While whiskies such as Scotch (which can be either single malts/grains or blends) have thrived in the domestic market, they have also proved popular globally, with steadily increasing exports to both emerging and developed economies such as Brazil and the USA respectively. However, while exports of Scotch have almost doubled over the past decade, they too are now starting to come under pressure, with the SWA announcing in April 2013 that exports declined markedly in the past year, down by some 70 million bottles. This came despite a slight increase in value sales to £4.3bn, reflecting the growing popularity of more sophisticated and expensive brands in certain countries.

Punitive taxation was again cited by the SWA as one of the main reasons for the downturn in Scotch exports across the world. Demand for spirits such as Scotch in struggling Eurozone countries such as Spain has, perhaps as expected, fallen notably as these economies continue to flounder. However, the 25% decline in exports to France in 2012 is more telling and particularly problematic, as France represents the largest export market for the category in volume terms.

The French market is particularly price-sensitive when it comes to Scotch, with consumers thought to have stocked up in 2011 to avoid tax increases, a cautious approach which is only likely to have been reinforced by additional taxes in 2013. France also fell well behind the US market in terms of value sales in 2012, not only indicating the popularity of premium Scotch whiskies among American drinkers but also how their French equivalents appear to be switching their allegiance towards some affordable American whiskeys such as Four Roses and Jack Daniel’s.

With around 25 million bottles being released annually for consumption in the UK, the domestic Scotch market remains highly important for producers. However, the market’s wider success may depend on success in North/South American markets such as the US, Venezuela, Mexico and Eastern Europe which may also provide significant growth opportunities in the coming years.

Despite the dip in exports in 2012, the future for Scotch whisky looks bright as a number of companies are building new distilleries or investing in boosting the production capabilities of existing ones, often supported by favourable government grants. Recent examples include:

  • A new single malt distillery is to be built on the Isle of Harris after it received a £1.9m grant from the Scottish government.
  • Wemyss Malts plans to open a new £3m distillery in Fife in 2014, backed by a £670,000 grant.
  • Chivas Brothers is currently planning to build a new malt whisky distillery in Speyside.
  • Diageo plans to extend its Glen Ord malt whisky distillery and double the capacity.

As the above examples show, single malts appear to be the preferred choice for investment, providing premium cues which are particularly resonant for exports to emerging markets such as China and India where many consumers want to be seen to be embracing premium Western goods. The struggle of the Eurozone economy means that drinkers in countries such as France, Spain and indeed the UK, are particularly feeling the pressure of the economic downturn. This may mean that more affordable blended Scotch whiskies come to the fore in various European markets, while the typically costlier single malts are likely to grow at a quicker rate in emerging global markets with burgeoning middle class populations.

For more information, please see Mintel’s Dark Spirits – UKDark Spirits – USand Premium Alcoholic Drinks – UK reports or contact us here.

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