Is Scotch whisky on cusp of new global boom?

Throughout the seismic global health and macroeconomic events of recent years, Scotch whisky has continued to perform well. Many distillers moved successfully into online retailing to offset sales lost in the on-trade and global travel retail outlets when Covid struck, and after restrictions were lifted, sales rebounded strongly in pubs, bars, and hotels around the world.

New challenges have come along, of course. The surge in energy bills and rampant inflationary pressures we have seen in the last year and a half have brought new hurdles for firms to overcome, as has the cost of living crisis faced by consumers on these shores.

The latest figures on exports from the Scotch Whisky Association were perhaps a reflection of those difficulties. In August, the SWA reported that the value of exports had dropped by 3.6% in the first half of the year to £2.57 billion. But the association said there were mitigating factors, chief among which was the tough comparison with the first half of 2022, when sales roared back following the easing of Covid restrictions.

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The SWA declared the industry was continuing to deliver growth for the economy in Scotland through its continual investment and underlined its confidence in the long-term prospects for distillers. And it highlighted the benefit to the industry from “premiumisation”, a trend which is seeing people consume less alcohol in volume terms but opt for better quality products, such as Scotch whisky, when they do decide to drink.

That confidence in the potential of Scotch whisky to continue driving growth and win new audiences around the world is doubtless central to the array of expansion projects which have been announced in recent weeks, and arguably gives credence to the view that the sector is on the brink of another boom.

Whisky may currently be challenged in certain markets, most notably the UK, because of high inflation, but there are plenty of other countries with thriving economies and well-off consumers for distillers to aim for, none more so than the Far East.

Scotch whisky veteran Billy Walker was quick to highlight the “dynamism” of the market for single malt in the Far East when new accounts showed that his GlenAllachie Distillery on Speyside had turned over more than £20 million for the first time in its most recent financial year.

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Mr Walker, who last week launched the distillery’s new peated range, Meikle Toir, to much acclaim, highlighted “booming sales” in South Korea, Taiwan, China, Singapore, and Hong Kong, adding that Vietnam was also a market of significant potential.

“There is a huge dynamic in Asia, not just for GlenAllachie but for the [single malt] category,” he told The Herald.

The global appeal of Scotch whisky was then emphasised by the new chief executive of The Glenmorangie Company, Caspar MacRae, in an interview with The Herald on Tuesday.

Mr MacRae said the distiller, which makes the Glenmorangie and Ardbeg single malts, was well aware of the pressures consumers face in the UK at present, which he said comes into its thinking when marketing its wares. But he pointed out that conditions were a lot more favourable in other markets at present.

Mr MacRae said: “I think everyone is feeling the pinch at little bit. Of course, it varies in markets around the world. The economy in Asia, for example, is still very vibrant. The economy in India is still very vibrant. It is impacting in different parts of the world to different degrees.”

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The fact Scotch whisky can sell its products to so many markets is undoubtedly an enormous strength that helps insulate the industry from the economic headwinds which are inevitably whipped up as global events play out.

Without such geographical diversity, companies such as Glenmorangie would arguably not have had the confidence to have invested as heavily as it has in huge infrastructure projects over recent years. It has doubled production capacity at Ardbeg on Islay, expanded its bottling plant in Livingston, and created The Lighthouse innovation distillery in Tain, among other things.

Likewise, would Chivas Brothers be forging ahead with plans to build its first distillery on Islay, details of which were reported in The Herald on Tuesday, if there was not a global audience ready and willing to buy the product when it is finally released in the years to come?

It should be emphasised that it is not only the big players which have been investing for the future. The independent Isle of Harris Distillery, which now employs 48 people full-time after starting with a team of 10 in 2015,  has been an astonishing success story.

The release of its hotly anticipated maiden single malt earned rave reviews when people were finally able to get their hands on it last month, with the product expected to be exported to more than 20 countries.

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Plans are afoot, meanwhile, for new distilleries in the once-mighty whisky region of Campbeltown. Plans to construct a new distillery, Dal Riata, on the banks of Campbeltown Loch were approved by Argyll & Bute Council last month. It is one of several in the works in an area that continues to attract the interest of whisky lovers around the world.

Some observers may say that because the whisky industry is dominated to such a large extent by companies the size of Diageo, which makes Johnnie Walker, and Chivas owner Pernod Ricard, much of the financial benefit from its success goes to shareholders, many of whom are not based in Scotland.

But that arguably overlooks the importance of the jobs the industry is continuing to create through its expansion plans, employment that is frequently located in rural areas such as Harris or Campbeltown.

Moreover, Scotch whisky is increasingly important to the Scottish economy in tourism terms. Figures released by the SWA last month show that the number of tourists who came to distillery visitor centres exceeded two million in 2022, which the organisation said underlined the sector’s recovery from the pandemic.

While the number of visits in 2022 lagged the tally for 2019 by 7.21%, total spend by visitors was marginally up, by 0.82%, at £84.7m.