Doubles All Round

The days of the Covid super-cycle that spun exports to a record £6 billion are a distant memory, as Scotch prepares for 2025. In these challenging times, real long-term vision and a dram to steady the nerves are what’s needed reckons Tom Bruce-Gardyne…

As we put 2024 to bed and contemplate the year ahead, the Scotch whisky industry could well do with a stiff drink. The latest export figures from the Food & Drink Federation for the first nine months of the year show a 36.4% fall in value compared to the same period in 2023. Volumes were 28.5% adrift.

Nerves must be a little frayed at the moment with falling demand in many key markets, and intense price competition over the festive period. It is a time for steadying the ship and keeping a cool head.

Of course, the industry should be predisposed to real long-term thinking given the way it is structured with that infamous time lag from distillation to being bottled and sold. In the case of Diageo, for example, what is filled into cask this year won’t see the light of day until 2031-32 on average.

However, other forces are at play, pulling in the opposite direction. The boardrooms of the big, publicly-quoted distillers have to appease the City and its craving for jam today, or at least every six months. While on the frontline, with sales teams struggling to defend or grow their brands’ market share, few will be thinking much beyond their year-end targets.

“We are in a tough moment right now,” concedes Kirsteen Beeston, global marketing director for Bowmore and Suntory’s other Scotch and Irish whiskies. “Consumer confidence isn’t there with spending affected by interest rates and inflation, and that may result in some short-term measures to ensure businesses extract what they need from the category. But, by and large, I feel the majority of these big businesses are still in it for the long-term.”

“I think you only need to look at the swathe of innovation,” she says, “the investment in marketing campaigns and brand homes, and the level of consumer engagement to bring more people into Scotch, and single malts in particular, to know the commitment is there.”

This will be put to the test in 2025, not least in the drink’s most valuable market – the US with its ominous threat of tariffs when Trump takes office on January 20^th. Three days before the US election, Scotland’s First Minster, John Swinney, publicly endorsed Kamala Harris, a point noted by Trump’s son Eric on a flying visit to his dad’s Aberdeenshire golf course in late November.

“My father adores Scotland, and you have a First Minister coming out and just being fairly nasty in the days leading up,” he told reporters, adding “if he ever needs to call my father and ask about tariffs or negotiate a base, does that benefit Scotland?” Well, the call came just a few weeks later on December 10^th and while tariffs were not discussed directly, Swinney waxed lyrical about the cultural and economic significance of whisky and golf.

Does the Donald care? Not really, you’d imagine - and nor will Peter Mandlesohn, the UK’s newly appointment US ambassador, have much sway on the issue. Last time, when single malts were hit by 25% tariffs from October 2019 to March 2021, it cost the industry over £600 million according to the Scotch Whisky Association (SWA).

That time the drink was caught in the crossfire of a totally unrelated trade war between Airbus and Boeing. The tariffs are only suspended until June 2026, which sent the SWA scuttling across the Atlantic in May to team up with the Distilled Spirits Council of the US (DISCUS) to lobby Congress. Trump meanwhile, was soon ramping up the rhetoric about “the most beautiful word in the dictionary,” as he calls it.

“We’re going to have 10 to 20% tariffs on foreign countries that have been ripping us off for years,” he told a campaign rally in August. If that includes the UK, and all Scotch whisky, not just single malts, it would be pretty devastating for the industry. But perhaps it’s all just bluster, or simply an attempt to soften us up for a UK-US trade deal. Maybe Scotch will be let off the hook if we promise to eat enough American chlorinated chicken. Who knows?

If it comes to it, the industry’s best hope may lie with American distillers and their ability to lobby for restraint. Last time around their whiskey shipments fell 37% by value to the EU and by 42% to the UK by value thanks to tit-for-tat tariffs from 2018-21.

Talking of tariffs, it feels the industry is long overdue some good news from India. Could 2025 be the year it finally happens that a trade deal is signed? With no general elections in either country to distract negotiations, one can but hope. That said, even with its 150% protectionist tax wall, more Scotch seeps into India than anywhere else on earth. In the first half of this year, its shipments jumped 17% to overtake France.

Whatever happens here and in America, there is a vast world of Scotch to tap into which has always been one of its greatest strengths. As Kirsteen Beeston says: “We have the benefit of having a really broad geographic footprint which gives us a level of resilience to withstand the different pressures around the world.” Batten down the hatches, 2025 is almost upon us.