Turmoil in the whiskey/whisky industry on both sides of the Atlantic


(Above image is a capture of stills at Laphroaig Distillery on the island of Islay.)

This evening I am reporting on retaliatory tariffs levied by U.S. and Europe on each other's whiskey/whisky industries.The story so far:
  • Last year Europe imposed a 25pct tax on all U.S. whiskey imports in response to new tariffs levied on European steel exports to the U.S.This development  has hit Brown-Forman (producer of Jack Daniel's) hard causing losses of USD125M.
  • This Friday punitive tariffs of 25pct will apply to imports (to the US.) of single malts from Scotland and Northern Ireland. Blended whisky (e.g. Johnnie Walker) is exempt for the time being.The Distilled Spirits Council (of the U.S.) has estimated job loses of up to 78,000 across the supply chain as a consequence of the latest tariff 'hit'.
  • Last year whisky exports to the U.S. were worth around USD1.25bn with single malts accounting for 33pct of the total.Inclusive of blends the U.S. accounts for 22pct of scotch exports by value and 11pct by volume. Whisky is Scotland's single largest export.
  • From a Scotland perspective, the potential implications are: (1) The larger companies (e.g. Diageo) may be able to absorb any losses, at least in the short-term, as most of their business is blends (2) American buyers of single malts (a premium product) may prove less price sensitive and continue buying. (3) Small scale distillers of single malts, which operate on lower margins, may find the going tougher but, again, their sophisticated customer base may prove resilient and loyal.
Tasting session at Isle of Arran Distillery


Over the past 15 years or so the number of actual distilleries in Scotland has jumped by about 20pct., albeit mainly at the small end. Additionally, larger and pre-existing distilleries (e.g. Macallan) have invested heavily in new distilling capacity. On a historic basis, the industry is cyclical and, in the writer's view, this latest tariff 'war' could finally puncture the long 'bull run' in Scottish whisky distilling. Time will tell.

Acknowledgement: Some of the information provided above was sourced from the Sunday Times newspaper.

Comments

Popular posts from this blog

Tyninghame Beach: A stunning and secluded beach in the east of Scotland

Million Dollar View, Dornoch Firth, Scottish Highlands

Glen Quaich, one of Scotland's best backroads tour routes