Oldest distillery on offer
Edrington selling two whisky brands to focus on premium market
Edrington has put its Cutty Sark and Glenturret brands up for sale in order to focus on its top-of-the-range whiskies and other spirits.
Chief Executive Ian Curle said that the proposals will see more investment in supporting the long-term growth of the company’s premium portfolio including The Macallan, The Famous Grouse, Highland Park, The Glenrothes, and Brugal Rum.
“Premium spirits is the fastest growing area of the spirits market. Focusing our resources and investment on the brands best equipped to compete powerfully will help Edrington to capitalise on the long term prospects from premium spirits,” he said.
The sale process starts this summer and is not expected to involve any redundancies with an anticipation that all 31 employees at The Glenturret in Crieff, Perthshire will transfer to a new owner. Edrington will consult with these 31 employees about this transfer.
The Glenturret is Scotland’s oldest Single Malt Scotch Whisky distillery and the site includes the visitor centre for The Famous Grouse. A high level of interest is expected from prospective purchasers.
Cutty Sark has been owned by Edrington since 2010 and enjoys leading positions in Spain, Greece and Portugal. It is blended and bottled at Edrington’s Great Western Road facility, accounting for around 10% of volume output at the site.
Graham Hutcheon, group operations managing director, said the impact can be managed over time, adding: “Our intention is to offer blending and bottling facilities to a new owner.
“If that should not prove appropriate we do not anticipate any compulsory redundancies and would endeavour to redirect our people to the dynamic premium developments at Great Western Road.”
Edrington said its new £500 million Macallan distillery and visitor centre has enjoyed a successful opening month and that the brand has been a key contributor to another year of growth for the company.
The company’s 2020 strategy has been supported with higher levels of investment in brand advertising, increased innovation, and greater focus on consumers.
However, the blended Scotch market “continues to be challenging”. The Famous Grouse’s contribution slid by a “a low single figure”, though it strengthened its leading position in the UK, delivering an all-time high market share.
Group profit before tax for 2017/18 came in 3% higher at £194.7 million on a 7% rise in core revenue, with 76% of core contribution for the year generated by premium brands.
Entrance to new Macallan distillery (photo: Terry Murden)
The Macallan delivered another strong year of sales volume and revenue growth, enabling higher levels of brand building investment whilst delivering 7% contribution growth.
The brand strengthened its leading position in some of the world’s most significant Scotch Whisky markets including The USA, Taiwan, and Japan. The Macallan will embark on its first global advertising campaign in the autumn with an £11m budget.
Highland Park benefited from a 23% increase in marketing investment, which flowed through to contribution growth of 15%.
It was a year of transition for The Glenrothes Single Malt as it expanded its distribution to 30 new markets. A new range and packaging are on track for launch later in the summer.
Edrington said it continues to be well-positioned for growth in Tequila, the largest spirits category by value in the US. The super-premium segment is in double digit growth and Edrington’s partnership with Tequila Partida has benefitted from the strength of The Macallan in this key market.
Commenting on the 2018 results, Mr Curle said: “2017-18 was a strong year of growth and increased investment for Edrington.
“Economic and market developments remain encouraging in the near term. All regions are experiencing an upturn in economic growth and Scotch whisky exports are also in growth.
“The premium segment of Scotch Whisky and other spirit categories is the fastest growing, reinforcing Edrington’s emphasis on premium brand building.
“While consumer trends are encouraging, the geopolitical context, including Brexit, remains uncertain. Scotch whisky is a robust and successful industry but it does face increasing competition from other authentic spirit categories leading to the 400+ trade barriers faced currently. Against this backdrop we want our governments to create a climate where economic development and growth is actively encouraged and rewarded.
“Despite ongoing geopolitical uncertainty we are confident about the medium and long term prospects for the business and will continue to invest in our people, brands, and processes.
“With its premium brand portfolio, proven strategy, and management capability, Edrington remains well-positioned to deliver further growth.”
Core revenue (Revenue from branded products at constant currency) of £706.7m, +7% versus 2017
Brand investment of £125.7m, +5% versus prior year
Core contribution of £210.5m, +7% versus 2017
Profit before tax £194.7m +3%
Profit for the financial year of £86.6m, -5% versus 2017 as a consequence of a one off tax credit in the prior year