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BRIEFING
[ 14 December 2018 ]

Whisky

Our Christmas briefing is about... Whisky. In the fiercely competitive market for what is ‘fiery and instant’, Britain is a big shot. (No jokes about being 'on the rocks' please.)

Pouring all over the world

The importance of the UK’s whisky industry can barely be overstated. Scotch whisky alone accounts for 20% of all UK food and drinks exports.

And it’s growing. Exports of Scotch are growing at about 9% a year, driven particularly by a taste for premium single malts. The US is the largest importer, accounting for about £1bn in sales, while Asia is growing fastest. In China, they mix it with green tea.

Scotch is sold in about 200 markets around the world and sells three times its nearest rival whisky. Some stats from Flexport:

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"More Scotch whisky is enjoyed across the world than American, Canadian and Irish whiskies combined."

Karen Betts CEO of the Scotch Whisky Association

Scotland is home to...

...120 distilleries, and the number of operating distilleries in the country is at a 70-year high.

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Whisky and tourism

Diageo has announced a £150m, three-year investment programme for its Scotch whisky visitor experiences, with the centrepiece being a new Johnnie Walker “immersive visitor experience” based in Edinburgh. (Does that mean being dropped into a vat?) Add in the £35m already committed to re-open the ‘lost distilleries’ of Port Ellen and Brora, and Diageo’s network of distilleries with specialist visitor experiences in Scotland will rise to 14.

Johnnie Walker will be 200 years old in 2020. Cheers!

"Freedom and whisky gang thegither,
Tak aff your dram!"

Robbie Burns

Is there such a thing as the best whisky in the world?

No. The dizzying number of awards and competitions held around the world for whiskies is pretty, er, dispiriting. So you end up with any number of “award-winning” whiskies. Aldi’s own brand was a winner in the Scotch Whisky Masters.

Indiana Jones drinks Bruichladdich

Actor Harrison Ford recently revealed his favourite whisky is the Scotch single malt Bruichladdich.

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Rick Deckard prefers Johnnie Walker

Johnnie Walker created a limited-edition whisky blend in a futuristic bottle that appeared in Blade Runner 2049.

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Across the Irish Sea

Ireland may have only just 18 distilleries, but things are changing fast. In fact, Irish whiskey is the fastest growing premium spirit in the world, according to the Irish Whiskey Tourism Strategy, with sales increasing by more than 300% in the past 10 years.

At the heart of the marketing push is the Old Bushmills Distillery in County Antrim which is seeking to treble its 120,000 annual visitor numbers. The distillery, close to the world famous Giant’s Causeway, has been licensed since 1608, and produced whisky long before even then.

Meanwhile, smaller northern Irish distilleries are being established at pace. In 2016, County Down’s Echlinville Distillery in Kircubbin was the first to be granted a licence to distil spirits in more than 130 years, laying the ground for a renaissance of whiskey distilling in the region.

This year total sales of Irish whiskey are forecast to hit about 10.5 million cases, up 14% on 2017, and a more than five-fold increase on the 1988 figure.

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Big names

Despite the growth of smaller players, it is still a very top-heavy industry. Diageo, which owns brands such as Johnnie Walker and Talisker, accounts for a third of all Scotch production. The other giants of the industry are Pernod Ricard, which owns the largest number of distilleries in Scotland, and produces big name brands Glenlivet and popular blend Jamesons.

In third place by production volume is William Grant & Sons, which remains an independent, family-owned business. It produces Glenfiddich (the best-selling single malt in the world), and brand name blends Grants and Monkey’s Shoulder.

Meanwhile, Japanese conglomerate Beam Suntory owns Teachers, Maker’s Mark and Islay malts.

Million dollar bottle

A bottle of 60-year old Macallan, distilled in 1926 and bottled in 1986, recently sold for £848,750 at a Sotheby’s auction.

St Andrews uncorks

In 2018 Eden Mill, Scotland's first single-site distillery and brewery, released the first Single Malt whisky to be distilled in St Andrews in over 150 years. The First Bottling was sold at auction and broke the world record for a first release - at £7,100. Watch their first bottling here:

A glass of Englisch?

The number of distilleries has almost trebled since 2010 from 116 to 315 according to HMRC figures. But they are not all in Scotland. There are now 21 whisky distilleries in England - there was just one in 2003.

One important factor for this growth, notes the FT, was the legislative change in 2009 when HMRC agreed to grant licenses to producers distilling much smaller volumes of spirits. This has made it easier and cheaper for new ventures to get off the ground.

Many of these startups are gin-makers (and we’ll look at that delicious spirit in another briefing). Whisky making may be much more capital-intensive (think of all those years maturing in barrels) but there is no shortage of new entrants.

The London Distillery Company has produced its rye whiskey - the first bottle of whisky made in the capital for more than 100 years.

And they ain't half bad

In its first full year of sales, the Cotswolds Distillery was named Craft Producer of the Year in the “Rest of the World’ category at the Icons of Whisky Awards, beating artisan makers from whisky-loving Japan among others.

Penderyn Celt, made in the Brecon Beacons by the 14-year-old Penderyn distillery, is listed in the Top 20 Whiskies of 2018 by the US magazine Whisky Advocate magazine. (See what we mean about all the awards??)

And some are ambitious

The Lakes Distillery is even considering (or should that be nosing, or sniffing) an IPO on London’s AIM market.

Another whisky, sir?

The bar with the biggest selection of whiskies is not in Britain. The Hotel Skansen in Sweden claims that particular bragging right - with 1,179 whiskies for its guests to choose from.

Improving the raw ingredients

Plans are now in place to create the International Barley Hub, which aims to be “a world-leading centre to translate excellence in barley research and innovation into economic, social and environmental benefits.” And that is pretty pivotal to whisky. A champion of this initiative is the Invergowrie-based James Hutton Institute, which claims to be the UK's only centre of expertise for the UK's second largest crop.

Brexit: neat or on the rocks?

DIT officials are reportedly looking to see where future trade agreements and stronger trade ties could reduce export tariffs for Scotch whisky, which can be over 150% of the value of the product (yes we are looking at you India..!).

Who benefits?

Some commentators, such as the veteran Scottish economist John Kay, point out that most of the value of Scotch whisky doesn’t really flow back into Scotland. Once sales have been taxed in the countries in which it is consumed, and profits have been made by the (largely) non-Scottish owner, he reckons that only about two per cent of the total value comes back to the glens. Ultimately, he argues, the real value of Scotch to the Scottish economy lies in the jobs that are generated.

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