Saturday, March 13, 2010

The Ardbeg Experiment

The Ardbeg distillery was originally established in 1815, but was mothballed in 1981. Although it reopened in 1989 in limited production, it again closed in 1996. In a very interesting move LVMH which is the holding company for Louis Vuitton, Moët et Chandon, and Hennessy, re-opened the distillery. LVMH is the world's largest luxury goods conglomerates, so they clearly had a plan with the purchase. With all of the rappers like Biggie and 2Pac rapping about drinking Dom Pérignon and Hennessy, Fergie singing about LVMH product Fendi, I am sure that LVMH is doing quite well. So what was the vision for the newly acquired Ardbeg?

First they invested in high quality management. Next they invested heavily in their internet marketing. Even today you can see how Ardbeg's web site is vastly superior to any of the rest of the Islay distilleries, selling the scotch directly to the customer, which is still a rarity. They also sell Ardbeg branded clothing from the web site, which also is unique. The Ardbeg Committee email group which allows purchase of special scotches again directly from the distillery, again by passing the resellers.

The real area of differentiation for Ardbeg has been the special bottlings. The only bottling that has a year associated with it is Ardbeg 10. The rest are blends. For far too long scotch brands have made the connection between quality and age, which is just not the best way to measure quality. Although many scotches increase in quality as they age, many actually do not such as Glenfiddich. Focusing on age increases costs since they have to be held for longer and also prevents focusing on the flavor. By focusing on flavor and blending within Ardbeg's distillery has been revolutionary in the static world of single malt scotch.

The names of these bottlings include Airigh Nam Beist, Blasda, Corryvreckan, Uigeadail, and the newly released Supernova. With the Ardbeg Committee swelling to 300,000 members these enthusiasts have made Ardbeg quite successful. When the new Supernova was released the Ardbeg website crashed.

Like other LVMH they have formed close relationships with celebrities. For scotch the biggest celebrity is currently Jim Murray with the very popular Whisky Bible. The results for making him a consultant for the distillery have paid off nicely as he in 2008 named Ardbeg 10 the best whisky in the world and the year after Ardbeg Uigeadail. This obvious conflict of interest has brought him a bit of notoriety among scotch snobs, but has clearly increased the brand's visibility.

The marketing of Ardbeg is clearly well beyond the more traditional distilleries. Recently Ardbeg 10 has increased its price and each special edition has been more pricey than the last one. Although word about Ardbeg's ascendancy has not reach the US yet, clearly this is a major brand to watch.

The rest of the distilleries are starting to play catch up. The Lagavulin Distiller's Edition is an attempt to address the Ardbeg special editions. Laphroig has increased their web presence to build a stronger relationship with their customers. They have also created the blended Laphroaig Quarter Cask as a special edition.

It will been interesting to see how the industry continues to respond to the disruptive entrance and ascendancy of Ardbeg. There are now three premium distilleries on Islay. These are glorious times for the this little island of Scotland

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