allied Distillers. As part of this deal, Pernod offered Diageo the opportunity to buy Bushmills for a price of £200 million. This helped Pernod land the Allied deal and gave Diageo a much-wanted stake in Irish whiskey to complement its Guinness and Baileys brands.

The next major event took place in 2014 when Diageo announced that it had swapped Bushmills with Cuervo for the remaining 50% stake in the Tequila brand, Don Julio, that it didn’t already own. Looking back at this transaction is interesting given the development of both categories in recent years. Irish whiskey growth is only being outpaced currently by the rise of Tequila so on that basis it looks like it was a very smart deal for both businesses.

Two Distilleries become many….

To visualise the recent growth of the Irish whiskey category we examined the distillery opening evolution since New Midleton started in 1975. The following chart shows the number of openings per year and also shows the cumulative number over time. We have reached out into 2024 where firm openings are tabled but thereafter things are far more uncertain.

Following the Opening of New Midleton and ongoing production at Bushmills, the Irish whiskey category got a new plant in the 1980s. John Teeling bought a former potato schnapps spirit factory and converted it to make whiskey as the Cooley Distillery. The first production started in 1987. The distillery was eventually sold to Beam in 2011. Kilbeggan was owned by the same company and operated as a museum before resuming distillation in 2007 and full production in 2010.

In 2003 West Cork Distillery was opened. It has since moved site but has become a significant producer of Irish Whiskey.

The growth in popularity of Irish whiskey hadn’t gone unnoticed. Jameson and Bushmills were growing in volume during the early 2000s and this attracted investment into the sector that had few existing players.

It is worth noting that most of the many brands in the marketplace are based on liquid styles that originate from New Midleton, Bushmills or Cooley stocks. Anything older than 10-12 years will have been distilled in these locations. These distilleries operate on a bourbon-forward maturation approach, and this has resulted in new plants following that style to remain true to their initial flavour profiles.

William Grant and Sons acquired the Tullamore Dew Brand from C & C in 2010. The brand had relied on sourced liquids for its manufacture. Grants immediately started to build a new state-of-the-art facility to produce malt, pot still and grain whiskey spirit to support the brand’s growth in the longer term and this came into production in 2014.

This brings us much closer to the present day and the real purple patch for distillery openings. Many may be small when compared to expansions at Bushmills and Midleton but there are many now and the pipeline looks healthy.

Our analysis indicates that there are ~20 more in various stages of planning build or design at present. The category shows no signs of slowing down and looks undersold when compared to its Scottish counterpart with much room to grow on that basis – both in terms of case sales, value and distillery numbers. 2021 saw 9-litre case sales of ~ 14 million for Irish whiskey. By way of comparison, Johnnie Walker on its own sells significantly more than the entire Irish whiskey category – but the gap is closing. With nearly 50 distilleries operating in Ireland there is still some room to catch the 150 plus operating in Scotland too.

Irish whiskey is typically light, sweet, and very accessible to new whiskey drinkers and this helps with its growth in new marketplaces. The Irish connections and strong brand cues also help with export sales.

When visiting the county and its distilleries it is self-evident that major investment continues in the front-end distillery infrastructure. Pressure is building, however on the back end of this supply chain with an apparent lack of warehouse space and bottling capacity to service the many new operations. In common with all brown spirits, the need for raw materials like quality grain, malt, yeast, barrels and even people will all need satisfying in some form to allow unhindered growth into the future. In addition, we will soon see many brands able to release older and older products as their own made spirit becomes of age.

The future still looks buoyant and rosy for the category with the heady cocktail of ongoing significant investment, room to grow back to its historic levels and strong demand from the consumer. Whatever happens, it will be a very interesting watch.