Scotch Whisky Industry – Boom or Bust?


Two rather different views of the future of the Scotch whisky industry have been published recently.

The Scotch Whisky Association (SWA) is the industry trade body that represents some 90% of Scotch whisky production. It has 51 members; Bruichladdich is not one of them.   The SWA has commissioned a report which paints a very rosy picture with a particular focus on the importance of Scotch to the UK economy.

However, Ian Buxton, the well respected industry commentator and author of 101 Whiskies To Try Before You Die, (and yes, Bruichladdich does feature – here with the Laddie Ten) lays out a cautionary tale in an article published in Just-Drinks yesterday.  Check out Buxton’s concerns here: Where Next For Scotch Whisky?

The issues raised include the global political situation, pricing policy and NAS whiskies.

A trawl around the internet reveals much more information.

Scotch whisky accounts for approximately 85% of Scotland’s food and drink exports and a quarter of the UK’s overall total. It is Scotland’s second largest export earner after oil and gasIn 2013 Scotland exported whisky worthy £4.3 billion, which works out at £135 per second. This was the same as in 2012 but sales did increase slightly in volume terms by 2.3% or 1.23 billion bottles.  Blends made up 75% of sales in 2013 but single malts have been growing in popularity. Sales were up 5% and now account for roughly one fifth of the total.

Exports may be measured either by value or by volume. The US is by far the largest importer by value and its appetite for the drink is growing.

US sales were up 8% in 2013 to a record £819 million. France imported more by volume than the US but spent only slightly more than half as much – £434 million. More Scotch is sold in Franch each month than Cognac in a year. The UK itself consumes slightly less than France and unsurprisingly the bulk of the UK’s scotch whisky is consumed in Scotland.

Singapore is the third largest export market both in volume and value behind France and the US. The Singaporeans are the largest per capita consumers of Scotch whisky in the world, drinking nearly 13 bottles per head each year, compared to roughly half a bottle per head for US citizens. Singapore is also a gateway to China, which accounts for much of the numbers. The fastest growing markets by value are Poland, Mexico and Brazil. There are now an estimated 40,000 Poles living in Scotland and they are taking their newfound affection for the drink back home with them where it is generally used as an alternative mixer to vodka.

Overall, Scotch whisky exports have been enjoying an unprecedented period of growth, nearly doubling in a decade. However, the uncertain economic climate has recently put a dent in this growth. Exports for the first half of 2014 fell 11% year on year, down to £1.77 billion – the largest half-yearly decline in 15 years. The strong pound has been unhelpful in this regard, as have Russian sanctions, a downturn in Brazil and a new mood of restraint in a suddenly anxious China.

In a press release dated 28th January 2015 in which it suggests The Chancellor implements a 2% cut in excise duty for Scotch whisky in his March budget, the Scotch Whisky Association remains upbeat: “Despite a slowdown in exports, the sector is expanding at unprecedented levels with about 30 new distilleries being planned or built across Scotland.” It will be interesting indeed to see if their optimism is matched by a recovery in the export data when the complete figures for 2014 are released. In its Spirits Quarterly for the first quarter of 2015 the Rabobank Group said that, whilst the downturn did not yet constitute a trend and may well still turn around, it “could be an indication that the Scotch industry is battling structural challenges.”

Your comments are welcome.

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