Five Years in Scotch Whisky: A Report by Richard Woodard

Scotch whisky has a long and distinguished history, but few periods can have been as volatile and incident-packed as the past five years. From a global pandemic to trade wars; from a spate of new distillery openings to production cuts and job losses; from a £2.2 million bottle of whisky to fraudulent cask investment schemes – it’s been a rollercoaster period of violently oscillating fortunes for the industry, and one during which its global reach and reputation has never been more vital.

Turn the clock back five years and the world was gripped by the COVID-19 pandemic which, beyond the horrific human cost, brought society to a screeching halt, with bars and restaurants closed, and travel curtailed. As such, it was no surprise when it was revealed that, in 2020, Scotch whisky had recorded its worst year of overseas sales since 2010, with HMRC data showing a 12.6% volume decline and a painful 22.6% value slump.

A multi-coloured neon sign that reads "Everything Is Going To Be Alright" by Turner Prize winning artist Martin Creed was unveiled in the grounds of Braemar Castle, Sept 2020.

The annus horribilis was exacerbated by painful comparisons with 2019 – a record year in terms of volume and value – and Scotch becoming embroiled in a transatlantic trade spat between the outgoing Trump administration and the European Union. The result was a 25% tariff on imports of single malt into the US, Scotch’s most lucrative market, which stayed in place from October 2019 until March 2021. At the end of 2020, the Scotch Whisky Association reckoned those tariffs had cost the industry more than £400m in lost exports.

The pandemic caused obvious and lasting damage to the hospitality sector, and also the world of travel retail/duty free, in which Scotch has long been the pre-eminent spirits category. It also had a devastating short-term impact on Scotch whisky tourism, which has undergone a transformation over the past decade. Witness the £185m invested in visitor facilities by industry leader Diageo: the long-awaited Johnnie Walker Experience, which finally opened in a former House of Fraser department store on Princes Street, Edinburgh, in September 2021, as well as much-improved visitor facilities at Diageo’s Caol Ila, Cardhu, Clynelish and Glenkinchie malt distilleries.

New Year celebrations in Edinburgh, December 2019. The seven Johnnie Walker striding men statues on the Mound in front of the Assembly building; the Hogmanay street party was hosted by Johnnie Walker.

If ever anyone needed convincing of Scotch whisky’s inherent resilience, the industry’s resurgence during 2021 provided ample evidence. The highly contagious omicron variant of COVID-19 may have put a dampener on Christmas and New Year celebrations, but export shipments outstripped industry expectations, rising 21% by volume and 19% by value, spearheaded by remarkable surges in Latin America, China and India.

Nevertheless, that was nothing compared to 2022, which with hindsight may prove to be a high water mark for the industry to last decades. Volumes rose 21%, while value surged up 37% to top £6 billion – a record by some distance. India grabbed the headlines, with volumes up 60% and value nearly double that of 2021; in the process, the country became Scotch’s largest export market by volume, although it should be noted that a hefty chunk of that liquid is shipped in bulk to be used in large-volume IMFL (Indian Made Foreign Liquor) brands by domestic distillers.

Distillers heaved a collective sigh of relief. So 2020 was just a blip, the result of an unprecedented pandemic and the whims of a tariff-loving US President, right? Well, not quite…

During 2023, it became apparent that those 2022 export figures were simply too good to be true. Following the supply chain disruptions and the ‘pantry loading’ phenomenon of the pandemic, retailers, wholesalers and distributors had over-ordered, leading to swollen inventories of unsold Scotch in many parts of the world – but particularly the US, Latin America and Asia. The longer-term economic consequences of the pandemic beginning to impact consumers’ disposable incomes simply added to the toxic mix.

So much was apparent in Diageo’s profit warning, issued in November 2023, when the owner of Johnnie Walker and Buchanan’s admitted that it had taken its eye off the ball in Latin America, with sales in the region likely to slump by 20% in the second half of the fiscal year. That debacle was symptomatic of a global correction in Scotch shipments during 2023: down 19% in volume terms, and slipping 9.6% by value.

China had been the first country to be affected by COVID-19 and was one of the last to emerge from its restrictions at the end of 2022, but it was soon apparent that the market was being affected by deeper issues. Lacklustre economic growth, a fragile stock market and a real estate slump negatively impacted consumer sentiment: people may have been returning to bars and restaurants following the pandemic, but they were doing so less frequently – and spending less when they did.

