Glenmorangie growth highlights reason for LVMH bid

Total cased volumes sales for the six months to 30 September were up 30 per cent, with the three premium malt brands Glenmorangie, Ardbeg and Glen Moray driving the increase with gains of 11 per cent, 27 per cent and 52 per cent respectively. Value sales of cased whisky (as opposed to bulk sales) were some 23 per cent ahead at £28.7 million.

The company said that the Glenmorangie brand had consolidated its position as the UK malt market leader (having taken over from Glenfiddich in 2003) through increased marketing investment. A new television advertising campaign highlighting the Wood Finish range (whiskies 'finished' in port, sherry, burgundy and Madeira barrels) helped maintain consumer interest in the brand, and further benefits are expected in the second half following a pre-Christmas campaign focusing on the 'giftability' of the whisky.

For the flagship Glenmorangie brand, US sales were up 15 per cent with additional investment in marketing helping the brand grow at three times the rate of the buoyant US Scotch whisky market. Canada, Duty Free, and Asia were also strong markets for the brand.

While marketing investment was the secret of Glenmorangie's success, for the Ardbeg brand it was more a question of new product development. While the standard 10-year-old variety posted an impressive 30 per cent increase in sales, it was the new Ardbeg Uigeadial premium variety (selected from the best casks of 1990 and 1993 and sold in the UK, US, Italy, France and Germany only) which drove much of the Islay whisky's growth, outperforming the company's expectations in its first year.

Further growth is expected in the second half following the launch of Very Young Ardbeg, a limited edition brand which is the first whisky produced by Ardbeg since Glenmorangie took over the distillery in 1998.

Exceptional costs related to the imminent takeover of the company by LVMH meant that pre-tax profits were reduced to £4.71 million during the half, although this was still 12 per cent higher than in the previous year, despite the continued investment in brands - underlining the cash-generating qualities of the French luxury goods group's new acquisition.

LVMH has already said it intends to run Glenmorangie as a stand-alone unit (a decision which played a major part in its successful bid for the company, as rival Pernod Ricard would probably have integrated the Scotch maker with its other whisky units), and given the current management's excellent performance in the first half, this looks like the right decision.But with a new focus on building the brand's international reputation - compared to domestic rival Glenfiddich, Glenmorangie is a relative unknown on the world stage - some of the company's minor brands may have to be sacrificed, despite solid growth.

Martin's Deluxe, for example, has a strong presence in the Portuguese market and grew its first half shipments by 24 per cent, but it is blended whisky (albeit a premium one) and not a single malt, and as such fits less comfortably in the portfolio of a luxury goods group.