By Scott Wright

IN the current climate, it is arguably difficult for business leaders to truly focus on the long term, given the challenges that coronavirus presents on a daily basis.

But for Scotch whisky companies such as Gordon & MacPhail, preparing the ground for future generations is second nature.

Following a brief delay with the imposition of lockdown in March, the company is now overseeing the construction a new distillery in the heart of Speyside at Craggan. It is the second distillery in Speyside to be developed by the venerable whisky merchant, following its successful acquisition of Benromach in Forres in 1993, with the investment central to the long-term planning that underpins the approach of the now 125-year-old business.

“It is a really important message for us,” said Ewen Mackintosh, managing director. “These are tough times, but one aspect of the whisky industry is that long-term view that we always take. That distillery forms part of our long-term ambitions for the business, so the sooner we got the construction started, the sooner we were making whisky and putting whisky in casks for future generations.”

All being well, the new distillery will be operational and making whisky by the end of 2021, with a visitor centre opening the following spring. On that basis, the company will not have lost too much time as a result of the pandemic.

While Benromach is steeped in tradition and focused on making whisky by hand, its younger counterpart, which will one day release its own single malt, will approach distilling in an altogether more modern way.

“The whole process will be automated,” Mr Mackintosh said. “Whereas at Benromach someone walks up to a valve or button, we will fundamentally be running the [new] distillery on iPads and PCs, retaining the knowledge of the operators. It will provide a real contrast.”

Work on the new distillery has been taking place, of course, against the backdrop of the Covid-19 pandemic, which necessitated the company to utilise the UK Government furlough scheme. The family-owned firm has a team of around 160, and roughly a third were still on furlough by late August, though staff were gradually being brought back.

Mr Mackintosh admits to missing the face to face contact that has traditionally been the bedrock of relationships in the industry, whether between suppliers and customers or distillers and consumers. But on the whole Gordon & MacPhail, which turned over £41 million in its most recent accounts, has adapted well. In one respect, the shift by consumers to buying whisky for consumption in the home, rather than pubs, has suited the merchant, which originally built its reputation as a blender and bottler of luxury whisky. Moreover, Mr Mackintosh feels it has been a strength that its product portfolio spans a wide spectrum of price points, from £50 all the way up to £5,000, at the ultra-premium end of the market.

“We have the ability in markets to really shape and recognise where the opportunity is,” he said. “The demand is there, and what we are seeing is demand right across that spectrum.”

He added: “It’s not obviously where we expected it to be when we started the year, but it is making good progress.”

What is proving to be less satisfactory for Gordon & MacPhail is the fallout from the tariffs imposed by the US on imports of single malt whisky, introduced by Washington as part of a long-running trade dispute with the European Union (EU). While diplomatic efforts are being made by the UK to have the tariffs removed, the damage being inflicted in the meantime is considerable.

The Scotch Whisky Association says the 25 per cent import tariff on single malt is costing the industry £30m per month in terms of lost export business, as prices are pushed up in the US.

“It is incredibly frustrating that we have been dragged into this, and used as a pawn in a trade dispute in something we had nothing to do with,” Mr Mackintosh said.

“The US is the most valuable Scotch whisky market. It is a market that is easy to do business in. Any business of any size can make an impression in the US, but all of a sudden to have a 25% price increase thrust upon us just means we are uncompetitive against other categories.

“It hits everyone; it hits the very largest whisky companies and the very small craft producers which are rightly important to various rural communities around Scotland.”

The prospect of a no-deal Brexit, which seems increasingly likely given the deteriorating relations between the UK and the EU, is also a worry. Gordon & MacPhail has been assessing the implications for its business, and has been exploring new ways of working with distributors on the European mainland.

“But ultimately I still think there are going to be challenges around shipment of goods,” Mr Mackintosh said. “Ultimately, we still need to ship into the EU, and we need the systems in place to allow all the revenue and customs, documentation and processing to happen. It would be a concern that we are not in a place where that is going to be seamless, and we will have hurdles which will impact us. We will have to roll with it.”

If anything, Mr Mackintosh added, the immense pressures arising from the pandemic have shown that “we need to speed things up”.

He said: “Everyone has realised we have to change, and at times we have to change quicker. The ask around Brexit and US tariffs is, why can we not accelerate some of the discussions and actually get a solution?”