2019, 2020 & 2021 Releases | Various ABV

Diageo and the peated malt bubble.

We talk about the whisky bubble frequently, cynically and, above all, speculatively.

There are some serious lessons to be learned from the past and, as the saying goes, those who ignore history are doomed to repeat it. I hope to see the restructuring of the whisky industry in my lifetime, mostly so that some of it might become affordable enough at the high-end to actually buy and drink some spiffing bottles. If and when that happens, many of us will be deeply vindicated, but until then it’s a patience-wearing waiting game. A bubble that is, however, right this moment in the midst of bursting is that of peated malts, by which I mean both the style of whisky and the grain itself. Beware, as is common in these articles much speculation lays ahead and personal opinions abide; take many grains of salt to all places below.

Diageo has obviously been a driving force in whisky for a long time, and they’re only looking to get bigger. The acquisition of Balcones has been a major point of discussion in recent times, though that’s hardly the full extent of Diageo’s plan for global drinks domination. Their plans for the Eryuan malt distillery in China is probably indicative of serious intent to further capture Asian markets in the coming years, and their operations in the Yunnan province may open up dialogue for other Diageo controlled whisky business in China. Diageo have also invested in other international whisky brands such as Australia’s Starward, helping them expand and extend distribution, and this year announced a major addition to the Canadian Crown Royal facilities for expanded production. We also shouldn’t forget Diageo have well-established stakes in other multinational drinks businesses- from a quick spurt of research, it appears they retain a 34% stake in the Moet Hennessy drinks division of LVMH. This latter point in particular leads us to our topic for today; Diageo’s pole position in the peated whisky industry.

Of course there are many plants in the UK and indeed around the world dedicated to malting, but there are precious few that make peated malt, and even fewer that make it in significant volumes. The major companies operating such plants are Bairds, Simpsons, Boortmalt and Crisp maltings, though it should be noted that the latter have had their production significantly diminished by a fire at their Portgordon facility from April of this year. The fifth group of maltsters is owned, of course, by Diageo.

Controlling the Burghead, Glen Ord, Roseisle and Port Ellen maltings gives Diageo a level of end-to-end production control unrivalled by any other company operating in the Scotch whisky industry. This doesn’t necessarily cause any major issues for the wider industry aside from potential arguments about anti-competitive economies of scale, but not being anything like an economist I’ll stay well and truly out of that debate. No, the problem we’re seeing now is much more direct and twofold in nature.

First, they’ve announced the restriction of malt supply to non-Diageo invested distilleries from Port Ellen maltings from 2023 onwards and may have to deny malt access outright from 2024. Second, there are rumours circulating that Diageo plans to pull Caol Ila casks from the open cask market, cutting off indie bottlers’ supplies.

To the latter of these alleged issues, the impact will be straightforward; indie bottlers would have to rely on the availability of other peated malts and previously acquired stock for their blends and single malt bottlings.

Considering the number of Caol Ila and “Secret Islay'' bottles on the market, this restriction will represent a significant contraction of the peated malt wholesale cask market which is probable by simple supply-demand action to increase the value of present stocks and other peated malts. Considering the issues and squeezed margins indie bottlers are already having with cask prices due to inflated interest in the market (particularly the utterly unprecedented degree of direct sale of casks to private individuals) this cost can only be transferred to bottle pricing for folks like you and I to stomach.

Likewise, the issue of peated malt restriction from Port Ellen has serious implications; swathes of distilleries (including some on the mainland) rely on Port Ellen maltings for most if not all of their peated malt.

The exceptions on Islay are Bruichladdich and Bowmore who source their malt from the mainland (and in Bowmore’s case their own floor maltings of course) however that means that the infrastructure for importing/exporting malt by ferry is already under significant load. If the Islay distilleries are unable to build their own malting facilities, the only refuge will be to import malt from the mainland at a higher cost. That is, assuming that mainland maltings can even satisfy demand; Bairds are in the process of expanding their malting facilities and Simpsons are seeking approval to do the same in order to keep up with currently projected demand, and there are further rumours that contracts for malt supply to major distilleries are already being turned down.

