London, Oct 9 - The American whiskey market may be back on a roll. The industry which produces Jack Daniel's and Jim Beam is seeing sales flatten in its domestic market but overseas business is booming and driving overall growth.
These two top brands already have half or more of their sales overseas and are dragging the rest towards export markets such as Western Europe and Australia where annual sales volume growth has averaged nearly 6 percent over the last 10 years.
Both compete head on with other Scotch, Irish and Canadian whiskies, but have done well as Brown-Forman Corp's <BFb.N Jack Daniel's became the world's largest selling single whisky brand four years ago overtaking Diageo's Johnnie Walker Red.
"Worldwide American whiskey has the opportunity to be the fastest growing in overseas markets. One of its advantages is its mixability compared to scotch whisky," said Brown-Forman's Chief Executive Officer Paul Varga.
In the economic downturn, Varga has seen some downtrading to cheaper brands, but whisky's heritage and taste protects it from the worst of the downtrading seen in the vodka sector.
"The summer months have seen some easing of industry destocking while there is still some trading down," he said.
The current downturn comes after a decade of growth which followed sliding volumes in the 1990s, and the domestic market has gained nearly 2 million 12-bottle cases since 2000 as whiskey like other spirits gained at the expense of beer.
The U.S. whiskey market was worth 28.3 million cases in 2008, over twice the size of the French cognac market at 12.4 million, but well below the scotch industry at around 100 million. This U.S. industry takes in two Tennessee whiskey distilleries and around 10 bourbon distilleries in Kentucky.
The market is dominated by Jack Daniel's at 9.5 million cases and Jim Beam at 6 million, which make up 55 percent of U.S. industry volumes, and on the export front the former started selling more overseas two years ago and now sells 4.8 million cases outside the U.S. as it pushes into the big export markets of Britain, France, Japan and Australia.
"We are a near-10 million case brand, but could be a 17 million brand with more warehousing," said master distiller Jeff Arnett at the Jack Daniel's Lynchburg distillery in Tennessee.
North of Tennessee, Jim Beam is the world's No 1 Kentucky bourbon, owned by Fortune Brands Inc, selling its 6 million case sales split equally between the U.S. and its big export markets especially Australia and Canada.
Around 12 years ago Jack Daniel's first moved ahead of Jim Beam in volume terms, but Beam is fighting back as it is the first to move into flavoured whiskeys, so popular in the vodka market, with its new Red Stag bourbon infused with black cherry.
This new product has sold 90,000 cases since its launch in June and is attracting new drinkers not seen as typical bourbon consumers. It is Fortune's first major launch since Jim Beam Black Label over 10 years ago, and executives say if U.S. sales continue strong, it will look at the overseas market.
At Brown-Forman, Varga says Jack Daniel's has not launched a new pure whiskey product for 12 years, and its flagship No 7 brand accounts for 97 percent of Jack Daniel's volume.
In its last quarter, (May-July) the Jack Daniel's family of brands, which includes strongly-growing ready to drink products, saw sales up 8 percent at constant currencies, and Varga says the sales mainly came from volume rather than higher prices.
Jack Daniel's annual 9.5 million case sales dwarfs its Tennessee cousin, George Dickel owned by Diageo at just 170,000, which is largely sold in south eastern U.S. states, but the small distillery is not overawed by its bigger cousin.
"We hand-craft whisky the traditional way, taking a little longer to produce a smoother whisky," said master distiller John Lunn.
The two Tennessee whiskeys differ from bourbons in that the distilled liquid is allowed to mellow by filtering it through over 10 feet of hard sugar maple charcoal, and while most U.S. brands spell whiskey with an e, some such as Dickel and Maker's Mark bourdon still use the scotch spelling without an e.
Diageo, the world's biggest spirits maker with brands such as Johnnie Walker scotch and Smirnoff vodka, is a relatively small player in the U.S. whiskey market with Dickel and Bulleit, its fast-growing small-batch bourbon.
Bulleit is produced for Diageo under contract by Kirin's Four Roses distillery, and family member Tom Bulleit said the brand has probably the most rye grain used of any U.S. whiskeys, which tend to use largely corn, to give it a dry taste similar to scotch whisky. It sells around 75,000 cases a year.
Another product seeing strong growth is Brown-Forman's Woodfood Reserve bourbon, selling 145,000 cases a year and master distiller Chris Morris says although the U.S. makes up 90 percent of the market, new export markets are opening up in Britain, Canada, Australia, France and Germany.
Fortune's Maker's Mark has seen 10-percent plus volume growth over the last few years and is up to nearly 900,000 annual cases, and exports are growing for this sweeter bourbon which uses soft winter wheat in its grain mix.
This growth has pushed it into the top six U.S. whiskeys which as well as Jack Daniel's and Jim Beam include Evan Williams from privately-owned Heaven Hill, Brown-Forman's Early Times, Campari's Wild Turkey and then Maker's Mark.