If China has failed to live up to its promise over the past few years, however, there is little sign of the industry’s big hitters doing anything other than sticking with it. Speaking in early 2024, Alex Ricard, CEO of Pernod Ricard, Scotch’s second-largest brand owner, admitted that there were “macroeconomic headwinds”, but emphasised: “The reality is that our consumer pool in China is middle-class Chinese households, which are expanding … Over time, we remain very confident on China.”

Such periods of volatility are challenging for businesses of all sizes, but especially so for the many new and small distilleries that have entered the Scotch whisky scene over the past decade or so. An estimated 40 distilleries opened in Scotland between 2008 and 2022, with 40 more at various stages of planning or construction. A trio of ‘ghost’ distilleries – Brora, Port Ellen and Rosebank – have also restarted production over the past few years.

Rosebank Distillery was reopened in June 2024 after a 30 year closure.

New and planned projects encompass yet more distilleries on Islay – including Portintruan from Elixir Distillers, which also acquired Tormore on Speyside from Pernod Ricard-owned Chivas Brothers – but also new builds in Campbeltown and as far afield as the Port of Leith and the Isle of Barra.

New distilleries and new ways of thinking can help to rejuvenate an industry that is sometimes characterised as cautious and conservative, but Scotch whisky is a long-term business that requires careful planning and deep investment.

As the cost of energy and raw materials spirals, and interest rates remain stubbornly high, some will face a battle to survive. In April, Isle of Harris Distillers, established in 2015, announced plans to restructure the business, including job losses and reduced production – only 18 months or so after the launch of its first single malt.

Nor are such measures confined to smaller operators. In January this year, US spirits giant Brown-Forman announced that its Glenglassaugh malt distillery would effectively be mothballed, via a “shared production model” with sister plant Benriach. And in May this year, Diageo unveiled plans to drastically cut costs across the business, although Scotch has not – yet – been impacted by the move.

For some time, it appeared that Scotch’s secondary market – where rare bottles are bought and sold by collectors and investors – was immune to the troubles affecting the wider world. In November 2023, a collector paid a world record £2.2m to buy a bottle of The Macallan 1926 Valerio Adami edition at Sotheby’s in London.

Such transactions, however, are fast becoming exceptions to the rule. According to the Noble & Co Whisky Intelligence Report published in April this year, the secondary market in Scotch has “experienced an ongoing substantial decline”, with total transaction volume down 21% in the fourth quarter of 2024 versus the same period in 2023, and total transaction value down 53%.

Many in the industry will hope that this correction will have a knock-on impact on the rash of cask investment schemes that have crowded into the market in the past few years. An eight-month BBC investigation, unveiled earlier this year, uncovered a number of scams that had duped people into handing over their savings, lured by the promise of unrealistic returns. In many cases, investors discovered that they had paid up to five times the market value for casks – some of which didn’t even exist.

Add to all of the above the on-off threat of tariffs from the second Trump Administration in the US – and the generally fractious global trade environment – and these may look like troubling times for the Scotch whisky industry. Returning to those export figures, 2024 represented a mixed picture, with export value down 3.7% to £5.4bn, but volumes rising 3.9% to 1.4bn bottles.

But there are positive signs too. India has established itself as the industry’s biggest export market by volume (with that caveat about bulk shipments), even before the recent announcement of the long-awaited free trade agreement (FTA) with the UK. That means a halving of import tariffs from 150% to 75%, with a further cut to 40% within a decade.

According to the Scotch Whisky Association, that could mean an extra £1 billion rolling into the coffers of distillers over the next five years, creating 1,200 jobs in the process. The move, it is hoped, will start to open up the world’s most whisky-crazy market to smaller companies who previously lacked the wherewithal to enter – although it should be said that India remains a complicated and highly bureaucratic country in which to do business.

Those 2024 export figures also highlighted the promise of other relatively untapped markets – perhaps most notably Türkiye, which has now overtaken France and Spain to become the planet’s third most lucrative destination for bottled blends.

These bright spots in an otherwise slightly gloomy picture illustrate a broader truth about the multi-billion-pound Scotch whisky industry: its breadth, reach and global status as a product which many millions of consumers aspire to drink. As demand in China ebbs, the tide rises in India and elsewhere.

The next few years will have their challenges – and not all of the recent distillery start-ups will probably survive the difficulties that lie ahead – but the industry as a whole will do what it has always done in the past: evolve, adapt and – in the longer term – thrive.

Richard Woodard is a journalist and drinks writer with more than 20 years’ experience covering the global spirits industry, with a particular focus on Scotch whisky.