World By Chris Middleton / February 5, 2020 Only a few Australian whisky brands have crossed the Pacific to insinuate themselves into the world’s biggest and most competitive whiskey market. After more than half a century absence, Australia’s back serving up the next round of whisky. Since Prohibition, Australia has exported about 150,000 cases of whisky to America. While America shipped over 65 million cases of bourbon to Australia ,with another 250 million bourbon RTD cases bottled in Australia using bulk bourbon. Bourbon has been Australia’s favourite spirit for twenty years and Beam the top-selling spirit brand. Why only a trickle of imports to America? This one-sided trade can be slated home to Australia’s relatively small whisky industry and production declines since the 1960s. America also extinguished demand as drinkers abandoned lighter-bodied whiskeys, eventually all whiskeys in the 1970s, due to generational vagaries of fashion and flavour predilections. A History Lesson In April 1934 Australia’s first whisky shipment headed to America triggered by the lack of whiskey reserves after Prohibition. United Distillers sent over 225,000 proof litres of Old Court malt whisky to California and New York. Old Court was a five-year-old malt blend, distilled by three amalgamated malt distilleries in the Melbourne area. It had been Australia’s leading whisky brand since 1925. The Federal Distillery in Melbourne (one of the malts in the blend), was at the time the world’s largest malt whiskey distillery with a mash tun of over 200,000 litres. The whisky used local Cape and Chevelilier malted barley, matured in specially ‘sweetened’ new American oak casks so as not to overwhelm the delicate flavour compounds of pure malt new make. The bulk of the whisky was shipped in hogsheads to wholesalers for blending. Thirteen years of Prohibition shifted America’s drinking habits. Whiskey stocks fell from 70 million gallons to 16 million by the end of Prohibition, including 11 million gallons of new whiskey distilled since 1930. The pre-Prohibition whiskey held in bond was mostly medically prescribed, some stolen. The bulk of consumption was illicit whiskey, either imported light blended whiskeys from Canada, Scotland and Ireland, or locally made moonshine usually flavoured and coloured to resemble whiskey. Much of the bootleg spirit drunk was young and poorly distilled, spawning a cocktail culture to ameliorate the fiery taste and unpleasant congeners left in the spirit. Starward Nova is one of the newer crop of Australian whiskies (image via Starward) The first few years after Prohibition, consumers were limited to mostly light whiskey (young of age, re-coopered barrels, even 12-month bourbons) with one hundred and eight whiskey distilleries rushing to meet demand, supported by hundreds of rectifiers. The 1930s whiskey market divided into two categories: heavy-bodied and light-bodied whiskeys. Light-bodied consisted of imported blends of Scotch, Canadian and Irish, and classes of domestic American whiskeys such as ‘light whiskey’ (using re-coopered casks), ‘blended whiskey’ (usually only with 20 to 25% young straight as the base), and ‘whiskey spirit’ (containing a minimum 5% straight whiskey). Between Repeal in December 1933 and 1937, the industry distilled over 700 million proof gallons, with more heavily-bodied whiskey representing 85% of sales made up of straight and blended bourbons and ryes mostly over two years old. Most heavy-bodied whiskeys were relatively young, with two distilling leviathans, National and Schenley, controlling 79% of whiskeys four-years and older. Old Court made only one shipment before they discovered Britain had huge quantities held in bond, and along with Canada’s large outputs depressed demand for light-bodied whiskeys. Mid-1936, the Government passed new product identity standards for classes of domestic and international whiskeys. Had Old Court continued to ship Australian whisky, another class could have joined the three imported designations of Scotch, Canadian and Irish whiskey. It would have made COLA labelling approvals with the TTB easier for successive Australian whiskies seeking registration. United Distillers made another attempt to enter America in late 1962. Corio blended whisky superseded Old Court in Australia as the market leader in 1935, and their new formulation developed in 1960 presented them a deluxe export variant called Corio Black Gold. The combination of weak distribution, underinvestment and poor product acceptance by American consumers resulted in Corio Black Gold performing badly and quickly withdrawn from sale. Another Melbourne distillery, W & A Gilbey’s also formulated a whisky for America. They also capitalized on the new 1962 bilateral trade agreement, which permitted American whiskey to re-enter Australia after a half-century absence, with Daniel’s (Tennessee whiskey), Beam, Ancient Age and other bourbons entering transnational distribution contracts. Beam bourbon contracted Gilbey’s