Jameson Chases Jack Daniel’s Amid Irish Whiskey Revival

At a Jameson factory dating from the 18th century near Ireland’s Cork, the world’s biggest Irish whiskey producer has staked its future in a new facility with three shiny stills used to produce spirits.

The distillery is key to achieving Jameson’s ambition of doubling sales to more than 1 billion euros ($1.4 billion) by 2020. Owner Pernod Ricard SA says it provides capacity to spread Irish whiskey globally and will help close the gap with American whiskey behemoth Jack Daniel’s.

“Our long-term goal is definitely to be seen globally as a brand as big as Jack Daniel’s,” Thierry Billot, head of brands at Paris-based Pernod, said in an interview at Jameson’s new distillery in Midleton, just outside Cork. “Growth in the U.S. will represent a significant part of it -- we’re still far behind it there. We also need to open Asia.”

Founded in 1780, the Pernod brand is more than 80 years older than its U.S. rival, yet has a way to go to even reach the same league. Jack Daniel’s sold 13.2 million 9-liter cases last year, according to researcher International Wine & Spirits Review, while Jameson shipped 4.3 million. Still, the latter is growing faster both in volume and value terms, and with Irish whiskey demand outpacing the growth of the international market for all spirits, Pernod sees a chance to start bridging the gap.

Younger Consumers

“While they’ve largely focused on the U.S. and South Africa, it’s got huge untapped potential in other countries,” Trevor Stirling, an analyst at Sanford C. Bernstein in London, said of Jameson.

Catching up will involve appealing to younger consumers on a wider international scale, Billot said. It will also mean investment: Jameson last year completed a 100 million-euro plan to double the capacity of the Midleton distillery, and spent another 100 million euros on a site to mature the spirit.

“It’s got the potential to catch up,” said Spiros Malandrakis, an analyst at researcher Euromonitor in London. “Jack Daniel’s is dealing with lots of whiskey rivals at the moment, including craft brands, and hasn’t got time to quash Jameson when it’s also benefiting from the rising tide of huge growth in demand for whiskey generally.”

To consolidate its leadership of the U.S. whiskey market, Jack Daniel’s owner Brown-Forman Corp. last year said it will invest more than $100 million to add stills and barrel warehouses. Jack Daniel’s has about 12 percent of that market compared with Jameson’s share of 3.7 percent, according to IWSR.

Market Share

Pernod shares were little changed at 88.59 euros as of 4:22 p.m. in Paris, valuing the distiller at 23.5 billion euros. Brown-Forman shares were also little changed at $93.66 in New York. The company has a market value of $19.8 billion.

Jameson has been under Pernod’s aegis since it acquired the brand’s owner Irish Distillers in 1988. Growth has been rapid: the 4.3 million cases sold last year compares with 466,000 at the time of the acquisition. It’s a far cry from the 1970s, when Jameson’s then-owner was one of the only companies making Irish whiskey following a slump in demand.

More recently, the spirit has been growing ahead of the international market -- sales increased 7.5 percent on average a year from 2002 to 2012, compared with a 2.9 percent overall growth rate for all spirits. Controlling 68 percent of the Irish whiskey market, Jameson accounted for most of that.

Pernod needs a boost after cutting its forecast for profit growth in February, weighed down by declines in China, and sales of its Top 14 brands slid 1 percent in the first nine months of the year.

Ginger Ale

To maintain its momentum, Jameson is boosting its focus on developing countries such as Kenya, Brazil -- where Scotch is popular -- and Japan. In the U.S., its largest market, Jameson is adding salespeople, throwing parties to promote the brand, and entertaining drinkers with music festivals.

The efforts to raise the brand’s profile are paying off, with Jameson being namedropped by pop stars including Lady Gaga and Rihanna, who urges listeners to “let the Jameson sink in” in her hit song “Cheers (Drink to That).”

A smoother taste than most Scotch whiskies may give Jameson an edge when it comes to attracting female drinkers. And the suggestion to serve it with ginger ale and a squeeze of lime may appeal to both women and new customers in emerging markets, according to Melissa Earlam, a UBS AG analyst.

One thing Jameson says it won’t do is add flavors to its whiskey like Jack Daniel’s, which introduced a honey-tinged version in 2011. That’s led some analysts to question whether the Pernod brand can continue growing at the same pace as the last few years. Nomura analyst Ian Shackleton still sees Jameson as a “fabulous franchise.”

“It’s become a brand that transcends its category, and that’s a fabulous place to be,” he said.

(Updates with Brown-Forman shares in ninth paragraph.)
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