Local whisky producers are confident that they can continue to meet the demand for luxury goods despite a general decline in demand.
The US is the biggest market for Scotch Whisky. Annabel Thomas is not discouraged by the softening of demand in the US. She believes that her distillery will still be profitable this year, despite a softerening of demand.
Nc’nean Distillery, on Scotland’s West Coast, founded in 2013 by a former consultant, launched its fruity, single malt in America, in November. This was despite the global slowdown caused by deflation in China, and high interest rates.
In a report published in November by Edinburgh’s investment bank Noble & Co, the price of rare whiskey sold at auction fell by the most since the Pandemic in the past decade. This added to fears that producers may be left with an excess of whisky after a spate of new Scottish distillery opens that have pushed the number to 148 – a high for post-second World War.
According to the Scotch Whisky Association, the US was among two of the top ten destinations of Scotch that saw a decline in the first half 2023. Exports fell by 5.1 percent to £437mn. India was the second.
Thomas says that the slowdown will be more problematic for larger players, given that large groups such as Diageo sell through more distribution points like shops and each one demands growth. She says that small businesses like hers should view the US as multiple markets. Nc’nean, for example, can be successful by leveraging its image as a sustainable and female-led producer.
“If you’ve got high-quality stocks, you can tell a completely different story. . . “I’m not worried about my position,” she replied. What is also interesting is the US’s huge appetite for minority-run and female-run businesses.
The decline in auctions prices is said to hurt those who are looking for quick profits. However, the producers insist that any fears about a market overflowing with unwanted whisky cannot be justified.
The growing trend of rich individuals in Asian markets is cited by the experts. They say that Scotch will continue to be a premium product as consumers switch to more expensive drinks. This is known as “premiumisation”.
The £2.1mn Macallan bottle sale late last year has added confidence that the demand for rare whiskies is still strong. Buyers are looking to capitalize on declines in value to add bottles to their collection.
The whisky market does not currently favor quick returns on short-term investments. . . Charles Beamish is the chief executive officer of Beamish International. The company advises wealthy individuals on their whisky purchases.
The optimism of Scotch producers has also driven their investments, as they are confident that the UK will complete a free-trade agreement in India. The industry body stated that this could increase the sales in India by more than £1bn over five years. This is up from £282mn.
According to the SWA’s report, the SWA plans to build 37 new distilleries. The industry has also invested over £300mn into “visitor experience” in the last decade.
SWA reported this month that the industry, which represents 2 percent of UK goods exports between 2018 and 2022 invested £2.1bn into capital projects.
Chivas Brothers, owner of brands including The Glenlivet, opened its first guesthouse last year in Speyside, one of the best-known whisky producing areas. This is part of a producers’ trend to diversify revenue by targeting tourists, who spent an estimated £10.4bn in Scotland in 2022, according to data from VisitScotland, a government body.
June and Cameron McCann filled the first whisky casks in Stirling, the ancient city famous for its battles with the English. This was the first time since 1852 that a whisky had been produced there. Stirling Distillery was established in 2015, but its first product is not expected to be released until 2026. The husband-and-wife team behind the distillery are counting on its proximity to the castle in Stirling, which attracted 600,000 tourists in 2019.
Cameron McCann stated that the distillery had already booked between 7,000-8,000 tours for 2024 and hopes to increase this to approximately 30,000. Tourists are helping to generate income and sustain the distillery’s gin business before it launches its whiskies.
He said, “I do not see any slowdown of the demand for whisky.” “The tourism side will continue [and] We are literally right next to the castle.”
Mark Kent, CEO of the SWA, said that optimism is “well-founded”. Mark Kent, chief executive of the SWA, said that the 3.6% drop in exports during the first half 2023 must be viewed in light of the “exceptional” performance of 2022 which saw overseas sales increase by 37.5% to a record £6.2bn. According to the SWA, exports increased by 31 percent between 2018 and 2022.
Last year, Diageo – owner of Johnnie Walker – warned that sales in Latin America, the Caribbean and Africa were slowing down. This sparked concerns about the global economy catching up to whisky.
Jean-Etienne Gourgues is the chief executive and chairman of Chivas Brothers. This part of French drinks company Pernod Ricard. He said that Scotch would likely be protected from individual market slowdowns, as it was consumed in 180 countries. Many of these have growing middle classes.
“It’s in our nature to be optimistic about Scotch. . . We are confident that it will continue to be able to meet the demand of consumers for a long time,” said Gourgues. He was in China recently, where Pernod Ricard launched its first single-malt in China.
Alan Hamilton, a partner with Johnston Carmichael in Edinburgh, said that while “the direction of travel is positive”, it was still a concern whether the smaller whisky producers “would survive the pace” due to rising costs and shortages such as casks or glass bottles.
He said that because whisky must be aged for at least 3 years before it can reach the market, smaller producers may struggle to meet their costs and raise revenues.
Hamilton stated that “cash can be a challenge for the younger guys.” It is easier to purchase an existing distillery, even if the distillery is relatively new. . . “But I don’t foresee any doom or gloom.”
Taxes on whisky are also a burden. 73 percent of the average bottle price of Scotch sold here in the UK goes to tax. SWA wants the duty cut in the next budget. Burns would have approved.