Scotch is an icon among the spirits categories, perceived as a classic whisky that skews towards the higher end of liquor products. But sales growth for Scotch has lagged behind whiskey as a whole as competitors like bourbon push the category forward and capitalize on the growing U.S. cocktail culture. Though overall Scotch sales may not be growing as quickly as other whiskey or spirits categories, new product entrants and expanding consumer base demographics are reviving this traditional category and pushing growth for premium options, making it an important category to successful retail inventories.

Rapid Evolution, Slow Growth

Scotch as a whole has experienced strong growth over the past six years, increasing 7.8 percent in volume between 2014 and 2019, according to the IWSR. At the same time, this notoriously traditional category has become more experimental, resulting in new and interesting Scotch whiskies — particularly single malts — becoming available in the U.S. market.

“While the single malt Scotch industry prides itself on authenticity and tradition, we are always learning,” says Diana Brey, the brand manager for GlenDronach, Benriach, and Glenglassaugh. “The category is innovating throughout the different steps of production, especially with a variety of cask maturations.”

“We believe it is important to have a diverse portfolio of offerings to meet the varied and changing needs of today’s whiskey drinkers,” says Michael Giardina, the brand director for Glenfiddich and Monkey Shoulder, noting that Glenfiddich offers Scotch whiskies ranging from $40 to $30,000 per bottle.

However, this Scotch sales growth has trailed the overall whiskey category’s growth, which grew 30.1 percent between 2014 and 2019, according to the IWSR. Nielsen data echoes this trend; off-premise sales in 2019 Scotch grew by just 1.2 percent in value year-over-year while total whiskey sales grew by 7.4 percent. 

This trend has only continued amidst the effects of the pandemic: Scotch sales grew 12 percentage points above baseline growth year-over-year in 2020 on Drizly, compared to 59 percentage point growth above baseline of the overall whiskey category. Across all Nielsen-measured off-premise channels, for the 29-week Covid-impacted period ending September 19, Scotch sales grew 17.8 percent in value while total whiskey grew 29 percent.

At the same time, Scotch has lost share within the whiskey category, which is the top-selling liquor category on Drizly. It comprises 20.7 percent share of whiskey sales year-to-date, compared to 22.8 percent share during the same time period in 2019.

Part of this is due to the tariffs imposed on single malt Scotch whisky in October 2019. “The tariffs have depressed single malt category growth relative to the other whiskey segments, particularly American whiskey,” says Giardina. “Single malt Scotch whisky has always been a trade-up from other categories, and when you add a 25 percent increase to that trade-up, it has alienated some whiskey drinkers.”

Much of this can also be attributed to the rising popularity of bourbon, which comprises 43.7 percent of whiskey share — up from 41.9 percent in 2019 — and is the top-selling whiskey subcategory on Drizly. “Bourbon has been on an upward growth trajectory for several years, growing exponentially in the past few years,” says Drizly’s head of consumer insights Liz Paquette.

The bourbon category has also driven growth for the overall whiskey category, which is one of the reasons why it is outpacing Scotch. “Compared to Scotch, Bourbon’s average consumer skews younger towards the millennial age group,” says Paquette, “attracting new consumers to the whiskey category.”

In fact, several other whiskey categories—including Irish whiskey, rye whiskey, and flavored whiskey—have gained share on Drizly this year benefiting from the rise in at-home cocktail culture. Scotch, unfortunately, has not benefited similarly. “While other whiskey categories have benefited from the rise in cocktail making in 2020, Scotch is typically sipped rather than consumed as an ingredient in cocktails,” says Paquette.

These effects have been exacerbated by increased competition for whiskey, which has lost share within Drizly’s liquor sales. Tequila has experienced a three percentage point year-over-year share growth in the liquor category, has potential to take share from whiskey as a whole. “As tequila continues to experience strong growth and continues to become more mainstream,” says Paquette, “it is possible it may to impact the Scotch category particularly among the premium, sipping tequilas.”

Growth in Premium Scotch

While Scotch as a whole is not growing as fast as other whiskey or spirits subcategories, premium Scotch whiskies have seen success. “The overall Scotch category has seen some declines in blended Scotch, which are driving the overall growth rate down,” says Brey, who notes that ultra-premium single malts have grown in the double digits. “The U.S. is still the largest single malt market in the world.”

Blended Scotch SKUs still top Drizly’s best-sellers list in 2020, but single malts have moved higher up the list since 2019. “The Scotch category has continued to shift towards premiumization over the past five years,” says Paquette. “Since 2016, all of the Scotch price ranges from $70 and up have grown, taking share from the lower price ranges.” Currently, the $100+ price bracket has the largest sales share of Scotch on Drizly: 21.22 percent.

While single malt Scotch whiskies have been forced to increase in price over the last year due to tariffs, much of this is due to the increased availability of new and unique single malts for purchasers to explore. “Consumers appear to have been trading up as more ages and varieties become available,” says Paquette. Greg Levine, the brand director for The Balvenie, notes that while year-to-date volume for The Balvenie is in line with what was expected, value growth is increasing — indicating that consumers are increasingly trading up to higher-priced bottles.

The increasing desire to explore and learn about Scotch is an opportunity for retailers to attract engaged customers. “Drinkers are sampling single malt Scotch whiskies from all terroirs in Scotland rather than remaining in only one area,” says Brey, noting that consumers are also exploring different styles of peated and non-peated Scotch.

