Clouds on the Horizon

Numbers Schnumbers and the Scotch Whisky Ocean

It’s too early to do a deep dive as a follow-up on the piece I released at the beginning of the year, but I’m motivated to get these words down, because things are looking grim.

An 18% drop in the value of Scotch whisky exports (for the first six months of 2024 over 2023) should be sending enormous shock waves throughout the industry. Perhaps, just maybe, those big corporate bonuses, acquisitions, and continued patting-on-the-backs should be kept at bay. 

Looking at the numbers issued by the SWA, exports in volume fell by just over 10%—enough to send shivers up the spines of even the most optimistic sales forecasters. But it is clear that the major scythe is cutting through consumers and their habits at the premium end of the industry. The Grim Reaper is still busy administering his final touches to the tequila industry so Scotch, and whisky in general, has some breathing room, but a return to the giddy, ‘everything will sell’ days of Covid are gone like the final sunset on a glorious holiday. 

In typical SWA, ‘speak’, blame is apportioned to the 25% levies on Scotch imported into the US between late 2019 and early 2021, and recent UK tax hikes. In truth, neither of these factors are the driving force behind what we all know is hitting the luxury side of the Scotch whisky industry: over-premiumisation, a complete cooling of secondary prices (ergo making retail numbers look about as realistic as a Simon Cowell facelift), market saturation and perhaps the most important x-factor: consumer apathy and changing habits. 

In particular - and perhaps due to an inability to lobby anywhere else - the SWA are (rightfully so) banging on the door of the UK government that higher taxes equals lower sales, which ultimately leads to less tax. Several countries either ignore the common sense of this argument (Ireland and Australia – I’m looking at you) or feel spirits are an evil that must be whacked to death with a big tax stick. 

India has now become the largest importer by volume – something many larger distillers have been dreaming of for some time. So well done to them. But is India really the holy grail of a market everyone has been yearning for? The Tariffs on Scotch whisky are still 150%, meaning a bottle of something like McDowell’s (an Indian whisky) sells for about £5 a bottle, whereas Johnnie Walker Red sells for around £24. Remove those tariffs, and we are still somewhere around double what a bottle of McDowell’s costs - a brand shifting over 31 million cases compared to JW Red’s 14 million (worldwide sales, don’t forget…). India is now the largest importer of Scotch because products such as McDowells has ‘some’ Scotch whisky as part of its make-up. It’s the Japanese story all over again… isn’t it?

Summary of H1 2024 Scotch Whisky exports  

Source: scotch-whisky.org

Export value of Scotch Whisky in H1 2024 was £2.1bn, down £463.2m (-18%) compared with H1 2023 

Export volume of Scotch Whisky in H1 2024 was 566m 70cl bottles (equivalent), down 64.3m (-10.2%) 70cl bottles compared with H1 2023 

H1 2024 is the 4th highest value export total since record began. 

Top 10 Markets  

The largest export destinations for Scotch Whisky (defined by value) during H1 2024 were: 

• United States: £421.4 -3.5% (£436.5m in H1 2023) 

• France: £158.5m -32.61% (£235.1m in H1 2023) 

• Singapore: £128m -22.3% (£164.7m in H1 2023) 

• Taiwan: £117.1 -21.5% (£149.1m in H1 2023) 

• India: £105.7 +11.9% (£94.5m in H1 2023) 

• Japan: £80m -7.5% (£86.5m in H1 2023) 

• China: £77.9m -42.4% (£135.1m in H1 2023) 

• Germany: £63.5m -30.3% (£91m in H1 2023) 

• UAE: £61.3m +0.1% (£61.2m in H1 2023) 

• Spain: £61.1m -24.9% (£81.4m in H1 2023) 

The largest export destinations for Scotch Whisky (defined by volume, 70cl bottles equivalent) during H1 2024 were: 

• India: 85m bottles +17.3% (72.5m bottles in H1 2023) 

• France: 76.7m bottles -13.08% (88.2m bottles in H1 2023) 

• United States: 54.6m bottles -7.6% (59.2m bottles in H1 2023) 

