Gavin Hewitt picked a good decade to work in the whisky business. The former UK diplomat became chief executive of the Scotch Whisky Association in 2003 and in the 10 years since watched the customs value of Scotland’s exports of its most famous tipple soar from £2.4bn to an expected £4.4bn in 2013.
“It’s a pretty good record,” says Mr Hewitt, who steps down this month.
Sales of Irish whiskey are also surging, with multinationals investing in the main brands and the number of Irish distilleries set to triple over the next five years. In the US, Jack Daniel’s this year announced plans to invest more than $100m in new stills and warehouses at its rural Tennessee distillery. Bourbon producers in Kentucky have poured hundreds of millions more into their facilities in what has been described as the industry’s biggest expansion since Prohibition ended 80 years ago in the US.
New players are breaking in: England and Belgium now boast working distilleries and Taiwan’s Kavalan single malts are winning respect.
But Scotland is where the action is. Old stills have been taken out of mothballs and new ones brought into operation. UK-listed Diageo, the world’s largest spirits producer by sales, announced in 2012 it would invest more than £1bn in Scotch production over the next five years.
Chivas Brothers, the Scotch whisky and gin arm of the France-based Pernod Ricard drinks group, says its capital expenditure is about £40m a year.
And, just last month, Scottish producer Edrington announced plans for a modern distillery and visitor centre for its Macallan whisky that will have a price tag of more than £100m.
As Ian Curle, Edrington chief executive, explains, the group has done well by focusing on premium spirits, particularly its Macallan single malts.
While blends still dominate – accounting for 90 per cent of total Scotch whisky export volume in 2012 – their share by value has fallen to about 80 per cent, says the SWA.
Marketing has become increasingly sophisticated. Chivas Brothers recently opened a new “Prestige Hall” at its bottling plant in Glasgow that features a less automated production line for upmarket brands that require special packaging. The company’s Royal Salute Tribute to Honour comes in a bottle decorated with gold and diamonds and has a price tag of $200,000 before tax.
Not all is good cheer. Scotch producers are locked in a legal battle with the Scottish government over plans for a minimum alcohol price that the SWA says would encourage protectionism in other markets.
And, in a reminder that even the most promising market can stall, a slowing economy and a crackdown on excess have badly hurt sales to China, with the value of direct shipments falling 20 per cent year-on-year to £25m in the first half of 2013.
Scotch is also suffering some of the double-edged problems of success, not least a shortage of aged stock. Edrington and other distillers are trying to gain flexibility by moving from marketing whisky by age. The sheer pace of investment suggests risks ahead. But Mr Hewitt says the growth in capacity is far exceeded by the emergence of millions of potential drinkers in Asia and elsewhere. “The industry has a fantastic opportunity,” he says.
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