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Scotch Whisky Sector Enjoying ‘Strong Growth’ Says Insurance Expert

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Scotch Whisky Sector Enjoying ‘Strong Growth’ Says Insurance Expert

Scotch Whisky Sector Enjoying ‘Strong Growth’ Says Insurance Expert
January 08
09:36 2019

With no fewer than 122 active distilleries across the country, the Scottish whisky sector is enjoying one of its greatest periods of growth and investment in recent times. Indeed, with 23 of them opening since 2013 – ten in 2017 alone as well as a further 20 planned or projected over the coming years – the appetite to open malt distilleries shows no signs of abating.

Graeme Dempster celebrates the strength of one of Scotland’s most enduring and lucrative industries…

Single malt whisky distilling is set to return to Edinburgh for the first time in almost a century after planning permission was granted for the Port of Leith distillery – the first vertical such facility in Scotland – and Holyrood Park distillery, which plans to transform the Engine Shed near the Queen’s Park. Similarly, John Crabbie & Co also recently announced plans to invest £7m to build a distillery at Graham Street in Leith.

Earlier last year, Macallan launched their own new £140m facility and visitor experience in May, and Diageo announced plans to invest £150m to upgrade its 12 distillery visitor centres, as well as building a brand home for Johnnie Walker in Edinburgh.

Meanwhile, there was news of the reopening of three long-closed iconic distilleries which were never expected to return to production; Port Ellen on Islay, Brora in Sutherland and Rosebank in Falkirk.

This resurgence lies in stark contrast to times gone by, when just nine new distilleries were built over the 25-year period from 1987 to 2012, and there were 55 closures between 1980 and 2002 as the industry went through a tough period of rationalisation.

As if to emphasise this growth, a new Hebridean whisky trail incorporating a 115-mile journey to Torabhaig and Talisker distilleries (pictured above)  launched in 2018, and provides both whisky enthusiasts and Scotland’s economy with an important addition to their repertoires.

Scottish Tourism Alliance Chief Executive, Marc Crothall

And important it certainly is. According to figures released recently by the Scotch Whisky Association (SWA), whisky tourism grew to record levels last year with almost 1.9m visits to visitor centres, up 11.4% on the previous year and a rise of 45% since 2010. Scottish Tourism Alliance chief executive, Marc Crothall (pictured right), said: ‘These figures highlight the perfect blend of whisky and tourism as a major international draw for visitors to Scotland and underline how important it is that we as an industry continue work together to create and deliver these original, authentic and memorable experiences for each visitor.

‘This is the primary focus of the recently launched Food Tourism Strategy. The continued investment in distilleries – many of which are STA Members in their capacity as visitor attractions – serves as a reminder of the economic impact that investment in the tourism industry can bring to Scotland’.

However, while the UK market – which accounts for 6.7% of industry sales – continues to shrink, mainly due to the performance of blended whiskies, exports of single malt returned to growth last year.

As a result, the industry has most certainly benefited from the recent falls in the value of the pound. According to figures published by the SWA, volume is up by 1.6% to 1.2bn bottles and value has increased by 8.9%, with sales reaching £4.36bn. Scotch Whisky now accounts for 20% of all UK food and drink exports, in addition to more than 40,000 jobs.

All that being said, there are plenty of challenges ahead for the sector, from increased competition to the high level of duty in the UK. Likewise, the implications of Brexit remain unclear, but whatever the result of the negotiations, the industry is likely to be disrupted on account of any logistical and transport challenges that may lie ahead.

Tourist spend was up to £60.9m last year, an increase of 15.6%

It’s clear that the terms under which Britain will leave the EU must be made clear as soon as possible in order to to allow the Scottish whisky industry to prepare in advance. The future of prized geographical indications (GIs), which are protected under EU law, is essential in safeguarding the quality and reputation of Scotch Whisky.

On a positive note, malt distilleries are becoming highly fashionable once again, as consumers use premium products to enhance their social status. Distillers and other distributors are promoting product features such as heritage, age, authenticity and quality to distinguish their products from competitors’,  and to help build their brand among consumers. Recent examples include Ardnamurchan Distillery launching a scannable QR code for its bottles. The software, called Blockchain, provides importers and buyers with absolute certainty in what they are purchasing against a backdrop of increasing counterfeit spirits.

The creation of the Scottish Craft Distillers Association, now part of Scotland Food & Drink, should help encourage growth within craft distilling in Scotland. We may end up seeing some of the smaller independent distillers consolidate and merge their business operations to reduce cost and create economies of scale for purchasing cereals and other dry goods.

Although the industry faces a period of uncertainty, Scotch whisky has shown for generations its ability to remain the preeminent international spirit of choice, and the current boom is helping to position Scotland at the cutting edge of global tourism.

Graeme Dempster is a commercial account executive at Bruce Stevenson Insurance Brokers.

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