“Having the right Scotch selection is critical”, says Giardina, and retailers should consider whether they are using a wide whiskey inventory as a selling point of their store. “Scotch whiskey can be confusing and intimidating to shoppers, so in general retailers should first focus on prominently displaying their best sellers,” he says. Retailers should consider focusing on the top selling brands in the category before diversifying their selections. 

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Drizly’s Top-Selling Scotch SKUs, 2020

  1. Johnnie Walker Black Label   
  2. The Macallan Double Cask 12 Years Old 
  3. Johnnie Walker Blue Label
  4. The Glenlivet 12 Year 
  5. Dewar’s White Label Blended Scotch Whisky 
  6. Laphroaig 10 Year Old Islay Single Malt Scotch Whisky 
  7. The Balvenie 12 Year Old DoubleWood Single Malt Scotch Whisky 
  8. Johnnie Walker Red Label 
  9. The Balvenie 14 Year Old Caribbean Cask Single Malt Scotch Whisky 
  10. The Macallan Sherry Oak 12 Years Old 

Drizly’s Top-Selling Scotch SKUs, 2019

  1. Johnnie Walker Black Label 
  2. Johnnie Walker Blue Label
  3. Johnnie Walker White Walker Blended Scotch Whisky
  4. The Macallan Double Cask 12 Years Old
  5. Dewar’s White Label Blended Scotch Whisky 
  6. Johnnie Walker Red Label
  7. The Glenlivet 12 Year 
  8. The Macallan Sherry Oak 12 Years Old 
  9. The Balvenie 12 Year Old DoubleWood Single Malt Scotch Whisky
  10. The Balvenie 14 Year Old Caribbean Cask Single Malt Scotch Whisky 

After focusing on these top sellers, retailers can also use lesser-known single malts to set themselves apart. “In addition to the top-selling SKUs, retailers can differentiate themselves and attract new customers by offering unique or harder-to-find Scotch products,” says Paquette.

Changing Scotch Demographics

Overall, the Scotch category skews male. In 2020 YTD, Scotch consumers on Drizly were 68 percent men and 32 percent women, compared to the overall Drizly user demographic of 51.8 percent women and 48.2 percent men. Scotch purchasers also skew older than the overall Drizly audience: While 10.52 percent of Drizly users are 56 or older, 13.43 percent of Scotch purchasers fall within this age range. 

“Scotch historically has appealed to the older demographic,” says Paquette. “However, data is beginning to suggest that there may be a shift in perception, as Scotch purchasers’ age breakdown has shifted slightly towards the millennial age groups in the past year.”

The entrance of younger consumers into the Scotch category has been driven by the rising popularity of unique single malts from different distillers. “Consumers continue to be more and more curious, not only in exploring different taste profiles, but also learning and diving deeper into the brand than ever before,” says Levine.

Drizly’s Fastest-Growing Scotch SKUs

  1. Highland Park 12 Year Old Single Malt Scotch Whisky 
  2. The Balvenie 15 Year Old Sherry Cask Single Barrel Scotch Whisky 
  3. Johnnie Walker Aged 18 Years 
  4. Glenmorangie 18 Year Old Single Malt Whisky 
  5. The Macallan Double Cask 12 Years Old 
  6. The Glenlivet 18 Year
  7. Glenfiddich Bourbon Barrel Reserve 14 Year
  8. The Glenlivet 15 Year
  9. The Macallan Triple Cask Matured 15 Years Old
  10.  Caol Ila 12 Year Single Malt Scotch 

A High-Priced Sales Driver

Though overall Scotch sales have grown more slowly than those of other whiskies, the category is experiencing strong premiumization, which is a positive for retailers. “Despite the slight loss of share this year, Scotch remains an essential category within whiskey, the top-selling liquor category on Drizly, for retailers to invest in,” says Paquette. “Scotch has an avid fan base among consumers.” The average price point alone means that even if sales volume lags behind lower-priced spirits, premium Scotch whiskies are important margin drivers.

This is especially true as retailers move into the holiday season, as Scotch was the third-most gifted subcategory in Q4 of 2019, accounting for 12.2 percent of all gift orders. “Gifting is an important factor for retailers to consider when planning their Scotch selection,” says Paquette. “We anticipate that in 2020, gifting—particularly in online orders with social distancing protocols in place—will play an even bigger role in Q4 than years prior.”

Expect a continued consumer interest in age-statement whiskies as well as limited-edition releases. “Innovation as a whole will continue to drive the category as whisky fans and adventurous consumers are always seeking new and different whiskies,” says Giardina. 

Looking ahead, Brey sees Scotch potentially becoming part of the growing cocktail culture as well. “Peated single malt Scotch whiskies are seeing special interest from bartenders due to their smoky flavor profiles, which work well in cocktails by adding an extra element to a drink,” she says.

The growth of other whiskey categories may also indirectly boost Scotch down the line. “Consumers’ palates have evolved,” says Brey, “which means there’s a lot of exploration among all types of whiskies, and a transcendence of categories.” 

Giardina agrees. “The rise in popularity of segments like American, Irish, and Japanese whisk(e)y has helped the Scotch whisky category because it has helped introduce new drinkers to the whiskey category as a whole,” he says, “and those people, at some point, may be open to enjoying Scotch whisky.” 

As whiskey as a whole continues to grow in its position as Drizly’s top liquor category, Scotch can only benefit from its continued positioning as a premium whisky with an even more diverse selection of single malts. “Scotch whisky, and more specifically, single malt Scotch whisky, is one of the most profitable per-bottle sections of a retail store,” says Giardina. “Having a good Scotch whisky set is critical for retailers if they want to optimize the profit delivery of their store.”