to bottle in Melbourne with a reciprocal deal in 1966 to test-market Black Opal Australian whisky in Hawaii. The following year Black Opal ‘rare gem of a whisky’ was launched on the mainland. It was a customized brand and formula designed to appeal to the American drinker at 43% ABV, a 5-year-old blend with a high proportion of South Australian Milne malt blended with Melbourne distilled grain whisky. In the mid-1960s, the American whiskey market was enjoying growth, with lighter-bodied whiskeys growing in popularity. Heavy-bodied straight whiskey had shrunk to 38% of whiskey sales, American blended held 36% and imports, mainly Scotch and Canadian, had grown to 16%. Debuting in the early 1960s was a blended American whiskey called Seagram’s Calvert Extra engineering a new light segment they christened ‘soft whiskey’. Matured in re-coopered casks this whiskey style would later birth the new ‘light whiskey’ class in July 1970, designed as a whiskey substitute to prevent consumers moving to white spirits: notably white rum and vodka, led by Bacardi and Smirnoff. Whether futuristic Black Opal lacked product appeal or the marketing investment proved insufficient, it faced the same fate as the previous United Distillers brands. Within 18 months it was withdrawn. Gilbey’s went back to the drawing boards. Gilbey’s new Australian CEO was an ex-Beam executive, who embarked in identity theft by creating a new whisky brand for America called Ned Kelly Outlaw Australian whisky. It was wrapped in a large paper label with bullet holes to see the whisky inside. If you’ve not heard of the notorious Ned Kelly, he was a 19th-century bushranger and criminal hanged for multiple homicides, including a policeman. Unbeknown to Gilbey’s, the Kelly gang while hiding to avoid police capture intended to make illicit whiskey from their paddock of winter barley. The gang fled their bolthole before Kelly could start this endeavour for which Australia can be thankful, as he planned to use cast-iron stills, the most unpalatable metal for distillation. Sullivan’s Cove represents another in the newer generation of Australian whiskies (image via Sullivan’s Cove) Jim Beam was the distributor forecasting to sell 100,000 cases in four years. The timing was unfortunate as the American market peaked in whiskey consumption in 1971. Ned Kelly became a victim of a massive downward cycle in the whiskey market. So too, the latest distilling nation, Japan who exported 2,000 cases of Suntory to America in 1968. Over the next thirty years, the American whiskey market fell by 70%. More Recent Times The Australian whisky distillers were also taking a drubbing at home. Production volumes collapsed by 90% through the 1960s and 1970s. The lowering of international tariffs with increased production from Scotland and America flooded the market, especially when they dumped excess stocks due to their declining domestic sales. By 1980s the two major distilleries in Australia ceased production with only two distilleries operating, one in the Barossa Valley and another in Sydney. When these distilleries closed by the mid-1990s, the first nano-craft distillers mushroomed in Tasmania and Victoria. Leap forward a quarter of a century, there are over three hundred distilleries, with over one hundred making whisky in their portfolio; with only a handful of the larger distilleries responsible for 75% of the sales. Whisky has been the leading spirit category in Australia since the 1880s; however, the total whisky market has been in volume decline for several years. Local distillers hold about 1.5% volume share exclusively in the premium and ultra-premium price segments. The high cost of goods, both up and downstream, with variable production standards, prejudices small producers with little or no efficiencies. Larger producers must look to export markets for sales expansion, some to Asia, others Europe and America. America has encouraging trends for Australian whisky; although the high costs of entry, intense competition and complexity of channels and regulations make America a tough market to establish a consumer beachhead. That’s because there’s formidable domestic competition delivering high quality, low priced whiskeys from the major league producers, plus over a thousand variable craft whiskey producers, and innumerable wholesale and house labels. Then there’s Canada, Scotland, Ireland and the rest of the world fighting for shelf space and attention. The encouraging trends are driven by whiskey’s redux, new Millennial cohort and the cocktail phenomenon. Female participation has doubled in a generation, and sensory expectations are rapidly changing too. Bourbons and ryes over the past decade have recorded strong growth, with almost twenty per cent of Scotch whisky imports flavoursome malts. As drinkers become more experimental, tempted by new flavor nuances, and drawn towards brands with interesting backstories, this gives hope to meaningfully differentiated whiskeys, including those from Down Under.