Adding to the issue, the ferry system is likely incapable of supporting this import model’s growth, meaning added infrastructure would be required in the shipping sector. Furthered again is the need for increased supply due to the imminent production of Portintruan and Port Ellen over the next two years.

While Portintruan are building their own floor maltings, the capacity to satisfy demand in the case of fiscal success is limited; like Kilchoman and Bowmore, only so much malt can be made with the relatively inefficient floor malting process, so it’s unlikely to satisfy production schedules for very long. Of course, if distilleries are flow limited at the raw ingredient stage then production will be limited everywhere downstream. If distilleries are forced to reduce production, the logical decision would be to limit outbound whisky to the avenues with the highest returns - official bottles of single malt with high profit margins. Of course, if that does become the case then we see not just independent bottlers facing stock shortages for blends, but major companies with distillery assets too. The exception in this case would be the blends made by Diageo, which positions them nicely to occupy a greater market share of the blends category.

All in all, it’s just a bit messed up. We haven’t even delved into the barley shortages and resulting price hikes Europe is experiencing due to the persisting conflict in Ukraine, and frankly the fact that said conflict can still even be written about is abhorrent. This isn’t the mode of communication to be delving into such matters, and I have no energy for the various debates about virtue signalling vs basic human decency, but when the impacts are so wide and varied it’s hard not to touch on it. Anyway, back to Diageo.

No matter how we slice it, the industry is in a bit of a pickle. Demand for peated whisky has never been higher. Either Diageo has chosen not to expand the Port Ellen maltings to better position themselves in the market, or they’ve been prevented from doing so by stockholder interests or by governing bodies. Considering the recent building approvals for Ardnahoe and Portintruan, as well as the importance of peated malt supply to distilleries for the various Hebridean economies, I’m guessing it’s not the latter.

Through all of these voluminous issues, Diageo remains on many enthusiasts’ naughty steps due to their resoundingly whacky price rises. The topic is well covered (particularly by our fine leader Wally) so I won’t dwell, but it bears repeating. Among these unfortunate price increases are the Lagavulin 12CS releases.

Review 1/3

Lagavulin 12yo Cask Strength, 2019 Special Releases, 56.5% ABV
AUD$180 / £100 occasionally available

Lagavulin has been the drinks giant’s crown jewel for many years now. From the first episodes of Ron Swanson’s endorsement in Parks & Recreation, the distillery’s fan base has grown at a startling rate. I don’t mean to imply the inimitable Duke Silver was responsible for much at all of the brand’s increased interest, but I think it’s a fair time-stamp for roughly when the surge began, and ultimately the extra coverage from Nick Offerman’s “Manly man” character probably didn’t hurt. Of course I can’t complain about the newbie influx of attention spiking prices since I only started drinking whisky in 2020, however I’ll certainly pile on to the list of whingers frustrated by Diageo’s capitalising of that influx. I know, growth expectations, stockholder meetings yada yada, whatever; it’s entirely possible to run a profitable business and respect your customer base. Just ask J & A Mitchel & Co.

Though joining the cacophony of complaints, I have it pretty good. Thanks to connections in the drinks industry, I’ve had the privilege of purchasing all three vintages of this malt for somewhere between $180-190 AUD, which currently translates to about a £100. At that price I’ll probably keep buying these releases, but if it jumps to more than $200 by any significant amount in the next few years I’ll be hitting the eject button like many other people. Having suffered through my butchering of basic economic principles applied to simple situations, let’s try some whisky.

Nose

Just a wonderfully lean profile. Beautifully and intensely ashy, both wood and cigar, then coal dust, a wee touch of bitumen and good heavy petrochemicals, BBQ char, lemon oil and juice squeezed over various fresh sea molluscs (sans the salt of course), some tar with brominated phenols, light florals and garden herbs with some mild green peppercorn and an underlying pilsner malt sweetness. The oak is almost totally subtractive and interactive thus far, acting only to prevent any overt sense of youth.