• Japan: 34.7m bottles +13.4% (30.6m bottles in H1 2023) 

• Spain: 21.6m bottles -24.1% (28.5m bottles in H1 2023) 

• Germany: 21.5m bottles -21.2% (27.3m bottles in H1 2023) 

• Türkiye: 17.4m bottles -5.7% (18.5 bottles in H1 2023) 

• Brazil: 16.5m bottles -22.9% (21.3m bottles in H1 2023) 

• Poland: 16.2m bottles -1.8% (16.5m bottles in H1 2023) 

• China: 13.8m bottles -14% (16.1m bottles in H1 2023) 

Regional data 

In H1 2024, Scotch Whisky exports by global region (defined by value) were: 

Asia Pacific:  £661.3m  -21.9% 

European Union: £517.4 -29% 

North America: £485m -7.8% 

Middle East and Africa: £178.8m -8.6% 

Central and South America: £173.4m -2.4% 

Europe (ex.EU): £90.4m  -4.4% 

In H1 2024, Scotch Whisky exports by global region (defined by volume, 70cl bottles equivalent) were: 

Asia Pacific:  184.8m +0.8% 

European Union: 189.9m -20.7% 

North America: 67.2m -13.4% 

Middle East and Africa: 40.3m -2.7% 

Central and South America: 50.6m -8.8% 

Europe (ex.EU): 33.3m +0.4% 

India aside, as frankly, the readers of Dramface are not stocking their shelves with either McDowells or JW Red (nothing wrong with either; I’m just making a massive assumption), it is the enormous drop in value that has my eyes widening. Who is taking this hit? Could it be that the large discounts on premium Diageo bottlings and, incredibly, ‘Reduced’ stickers on bottles in airports (‘I have never seen such a thing’) are a sign of price adjustment, forced by consumers ignoring clearly over-priced products? You would think so, right? 

And yet, just before the bombshell news released by the SWA we witnessed several product re-vamps that came with those obligatory price hikes. 

So what is happening? Are some companies still of the mindset that their products are impervious to market conditions? A sort of ‘those drops in value don’t affect us’, or ‘our customers are ignoring other brands to concentrate on ours’. Or perhaps it is a ‘recoup any loss by gaining more profit on each sale, even if it means less sales’ mentality? Frankly, I dunno what is going on in the minds of many of these companies. Tunnel-vision. Partial blindness. An unwillingness to believe that anything they release could possibly have a price ceiling? It beats me.

Just take a look at the Dramface readership reaction to this news release over Ardbeg’s latest, their re-imagined 17yo. 

One thing is certain, however, if this trend continues – and let us not forget we have bred a generation more concerned with their eyebrows than quality drinks – projections and forecasts are about as meaningful as a certain piece of white paper waved around by Chamberlain in 1938.

That means the ocean (we are far beyond a Loch at this point) of maturing whisky, made due to the notion that Scotch whisky would always and forever have double-digit growth, is going nowhere quickly. And that means that companies will begin to feel the pinch. Whilst cash is not king anymore, fluidity still pays the bills and ironically many companies could find their fluid retention causing the losses. 

Look, I hate bringing the bad news. I really do. But sometimes you’ve got to read the writing on the wall and these letters are now so large that it would require a wall the size of a Pink Floyd concert to allow enough space. I have lost count of how many new distilleries have been announced since I wrote my Keeping Up With The Newborns article at the beginning of the year. I’ve also lost count of how many existing distilleries have announced enormous production expansions. And most bizarrely is the number of yet-to-be-built distilleries looking for capital. I’m pretty sure I’ve still got some magic beans available should you have several £million floating about. 

Anyone watching the secondary market will have lost count of the number of bottlings that are (considerably) cheaper at auction. Or the continued deep cuts and sales through retail - many at wholesale prices. As Prince sang ‘this is the ‘sign o’ the times’. It is just possible that we are witnessing the death of the arbitrary pricing strategy adopted by so many distillers? No longer can anyone watch the secondary market and price their next release accordingly – unless they are prepared to come to terms with a drop in their wholesale price. 

Imagine bringing that up in the next sales meeting…

FF