Scottish whisky sector faces supply glut amid sliding sales and tariffs

The Scottish whisky industry has entered a period of oversupply as global sales decline and trade barriers persist. Recent data from the alcohol analytics provider IWSR revealed a 3 percent drop in global Scotch sales during the first half of 2025, making this the third consecutive year of contraction after several decades of steady growth.

Key players in the sector have felt the impact. Diageo, the FTSE 100 group behind prominent brands such as Johnnie Walker, Talisker, and Lagavulin, has responded by reducing production at certain malt distilleries. Operations have shifted from a seven day schedule to a five day week at some sites, while activity at the Teaninich Distillery in the Highlands has been paused. Production has also ceased at Roseisle Maltings in north east Scotland, with a review scheduled for June 2026. The proposed redevelopment of the Talisker distillery on the Isle of Skye remains in limbo, with planning permission pending and no confirmed investment outlined.

Diageo stated it is adjusting capacity to meet current market conditions after a prolonged phase of investment and stock accumulation, maintaining confidence in the long term growth prospects for Scotch. The sector continues to contend with a 10 percent tariff on whisky exports to the United States, despite a recent UK US trade agreement, costing the industry an estimated £4 million per week according to the Scotch Whisky Association.

The US, traditionally the largest market for Scotch, has seen sales decline by 6 percent in the first nine months of 2025, following a 9 percent drop in 2024. These figures compare unfavourably to growth rates seen in 2020, when US sales of Scotch rose by 4 percent. The Scotch industry is also contending with shifting consumer habits, with recent Gallup polling indicating alcohol consumption in the US has reached its lowest point in nearly 90 years, now at 54 percent of adults reporting they drink alcohol.

Some companies are expanding storage capacity to house excess stock. International Beverage, the parent of Old Pulteney, Speyburn, and Balblair, has invested £7 million in six additional warehouses, providing space for 60,000 casks. Meanwhile, the broader whisky market remains more robust than Scotch alone, with total whisky volumes up 3 percent in the first half of the year.

Despite immediate challenges posed by tariffs, stock surpluses, and changed consumption patterns, industry observers anticipate renewed growth for Scotch whisky before the end of the decade.