Scottish Distilleries Facing Financial Distress Amid Declining Demand

Numerous Scottish distilleries are exhibiting signs of significant financial distress, as both domestic and global demand for spirits continues to wane. Research conducted by BTG Begbies Traynor has revealed that at the close of last year, 69 distilleries were grappling with critical financial issues. This figure marks an increase from 49 in the previous quarter.

The Scotch Whisky Association, which serves as the industry’s trade body, estimates there to be over 150 whisky distilleries in Scotland. In addition to whisky, more than 90 distilleries produce gin, alongside a smaller number creating vodka, rum, and liqueurs. The current challenges faced by these producers stem from a combination of decreasing consumer interest and rising production costs.

Thomas McKay, managing partner of BTG in Scotland, noted that a “perfect storm” is affecting the industry. This includes diminishing demand, along with increased tariffs and rising production costs. Distillers have also been impacted by substantial hikes in both energy and employment expenses over recent years.

The export markets for Scotch whisky, particularly the United States and China, have experienced significant challenges. Tariffs and duties imposed on these markets have added financial strain. Domestically, various British pub groups have reported a shift in consumer preferences, with patrons opting for cheaper alternatives such as beer and soft drinks instead of spirits.

As a consequence of these trends, the demand for Scotch whisky and other spirits peaked during the lockdowns in 2020. Since then, a decline in consumption has led to an oversupply, prompting prices to fall. These price reductions coincide with increased costs related to exporting to the largest market for Scotch whisky, the United States.

In a broader context, export volumes of French wine and spirits have plummeted to levels not seen in 25 years. Contributing factors include tariffs imposed during the Trump administration as well as duties in China. FEVS, the French industry group, indicated that the number of exports fell by 3 percent last year, while the overall value of sales dropped by 8 percent, marking the worst performance in five years.