AFTER a bruising spell for Scotch whisky in the international arena, some green shoots of recovery are beginning to emerge.

As it was for many industries, 2020 was a year to forget for Scotch. The ongoing impact of US tariffs on single malt – imposed by the Trump administration in October 2019 – combined with multiple challenges stemming from the pandemic to hammer sales in key territories and markets.

The official figures lay bare the extent of the fall-out. The overall value of Scotch whisky exports tumbled to £3.8 billion in 2020 from £4.9bn the year before, a hitherto unheard of fall of 23 per cent – at least not since the whisky lochs which hit in the 1980s.

The drop was the result of an unpalatable blend of closed hospitality venues, the evaporation of travel retail trade, and, more than any other ingredient, US tariffs.

In fact, the 25 per cent import tax on single malt – introduced by Trump as a trade dispute between the EU and US on aircraft subsidies escalated – was cited by the Scotch Whisky Association (SWA) as the single biggest contributor to the export woes of 2020. According to its figures, exports to the US fell by £340m to £729m, a decline of nearly one-third. And the pain did not end there. By the time a temporary cease-fire was reached in February of this year, the loss of exports to the US was believed to be well over £500m.

Happily for single malt distillers which export across the Atlantic, a five-year suspension of the tariffs was agreed by the US, now led by President Joe Biden following his victory in the November election, and the UK in March. That such a major hurdle has been removed has understandably been welcomed by the industry and there are early indications that it is having some benefit, in tandem with the easing of coronavirus restrictions in the hospitality trade.

Scotch exports were 31% higher in value terms, at £2.2 billion, in the first half of this year compared with the opening six months of 2020. Within that, the value of exports to the US grew by 3.9%, to £323.4m, compared with the first half of 2020.

However, while both the overall value of Scotch exports around the world and to North America in particular grew in the first half of this year, they remain well adrift of figures recorded for the first half of 2019. The total value of global exports lagged the tally for the first half of 2019 by nearly 10%, while sales to the US were down 33.65% on the same comparison.

So, while there are early signs of recovery, there is clearly still some way to go before the industry can say it has fully bounced back from the impact of the tariffs and the restrictions that have severely hampered sales in the US hospitality sector in the last 18 months.

Indeed, with regard to the tariffs, the view from the industry is that recovery in the US could take many months.

One of the reasons, insiders say, is because it is a lot more difficult to win market share than it is to lose it. Dark spirits such as US bourbon and rum have been able to win market share in the US among consumers for whom single malt had become too expensive.

The pipeline of single malt into the US from Scotland has to be rejuvenated, too.

While the tariff was in place, it pushed up the price of single malt in the US to the extent that smaller distillers were dissuaded from exporting to the market.

There were even well-documented instances of companies deciding not to progress with their US launch plans, given how prohibitive the tariff barrier was. Distillers which had reduced shipments to the US while the tariffs were in force – having ratcheted up exports to the market before the tax was enforced in 2019 – have only begun ramping up again, and it will be a while yet before a steady supply is reached.

Some producers may also be returning to the negotiating table to do fresh deals with US distributors and retailers, perhaps after seeing talks break down because of the tariffs. All of this takes time.

Of course, the Scotch whisky industry will naturally be hoping that “normal service” with the US is resumed as quickly as possible.

The US, after all, remains the single most valuable market for Scotch by some distance.

Encouragingly for the industry, there are some distillers which are finally ready to press on with plans to move into the market now the tariff is out of the way. These include Fife-based Kingsbarns Distillery, which put the launch of its inaugural single malt in the US on ice after the tariff was brought in by Trump.

William Wemyss, managing director of Kingsbarns owner Wemyss Family Spirits, revealed talks have opened with the distributor that sells the company’s range of blended malt whiskies, and its Darnley’s Gin brand, in North America. He hopes Kingsbarns’ inaugural malt, Dream to Dram, will finally be able to take its bow in the US in the first quarter of 2022, nearly three years after its original plans were scrapped because of the tariff.

“We’ve had the launch of Kingsbarns single malt on the back burner until we got a level playing field,” Mr Wemyss told The Herald. “Now we have that, we’re keen to move forward. We are ready to go. We are just discussing the launch with a potential importer.”

Also forging ahead with US expansion is the Glasgow Distillery Company. It has a similar timeframe for entering the US after postponing its move at the eleventh hour immediately before the tariffs were introduced in October 2019. That led to plans being put on hold, before Covid pushed the schedule back further.

Despite the delays, Liam Hughes, who co-founded the distillery with Ian McDougall, said there has been an upside. A change in US importing rules meant it no longer had to have a 75cl whisky bottle made to enter the market, meaning it could proceed with its standard 70cl bottle.

“We will be launching in the US in Q1/ Q2 2022. Our plans are back on track,” Mr Hughes told The Herald, revealing that the distiller will be targeting California, Chicago, Boston and New York with its Signature Glasgow 1770 whisky, two single-cask varieties and its Malt Riot blended malt. The last will be on sale in the US before Christmas.

Yet the legacy of the tariff issue is not the only thing standing in the way of recovery in the US: the loss of sales in the top-end bars of cities such as New York and Chicago, as well as travel retail, also needs to be recouped following the damage inflicted by Covid restrictions.

Mr Wemyss said that, while the removal of tariffs was vital to his company’s plans, the “sustained recovery” of single malt in the US will also depend on the on-trade firing on all cylinders again. He said bars and restaurants are an “important channel for brands that are looking to establish themselves in the market”.

Mr Wemyss added: “There will be stock, inventory in the system in the US [on] which the import tariff will have been paid. [We need] time for that to flow through the system for the zero tariff to apply.”

Meantime, although distillers can begin to think of US tariffs in the past tense, there are other issues which are impeding progress in the export market. Mr Hughes said shortages of glass and cardboard have held up plans to fulfil the expansion of a contract with a major retailer in Australia for Glasgow Distillery Company's G52 vodka.

“These are things that you don’t anticipate,” he said.