Scotch whisky has enjoyed something of a renaissance in recent years, with single-malt exports breaking the £1 billion barrier last year, and new distilleries coming on line.
For example, last October, Diageo announced that it was planning to reopen the distilleries of Brora and Port Ellen, "to delight and inspire new generations of Scotch lovers around the world".
While Scotch's momentum is largely positive, the spectre of Brexit, coupled with the UK government's tax legislation, is threatening to derail the industry somewhat, leaving the door open for other producer nations, chiefly Ireland, to steal its thunder.
Challenges And Opportunities
In her appraisal of the year ahead, Scottish Whisky Association chief executive Karen Betts said last week that Brexit "presents both challenges and opportunities for Scotch", bringing changes to the way that drinks are exported and how the industry is regulated.
Betts cited the Indian market as a key growth opportunity – "Scotch only has a 1% share of the Indian spirits market, which shows there is real scope to expand" – while Singapore, South Africa (which has seen double-digit growth) and Mexico are also in the industry's sights.
At the same time, the industry knows that the UK's post-Brexit trading agreements will be crucial to maximising this opportunity. Given the difficulties that Theresa May's government has faced in generating workable trade deals with the EU, sectors such as the drinks industry need to shout louder, to ensure that they are not left on the shelf.
"This year, it is vital that we hear more detail from the UK government, particularly on a sensible period of transition, customs procedures, the continuity of benefits secured through EU trade deals, and protection of Scotch whisky's geographical-indication status," Betts observed. "The clock is ticking."
Duty Strategy
At the same time, charity begins at home, and the Scotch industry is calling on the UK government to create a business environment in which distilleries both old and new can thrive.
In the UK's autumn Budget, duty was frozen on Scotch, however, both the SWA and leading businesses have called for duty to be reversed, pointing out that UK duty is 19% higher per unit of alcohol than imported wine, and 327% higher than cider.
Commenting on the Budget announcement, Charles Ireland, Diageo general manager for Great Britain, Ireland and France, told the Press Association last November that further tax increases on the industry could be severe.
“The spirits market suffered a downturn when the last increase happened [...] and that there would be another downturn if the tax increased in the next Budget,” Ireland said. “On top of that, it will make it more difficult for us to argue against increases and unfair treatment overseas.
“I think there is both a domestic impact for our industry and an international impact for our industry,” he added.
Irish Eyes Are Smiling
After all, if the Scotch whisky trade is hampered, either by Brexit or government inaction, the Irish whiskey sector is more than prepared to pick up the slack.
According to beverage export figures for the Irish market, released last week by Bord Bia, the Irish food board, whiskey exports saw 20% growth last year, to stand at €600 million. Whiskey accounts for 36% of total beverage exports, which stand at a combined €1.5 billion.
'Irish Whiskey continues to fuel international export beverage growth,' Bord Bia wrote in its report. 'The US market for Irish whiskey grew by 16%, to over €240 million, whilst European markets were also positive, including France, to €17.6 million, and the EU27 as a whole, by 14%, to some €111 million.
'This growth trajectory looks set to continue for Irish whiskey, as new markets are developed and premium products gain market share,' the report continued.
Increased investment in production is also helping to spur growth. Recent years have seen the number of operational distilleries in Ireland rising from four to 18, with a further 16 in the planning process. New 'whiskey tourism' trails have also been developed, with the Irish Whiskey Association expecting the numbers travelling to Ireland to avail of such trails to rise to as much as 1.9 million by 2025 – up from around 650,000.
So, when the dust has settled, who will prevail: Scotch or Irish? Seconds out, round one ...!
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.
