By Nicola Young
It would be difficult to write about the whisky industry this month without mentioning the change in duty which came into force on August 1, the largest duty increase on Scotch Whisky in 40 years. The 10.1% tax rise takes the tax burden on the average priced bottle of Scotch Whisky from 70% to 75% and deepens the competitive disadvantage faced by distillers in pubs, bars and restaurants, say the industry body SWA.
In 2022, Scotch Whisky exports were worth £6.2bn, accounted for 77% of Scottish food and drink exports and 25% of all UK food and drink exports. The Scotch Whisky industry provided £5.5 bn in gross value added (GVA) to the UK economy. Today, there are around 146 operating Scotch Whisky distilleries across Scotland (July 2023) and the Scotch Whisky industry directly employs more than 11,000 people in Scotland and supports over 42,000 jobs across the UK.
Perhaps its very success is the reason that we see it used as a pawn in international trade wars and targeted as a method to increase the tax take? And for this reason, an aspiring or successful drinks company should be backing the whisky industry. If it’s not your time yet, your time will come.
The whisky industry has shown remarkable resilience over its long life and this resilience has often been about international politics and tariffs. On the latest tax hikes, SWA Director of Strategy Graeme Littlejohn said, “The government has chosen to impose the largest duty increase in almost half a century, increasing the cost of every bottle of Scotch Whisky sold in the UK by almost a pound and taking the tax burden on the average priced bottle to 75%.
“In a further blow, distillers will now face a further competitive disadvantage in pubs, restaurants and bars by being unfairly excluded from tax breaks available to beer and cider.
“Pubs and other on-trade businesses are about far more than beer and cider. Today’s consumers are looking for high quality products when they socialise. Scotch Whisky and spirits are at the heart of this trend towards premiumisation, which supports our ambition around moderation while also supporting public finances.”
If you ask most licensees, they will agree telling you that consumers are ‘drinking better, not more’. They want quality, authenticity and taste – and whisky delivers that. The move towards premiumisation perhaps led by millennials, is not just a UK trend. The US is also seeing this too where whisky sales are growing. They say you get out of life what you put in and whisky producers have been relentless in their ambition to keep their brands front of mind. They have invested in new distilleries, new expressions and innovation in both spirit and production, all of which keep whisky relevant in every way.
Despite the fact it is an age-old product known for its authenticity, whisky is exciting, and not because the investment in whisky doesn’t just generate £’s for the business itself – more and more whisky business in Scotland have become tourism attractions in their own right. Distilleries are continuing to open and re-open – in the last 7 years alone, 25 have opened. Gordon & MacPhail opened The Cairn Distillery in Grantown on Speyside last October – the new distillery, the first new-build distillery in the Cairngorms National Park, was a £20m investment by the company.
In Inverness the £7.5m Uile-bheist distillery and brewery on River Ness opened – the first to open in the city for 130 years. In Edinburgh Port of Leith is getting set to open later this year. This, £12m, nine-storey distillery will be the UK’s first vertical distillery and it will also boast a top floor mezzanine bar. The two founders, Ian Fletcher and Paddy Fletcher also plan to break the whisky mantra of consistency, on their website they say, “There is no final destination to this pursuit, and so our whisky will never stand still – it will never achieve consistency. Each year’s production will reflect the people who made it, the changing environment of the place in which it is made, and the climate, challenges and discoveries of the time in which it was made. It will evolve.”
To me, that is the success of whisky – owners and producers are evolving continually. Part of that progression over the years has been that whisky companies are also embracing sustainability, which incidentally is another big sales driver – research shows that that by the end of this year 56% of alcohol drinkers will be positively influenced by a brand’s environmental position when considering a purchase.
Islay distillery, Bruichladdich, one of the only distilleries in the world to be B Corp certified, has just overhauled the design of its signature The Classic Laddie – reducing the single malt’s packaging CO2 emissions by 65% through eliminating the secondary tin – equivalent to taking 182 cars off the road in Islay. The redesign is 32% lighter compared to the previous bottle and is also made from 60% recycled glass.
Previously, customers had an option to opt-out of secondary packaging, but the brand is now removing production of the secondary tin for The Classic Laddie entirely in a move that brings sustainability to the forefront and challenges the perception of value within the whisky sector.
Other distillers are also considering the sustainability issues around peat. Peat holds more carbon than the combined forests of Britain, France and Germany and it needs to be wet because dry peat releases carbon dioxide, one of the biggest sources of greenhouse gas.
Diageo’s whisky Report 2022 reveals, “With peat becoming an increasingly unsustainable flavour source for the whisky industry, we are likely to see more brands turning to alternative methods of imparting taste into their liquids in 2023.”
For example, Glenmorangie has just brought out its first whisky crafted from barley kilned with woodland botanicals. What is also driving the popularity of whisky is the fact that whisky cocktails are more relevant than ever. According to statistics 40% of women are more likely to drink a whisky cocktail compared to 20% who would order a whisky! Research also shows that consumers want something a little less mainstream when drinking out and again whisky fits into this category.
One such brand looking to capitalise on this is The Woodsman, a blended Scotch whisky from Whyte & Mackay, who created this whisky specifically for use in cocktails and mixed drinks. Says the company, “The Woodsman is a contemporary Scotch for mixing – a stylish modern whisky that fits with up-tempo occasions.” As new markets emerge and tastes evolve, whisky-makers are now well placed to address the demand. I don’t think it has ever been a more exciting time to be in the industry. The last word goes to the newly retired co-founder of Bruichladdich, Simon Coughlin, “Back in 2000 the industry was in a very different place – distilleries were being mothballed or even demolished, and opportunities for new distilleries to open and thrive were almost non-existent. He continued, “It’s incredible to look at where the industry is now; an explosion of new distilleries globally, people talking flavour, provenance and even terroir.”