Spirit level

The decline in whisky exports is a warning shot across the industry’s bows, but with an eye on the past and some positive planning, the industry should survive the slowdown

The most recent figures from the Scotch Whisky Association (SWA) show a second successive year in which exports have declined after nearly a decade of dramatic growth. Are we witnessing the end of whisky’s golden age?

Since 2004 the total value of exports of Scotch whisky has risen 74% – blends and single malts – and for just single malts the value of exports is up by 159%. However, the latest results show a 7% decline in value to £3.95bn in 2014 from £4.26bn in 2013, making the last two years the fastest decline in exports for more than 16 years.

Things have been so good for so long that perhaps the whisky industry has become a little complacent – the 7% drop in total value certainly came as a nasty surprise to some distilleries. Last year Asia was seen as the culprit, as sales unexpectedly dropped by 11%.

Singapore, where exports dropped by 39% in value to £200m, saw the most marked decline. This is significant as Singapore acts as a major hub for mainland China and other south-east Asian markets. Direct exports to China also dropped by 23% to £39m due to new austerity laws that have prohibited gifting among government figures and imposed draconian sanctions for infractions. The lavish gifting culture had helped to fuel the recent growth of Scotch whisky.

There are good news stories too, however. Exports to Taiwan have jumped 36% to £197m and exports to India have increased by 29% to £89m, despite a punitive import tariff of 150%, which the Scotch Whisky Association is in negotiations to reduce.

Prior to this global decline in exports, it had seemed as if demand would never slow. Many distilleries embarked on major expansion plans, some which have been scrapped or put on hold. Distilleries that went full steam ahead now face the prospect of over-supply leading to a whisky loch and falling prices.

So should we be worried? Well, yes and no. Yes, because if things get as bad as they did in the early 1980s, we could see distillery closures once again. On the other hand, a glut of whisky is good for whisky consumers as it will help to drive down prices.

An eternal optimist, I think this is just the start of a period of balancing out in certain markets. The level of whisky education and understanding is at an all-time high. But there is still more to be done in certain markets, such as Central and South America and India. Hopefully with increased education these consumers will make the switch from blended to the more profitable single malt, which would ultimately reverse the worldwide decline.

While no one doubts the potential severity of the challenges ahead, many old heads within the industry are sanguine about the downturn, seeing increased stocks as the basis for rapid growth when demand increases once again. A short-term slowdown would also mean there is an abundance of nicely aged stock, which will fetch good prices. It is important to remember the positives during the hard times.

All industries are cyclical. I just hope that the whisky industry remembers how bad things were during the 1980s and has learned the lessons of those times. It would be a terrible shame to see some popular distilleries join the ranks of the so-called ‘lost distilleries’.

So let’s stay positive and hope our whisky industry, which supports thousands of jobs and is a vital part of Scotland’s economy, can survive this dip relatively unscathed. In the meantime, tell all your friends who live abroad to buy a bottle of whisky. It all helps!

‘A short-term slowdown would mean there is an abundance of nicely aged stock, which will fetch good prices’