ONE of Scotland’s biggest whisky distillers has revealed it is targeting expansion in China and Hong King after its parent group acquired a majority stake in a significant drinks distributor in the Far East.

But it warned ongoing Brexit uncertainty was causing havoc in its European supply chain.

Inver House Distillers, whose brands include the Balblair, Old Pulteney and Speyburn single malts, currently has a relatively small presence in China – one of the biggest growth markets for luxury Scotch whisky.

However, the Airdrie-based distiller is now looking to ramp up sales in China and Hong Kong following the investment its parent company, Thai Beverage, made in the Asiaeuro joint venture.

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Scotch whisky exports to Singapore, a key distribution hub for markets in Asia including China, increased by 10 per cent to £319.9 million in 2018.

Martin Leonard, managing director of Inver House, noted that key whiskies Old Pulteney and Balblair have been repackaged ahead of a sales push in the Far East. He said: “At the moment [the market in China and Hong Kong for Inver House] is relatively small. It is one we do see more potential in.

“We sell single malts through the smaller local distributors, linking it so some of the single malt clubs in the big cities. But I think we will get better and probably deeper distribution through this new distribution company. It’s got a pretty significant sales team.”

Mr Leonard added: “The scale of the population is such that relatively small changes in affluence and spending power can have a big impact on the overall sales figures. I think it is a market we need to be in for the longer term.”

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Until now, the activities of Inver House in the Far East have generally focused on selling into specialist whisky clubs via smaller distributors across Asia. Mr Leonard noted that aged malts are in high demand among affluent local collectors in developing markets such as Vietnam and Thailand, as well as China.

He said enthusiasts in these countries are often passionate about the spirit, and there can be a “powerful impact” when figureheads such as master blenders and distillery managers visit to talk to them about the more special whiskies in their portfolios. That in turn creates interest among consumers in the Far East in coming to Scotland to visit distilleries, which provides another marketing opportunity for brands.

Mr Leonard said: “We’re in a lucky position [in] that whisky elicits an emotional attachment.”

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Meanwhile, Mr Leonard underlined the disruption Brexit uncertainty is causing the distiller’s supply chain. “We have actually got to the stage where Brexit, instead of just talking about the potential issues, is causing issues now,” he said.

Mr Leonard said the firm has been informed by the HM Revenue & Customs that, if there is a hard Brexit, there would be questions around the status of goods should they arrive in their destination market after the Brexit date. He said: “We end up having customers saying: ‘don’t dispatch that unless you are sure we can get it.’

“In some cases, we have got customers who have asked for goods to be forward-shipped so that they end up holding a bit more stock. A number of the bigger companies have been doing that for Europe.”

However, Mr Leonard said moves by customers in the European Union (EU) to stockpile are having a knock-on effect on glass supply. The lead time for glass orders is usually three to four months and Mr Leonard said if sales exceed forecasts it can lead to a shortfall in glass supply. And while the prospect of selling more product because of stockpiling sounds appealing, the distiller in some cases may have to provide longer credit terms “because nobody wants to take all the costs associated with extra stock.”

Mr Leonard, who expressed his wish for the Brexit process to be “orderly” if it goes ahead, added: “We keep using the word uncertainty. It does create a lot of uncertainty, but it is also creating practical issues now.”

Mr Leonard’s comments came as the distiller’s Caorunn Scottish gin celebrates its 10th birthday, with the landmark coming as it increasingly makes its presence felt on the international stage.

The brand, made at the Balmenach Distillery in the Highlands, is now sold in 30 countries, and accounted for 11 per cent of the turnover generated by the Inver House premium spirits portfolio in 2018. The value of Carounn sales had increased by 37% in 2017, the company said, without providing a sterling value.

Inver House recently launched the brand's first flavoured variant – Scottish raspberry – and Mr Leonard said the move reflects the growing tendency for consumers to experiment with different styles of drinks, particularly younger drinkers.

He reckons the brand’s longevity is at least partly down to a decision to focus on authenticity and quality, noting that the Carounn recipe includes five local botanicals and is made with grain rather than molasses-based spirit.