March 11, 2013 in Interviews
There can be little doubt that the Scotch whisky world is experiencing a boom at the moment. A recent study from the Scotch Whisky Association suggested it contributed £4.2 billion to the Scottish economy in 2012 and saw production levels reach their highest point ever.
And this trend looks set to continue. At a recent conference I attended, new research conducted by International Wine and Spirit Research (IWSR) for the Vinexpo Conference (a yearly wine and spirits event in Bordeaux) predicted global consumption levels are likely to rise 12% from 2012 to 2016. This rate is nearly more than any other main spirit category with Cognac the only other high-growth product (with expected rises of 12.22%). Baijiu (a white spirit made in China) is predicted to grow further but with that increase mostly limited to domestic markets, it is Scotch that will be taking centre stage globally.
So, what will this mean for the Scotch industry?
According to whisky writer Ian Buxton, this growth further points to a new ‘golden age’ for Scotch.
“Over the long term, whisky has a history of boom and bust. This feels different, however, as the potential growth is spread over many more markets and a new generation of consumers are transforming whisky’s image to something contemporary and fashionable,” he commented.
However, the figure of 12% growth wasn’t necessarily on the money, he said.
“If anything, the forecast seems conservative – but I would be sceptical about any five-year forecast taken to two decimal points.”
George Grant, Brand Ambassador and future heir to family-owned Glenfarclas whisky, agreed with Ian.
“We have seen it growing between 15% and 25% per year for the last five years already,” he said.
But what can all this major growth mean for a product that needs time to mature and make?
According to George: “Twelve per cent growth over the next five years is certainly going to scare some companies who are already running at full production and cannot squeeze anything else out,” he said.
“Whisky isn’t an instantaneous product, by its very nature it needs at least three years to mature in cask and whilst the craft and care that goes into whisky is one of its most redeeming selling features, it does mean that stock levels need to be very carefully managed. More demand will equal the need for more whisky and I expect that we will start to see more distillers running 24/7 production to keep up,” she said.
On the positive side, Diageo’s head of whisky outreach, Dr Nick Morgan, said this will mean more money is invested into the industry. Pointing to the £1 billion planned for increased capacity at their distilleries and the building of new sites, he said this shows the company’s confidence in the industry’s potential.
“If you’re investing in production the way we have been for the past five years, we’re talking about a belief in sustained growth for the next five, 10, 15 or 20 years,” he said.
“One negative thing has to be a quality issue: it is all well and good being able to produce more spirit, but there is only a finite amount of good casks out there to mature the whisky in, so something has to give. This is not an issue for Glenfarclas but I can foresee it being an issue for companies that were struggling to get wood last year – if they have to find an increased 12% then wood that would normally be scrapped will be getting reused,” he explained.
It could also mean a shift in what whiskies we see hitting our shelves, according to Whyte & Mackay.
“For the foreseeable future, I believe non age statement products will come into fruition. We have already seen many companies move towards this and I believe it can only be a good thing for the industry as it gives the master blender more freedom to create different flavours and finishes without being restricted by age,” she said.
Cara Laing, a spokesperson for Morrison Bowmore Distillers, agreed that there is generally a positive viewpoint towards the category.
“It’s great to see new consumers from both the UK and the emerging markets exploring the whisky category and enjoying the spirit. The potential negative is stock restrictions and in turn potential price increases,” she explained.
And what of price? Will this continued increase in demand and squeeze on supply mean the average consumer will be unable to access the bottles being produced?
According to Ian, there are various factors that will help keep prices down.
“We shouldn’t forget that the overwhelming majority of Scotch whisky (more than 90%) is consumed as relatively young blends and competition will keep prices in check,” he said.
Going forward, Nick concluded the positive points far outweigh any negative points for either the consumer or the industry.
“This is hugely good news for Scotland and communities where all whisky producers make whisky – we’re all absolutely knitted into the fabric of Scotland and I think all local economies will benefit from this growth. It’s something I am very passionate about. This is not generally a good story, this is a good story.”