20th June, 2014 by Becky Paskin

Scotch producers have been advised to embrace flavoured whisky to retain interest from consumers and compete with overseas whisky brands.

Currently just a handful of Scotch whisky producers have developed flavoured whiskies, which under EU regulations, may not be called Scotch whisky.

But while the industry is divided over whether the addition of flavours are damaging to the quality perception of the category, analysts at Rabobank have warned producers, particularly those operating at the lower end of the price spectrum, to embrace innovation.

“Scotch producers need to become more comfortable with the idea of flavoured brand extensions,” a recent report from the analyst warned.

“These kinds of innovations are not appropriate for all brands, but for blended whisky brands in basic and premium price segments they may be necessary to retain their relevance with consumers in the face of increasing competition from other types of whiskies.”

Flavours such as honey, apple, cinnamon and cherry have proved popular with American and Canadian brands, with flavoured whiskey growing by 1.4 million cases in 2013. Traditional American whiskey grew by a comparative 1.7m cases.

US producer Brown-Forman even broke new ground this year by growing Jack Daniel’s Tennessee Honey to one million cases, making it the first flavoured whiskey to achieve the milestone.

The report warned that “chasing fads pose risks to the long-term prestige” of the Scotch industry, but pointed out that lessons learned from the wine industry also highlight the risks associated with failure to innovate.

Major Scotch distillers have started to embrace flavoured whisky already. Drambuie, the honey spiced Scotch whisky-based liqueur is arguably the most renowned flavoured whisky from Scotland having been on the global market for decades. The brand is currently up for sale by owners the MacKinnon family.

Meanwhile, Chivas Brothers has embraced the trend with the launch of Ballantine’s Brasil, a lime-flavoured “Scotch”, in December 2013. The Scotch producer even goes as far to claim flavoured whisky is a growth area for the category and “isn’t going to be a short-term fad”.

Other brands playing in flavoured whisky include Dewar’s Highlander Honey and J&B Urban Honey.

Despite the controversy over the addition of flavours to Scotch whisky, the sale of such a product is in fact perfectly legal, so long as the labelling is accurate and adheres to guidelines.

A spokesperson for the Scotch Whisky Association (SWA), said: “There is no law preventing the production of new products based on Scotch whisky. The important thing is that they are labelled and marketed in a way that clearly distinguishes them from Scotch whisky.”