A toast to success - Cheering news from the Scotch whisky industry
 - November 2011
It appears that the whole world from Azerbaijan to Albania, from South Africa to Singapore and from Turkey to Taiwan is learning to appreciate uisge beatha - the water of life.
In spite of global economic uncertainty Scotch whisky exports for the first half of this year soared by 22% to £1.8 billion with success not confined to emerging markets but also being achieved in traditional markets like America and France.
So what are the secrets to selling the equivalent of 569 million bottles overseas during January to June? Can other industries learn from one of the main drivers for the UK and Scottish economies in building export markets?
Rosemary Gallagher, Communications Manager for The Scotch Whisky Association, said that USA remained the top export market by value rising 14% to £268m with France rising a similar percentage to £219.5m. But emerging markets such as Asia and South America are becoming increasingly important; Taiwan is now a top five market having risen to £70m from £48m and shipments to Brazil were up 56% to £44.8m.
The rise in sales to Brazil had moved it into the top 10 and whisky is now the 6th largest UK export to Brazil.
“The expectations are for Brazil’s economy to continue to grow by between 4 and 5% per annum.
“Whisky is being bought by generally young, newly affluent consumers who tend to buy premium, blended Scotch whisky to ‘make a statement.’”
She said consumer confidence was strong and recent breakthroughs in trade relations with South Korea and better legal protection for Scotch whisky in India and Turkey - which mean only products made in Scotland can be called “Scotch” - give optimism for further growth.
“The story in Asia - Taiwan, India and China - is very similar to that in Central and South America. They are emerging markets with fast-growing economies and an emerging middle class who see Scotch whisky as an aspirational drink. Again it is the premium brands they are interested in.
“Taiwan is one of the biggest export markets for single malt and blended malt whisky so they are very discerning consumers.
“The Taiwan economy slowed down earlier than many other countries during the global economic downturn and started to pick up earlier so it’s now doing better than many other countries.
“As long as these markets continue to grow, we see no reason for any change in this trend.”
She said China was a growing market with much of the Scotch whisky which ends up there going through Singapore which is a big distribution hub.
The demographics of India, continued urbanisation, the emergence of a wealthy middle class are all reasons why Scotch whisky producers see India as a major opportunity for exports.
However, Scotch whisky, and other non-domestic spirits, still have a relatively small share of the overall whisky market in India largely down to the 150% import duty applied to international brands. Ongoing free trade negotiations between India and the European Union present a unique opportunity to offer Indian consumers wider variety and choice.
Michael Urquhart, joint managing director of Gordon & MacPhail, an independent family-owned and managed firm which has been bottling single malt whiskies for more than 116 years, said there was an increased desire for consumers around the world to enjoy the finer things in life and Scotch whisky is one of those.
“We have been exporting since the early 1900s and we now export to about 50 different countries. In the year to February our exports went up 57% and in the six months to date we are up 26%.
“We are seeing some growth coming through from America, strong demand in France, Germany, Holland, and then the Far East is really driving the increased volumes – Taiwan, Japan and mainland China are coming through quite strongly now – so it is a mix of those.
“Scotch whisky is a product which is closely related to affluence and if you look at the countries in the Far East, which are predominantly spirits markets – spirits first beer second wine third - people sit down for a business dinner and they will consume spirits with the dinner not wine as a sign of prestige.
“It is a sign that you are being successful if you have a single malt whisky or an older single malt whisky on your table but they also enjoy spirits in general. In China, for example, the main spirit consumed by the masses is made from rice so if you can afford to trade up you are going to go for a nicer smoother tasting spirit and Scotch whisky has that potential – it is recognised throughout the world as being of high quality.”
He said the reputation of Scotch whisky helped open up new markets.
“We actually find people seeking us out because they hear of our reputation and reputation and quality go hand in hand.”
He said when the recession hit America they were able to offer younger whiskies, but still of quality, at a competitive price which ensured people remained in the Scotch single malt market as opposed to spending their money on other spirits.
“When times get better they will trade up within the Scotch whisky sector to maybe a 15, 21, 30, 40, 50 or maybe even older.
“We work closely with our distributors because if it works well for them and it works well for us then that is a win-win.”
It is a similar positive story with J & G Grant of the Glenfarclas Distillery.
George Grant, Brand Ambassador, said: “Last year was our best year ever and this year we are up again. It is just going from boom to boom. There are countries where things are struggling, Spain and Greece for example, which you would expect, but Portugal is doing remarkably well so you can’t put it all on the recession.
“Our sales are going up significantly in developing markets which, percentage wise, they are phenomenally up but Germany which is our best market, is up 10%. When your best market is up by that level even if a new developing market sells a couple of thousand cases it is still not as much.
“Being a family owned business has helped us. I think there has been a bit of a backlash against the big corporations, not just in the whisky world. People are looking to move away from the likes of big supermarkets and shop more in their local food store or bakers. In the UK Fresher has gone and it is the independents which now have the power and they would much rather support someone who is independent.
“If you are going to try and sell a product anywhere go and visit them, see their operation, see their market place. A big mistake a lot of people make, and the Scotch whisky industry has made in the past, is they assume every market is the same as their own and quite clearly it isn’t.
“You say to people in the UK ‘Where do you buy your whisky?’ and 99% of them will say ‘In the supermarket.’
“But go to an awful lot of other countries and the supermarkets don’t have liquor licences so you have to completely change your philosophy on how you are going to sell products.
“Also promotions which are acceptable in one country could be illegal in another.
“Definitely fly the flag for Scotland, tell people you are from Scotland and it is a Scottish product.”
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