Irish whiskey is one the fastest growing spirit categories in the world, prompting increased investment from drinks giants Pernod Ricard (NASDAQOTH: PDRDY) and Beam (UNKNOWN:BEAM.DL).
With a growing numbers of drinkers around the world developing a taste for brown spirits and whiskey in particular, Irish whiskey's popularity is surging. But it is the U.S. market that is truly driving growth, with revenues reaching $415 million last year, up more than 460% since 2002, according to the Distilled Spirits Council of the United States.
While all major Irish whiskey brands have shown growth in the US, Pernod Ricard's Jameson is the clear leader, holding a massive 70% of the market. Jameson's sales have jumped from a mere 466,000 cases in 1988, when Pernod acquired Irish Distillers, to over 4 million last year.
Other major players include William Grant's Tullamore Dew, Diageo's (NYSE: DEO) Bushmills, and Beam's recently acquired Kilbeggan and promising newcomer 2 Gingers.
Small but growing
While Irish whiskey is still only a small player in the international whiskey market, holding just 3%, Pernod Ricard's success with the category has proven that it is a viable growth opportunity. In fact the French spirit-makers, the world's second-largest drink group by sales after Diageo, recently credited Jameon's "outstanding performance" for meeting its full-year profit in 2013 despite a slowdown in key market, China.
Jameson sales rocketed by 17%, with the whiskey reporting double-digit growth across all of its major markets. It is now the second largest contributor to group growth.
U.S. drinks giant Beam has also made significant investment in the category in the last couple of years, acquiring the last Irish-owned distillery, Cooley, in January last year, followed by an acquisition of thriving newcomer 2 Gingers in December. This has been underlined by a major U.S. marketing push of the Kilbeggan brand in March this year and an expansion of 2 Ginger's distribution across the U.S.
According to industry experts, Irish whiskey's renaissance has a lot to do with the growing interest in whiskey in general in the U.S. and Eastern Europe. With whiskey drinking on the rise, Irish whiskey's sweeter, smoother taste and competitive pricing makes it a lot more palatable for many young and first-time consumers.
Beam's 2 Gingers has also proved particularly popular with the under-served female market, rapidly becoming the second most popular Irish whiskey in the upper-midwest states where it is sold. After a nine-state expansion earlier this year, Beam recently announced plans to expand into nine more this year alone.
Coming of a small base (Irish whiskey sold only 2.2 million nine-liter cases in the U.S. last year as opposed to the overall whiskey category's 50 million), experts suggest the category still has a lot of legroom. This is due to increased investment by major brands, its accessible taste profile, and growth into new markets such as young, first-time and female whiskey drinkers.
While this is unlikely to have an impact on Diageo's impressive whiskey portfolio in the short to medium-term, it is indeed an encouraging sign for both Pernod Ricard with its market-dominating Jameson, and comparatively smaller player Beam.
Fool contributor Katie Carroll has no position in any stocks mentioned. The Motley Fool recommends Beam and Diageo plc (ADR). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.