Last year, Niall Handy, Head of Sales for Scotland & Northern Ireland, examined a recent report from the Scotland Food and Drink industry group highlighting a gin boom, and that gin would outsell whisky in 2020.
Well, 2020 hasn’t been the most predictable of years. Sales of food & drink have been heavily impacted by Covid-19, with some beverages and produce highly sought after, and others left on the shelves.
During Whisky Month, much of Scotland would have been celebrating with festivals and whisky competitions. With those plans in disarray, we’re looking at how the world is still embracing scotch, and other tipples, despite these challenging times.
Embracing Scotland’s heritage
A quick web search will show that there are more than 150 gin brands produced in Scotland; an increase in demand has led some industry experts to suggest that gin could overtake whisky sales in the near future. Demand has grown in part due to the increasing popularity of cocktails, but in many cases, whisky distillers across Scotland are opting to produce gin because it is quicker and easier to make and offers a faster return while whisky must mature before sale. Using existing skill-sets and expertise for gin production is perhaps why around 70% of all the gin produced by the UK is made in Scotland.
Three of the world’s best-selling gins are made in Scotland – Hendrick’s, Gordon’s and Tanqueray – but it is with the boutique firms that much of the strong growth is being realised. One of the reasons Scottish gin has grown in popularity is because makers are embracing their heritage. For example, The Botanist Islay Dry Gin is made from a selection of wild plants and herbs from the island to give its unique flavour. The House of Elrick uses fresh water from Loch Ness to make their gin, and has a heritage dating back to the Scottish Enlightenment in 1720.
Exporting a piece of Scotland all over the world
While gin is enjoying a boom, traditional Scottish whisky is not being left behind. Analysis of HMRC data by the Scotch Whisky Association (SWA) found exports grew 7.8% by value in 2018. Bulk whisky for bottling abroad and bottled single and blended grain whisky exports together amounted to £359m. The reputation of Scottish whisky travels a long way – the US became the first billion pound overseas market last year, although the EU remains the largest market, representing 30% of global value and 36% of volume sales.
Roughly 3% of total Scottish GDP comes from the spirits industry; whisky alone accounts for 20% of all the UK’s food and drink exports and the growth in gin will make this industry another force to be reckoned with on the global market. The industry is a major employer in Scotland and helps to support other industries such as tourism as visitors flock from across the world for distillery tours and whisky trails.
Coping with coronavirus
Despite the challenges, Chinese buyers have returned to the market after the easing of lockdown restrictions, with global trader BI Fine Wine & Spirits reporting a 25% increase in March volume sales of wine and rare whisky. Sales of whisky, both Scotch and America whiskies saw increased demand across Asia.
Russia also saw a spike in alcohol sales, with shoppers rushing to buy vodka, but also whisky and beer as the virus spread to the country and the government imposed a lockdown. While French drinks group Pernod Ricard, who own Glenlivet Scotch whisky as well as Jameson Irish whiskey, saw Q1 sales fall 14.5%, the UK saw sales grow by 2%.
The IWSR Status Spirits Strategic Study found that status spirits, retailing for $100+, such as rare Scotch whiskies, have proved to be resilient to economic curveballs, according to their 2020 research. This resilience to market conditions is good news for the industry, especially as status spirit markets can be typically quite dependent on Chinese customers, as well we tourists and global travel, all of which have suffered because of Covid-19. The established Scotch category is heightening demand for status spirits over and above other alcoholic counterparts.
Distilleries and brands joined the fight against coronavirus, with many changing their production line to hand santiser instead. The Scotch Whisky Association even helped put businesses in touch with another, connecting distillers who needed ingredients to produce santiser to companies who could supply it, as well as material and packaging firms. Whisky producers also came up with unique ways to also stay connected to customers during lockdown, even if sales didn’t suffer as badly as other sectors. Single malt whisky brand Glengoyne created a limited edition jigsaw puzzle to a bid to entertain people in lockdown who enjoy a tipple.
A cyber-attack on The Perfect Collection auction by the Whisky Auctioneer has also highlighted the increase in attention whisky is enjoying globally. While fake bottles have been found in auctions and trades for a few years, this type of attack on one of the most widely known whisky auctions also reveals how the industry may need to adapt to not suffer from such incidents again.
Using an FX expert
Producers looking to explore the potential of export markets within the alcohol industry, or even the food and drink industry as a whole, do face some challenges. Not just from Covid-19, but also Brexit, which has put a question mark over European markets and may see exporters branching out further to spread their risk. The uncertainty is also leading to greater volatility in currency markets and those fluctuating currency values can impact margins and make revenue and costs harder to predict. That’s why we work closely with distillers who have global ambitions to manage all their international payments in multiple currencies with great rates, expert guidance and a range of specialist tools to mitigate the risk of fluctuations in the value of the pound.
It’s clear that there is a lot of global potential in Scotland’s distilleries and support from a currency specialist can help producers make the most of that opportunity. Our Scottish office in Edinburgh can assist you with your payments and together we can raise a toast to the good health of distilleries across the country - sláinte mhaith!
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