Palate

Lean green smokin’ machine. Immense ashes, crisp malt, the synonymous lapsang souchong (yes, I do drink the tea on a regular basis), an almost charcoal burnt quality to the smoke with a pleasantly faint bitterness. The peat is almost taking on the effervescent citrus mouthfeel which we normally expect to see in Islay whiskies about twice this age- excellent but baffling. The malt is bold and just a little caramel oak sweetness does slip in, but it’s but an accoutrement to the brilliant phenolics on display; just stunningly smoky and lingers on ristretto and ash.

The Dregs

Aside from the phenolics usually being punchier, it’s a richness in the malt character that usually distinguishes Lagavulin from Caol Ila for me. There’s a sense of body, though not necessarily texture, which makes Lagavulin feel a bit deeper. To reference a previous article, the guitars feel double tracked. Even in this flight, the 2019 has a particular fullness, as well as feeling slightly more mature; that finish really takes it up a notch. It’s been a long time since I tried these in a blind flight and I’m not sure I could pick them all out correctly again, but I’d like to think I might at least get this one. It’s on the high end of its score.

Score: 8/10 TK

Review 2/3

Lagavulin 12yo Cask Strength, 2020 Special Releases, 56.4% ABV
AUD$180 / £100 occasionally available

Nose

It’s worth noting we’re pretty close in profile between all three of these Lagavulin; the tree is the same, it’s just which decorations we hang on it! Anyway, a notch sweeter and fruitier by comparison to the 2019, the peat being less overtly smoke driven too. Hints of sweet floral perfume and the citrus has just a touch more ripeness and perhaps some lime/grapefruit tropical notes blended in. The malt is also slightly dialled up with just a touch of sourdough youthfulness. Otherwise we’re pretty similar- sooty, charred, moderate bromophenols and a slightly softer feeling of the coast.

Palate

Similar to the nose, perhaps exhibiting just a whisker more youthfulness with a slight fresh mown lawn sweet grassiness. Again though, the peat is centre stage - read back the nose and trade the sourdough character for a smidge of mezcal stitched into the smoke and citruses. Mild.

The Dregs

It’s hard to tell if there was a varying degree of cask interaction, some difference in distillate profile, a different approach to blending or some combination thereof. Who knows and who cares? The quality is still very good and though I slightly prefer the 2019, it’s completely personal. Another great vintage, another good score on the very high end of its range.

Score: 7/10 TK

Review 3/3

Lagavulin 12yo Cask Strength, 2021 Special Releases, 56.5% ABV
AUD$190 / £125 still available

Nose

Pulls back away from the mild fruitiness of the 2020 yet also doesn’t quite have the phenolic impact of the 2019. There’s also perhaps the faintest degree of dirtiness here - a slight fermentary and lanolin-esque note that leans toward, say, a very clean Longrow. Again though, we’re seeing dry citrus and herbes de provence with some lighter petrochemicals and that beautifully dry, lean and coastal smoke.

Palate

Consistent with the nose. Still a pretty clean, phenolic and dry peat profile with some added smoked almonds and crustaceans, but there’s again just a sliver of lanolin and fermentary funk giving some extra complexity. Smoked silage at a distance? The halogenated phenols also have something more like walking into an indoor pool room than disinfectant; perhaps a higher ratio of chlorophenols? A nice tone of burnt butter and again plentiful terpenic herbs and green citrus oils with hints of olive leaf extract.

The Dregs

I don’t think I could fault anyone for picking any order of preference among these three, and certainly I wouldn’t wager on anyone picking them out of a blind line up with any great consistency, myself firmly included. They’re all very good and justify the prices paid for them, but not by a huge margin. The 2020 only slightly dipped under an 8, this 2021 just hangs in above the border thanks to the intriguing funk and the 2019 sits very comfortably in the top half of the mark’s range. Splitting hairs I know, but what else are these styles of vertical for? As much as Diageo may be on many of our collective naughty steps, caps ought to be doffed and game should recognise game - they know how to make some stonking malts.

Score: 8/10 TK

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