Latest News. 4
Scotch Whisky is popular in Commonwealth
Almost a fifth (19%) of exports of Scotland’s national drink goes to Commonwealth countries. Last year exports to the Commonwealth were up 1% on 2012 to £793 million, out of a global total of £4.3 billion. Singapore is the largest market in the Commonwealth for Scotch Whisky with exports of £330m last year. However, a lot of that Scotch will go to other parts of Asia as Singapore is a distribution hub for the region. The second biggest overseas destination for Scotch in the Commonwealth is South Africa with exports of £163m last year. It has been a growing market for several years now. While this growth is expected to continue, new markets are also emerging across Africa. For example, there is great potential in Nigeria. Last year, exports to Nigeria were up 43% to almost £14m, making it the seventh biggest market in the Commonwealth. Africa is one of the fastest developing markets for Scotch Whisky.
Economic growth is occurring and individual disposable incomes are increasing for many of the population. There is a growing middle class in many cities across Africa who regard Scotch as an aspirational drink. India is the fourth largest export market for Scotch in the Commonwealth, with exports of £69m last year. It is hoped the European Union-India Free Trade Agreement talks will resume which will lead to the reduction of the onerous 150% import tariff on spirits in that market. David Frost, Scotch Whisky Association chief executive, will be involved in a panel discussion on ‘Trade as a driver for development and economic growth’ at the Commonwealth Games Business Conference, organised jointly by UK Trade and Investment, the Scottish Government and Scottish Enterprise, at the University of Glasgow on Tuesday 22 July. He said: “In many Commonwealth countries Scotch Whisky has been popular for years. As economies in other countries develop, young, professional consumers are developing a taste for Scotch Whisky which they rightly regard as an aspirational drink of quality.
21 Jul 2014
With media enquiries please contact Rosemary Gallagher, SWA communications manager on 0131 222 9230/07432 605385 or email rgallagher@swa.org.uk
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Breaking New Ground – New Distillers Forum
I felt a real buzz when I arrived at our first New Distillers Forum event in Perth on Monday. The Scotch Whisky industry is enjoying record expansion with great confidence in the future. This is good for the wider economy and is creating optimism across the supply chain. I thought that optimism was abundant at our event to help new entrants make sense of the commercial and regulatory landscape governing Scotch whisky production. The numbers say it all – more than 30 new ventures attended the fully-subscribed event.
After the rationalisation of the 1980s and early 1990s, Scotch producers of all sizes are now investing in expanding production capacity and infrastructure. Some £2 billion of investment is committed over the next two years. This kind of growth has not been seen since the early 1970s and it feels to me like a great time to be working in this industry. As a result of the entrepreneurial spirit of those I met at our Forum, the number of distilleries licensed to operate in Scotland is set to grow from 109 to… well… who knows. These planned developments span the country from the Borders to the islands and range in size from micro distilleries to sites at a scale akin to mature distilleries in the sector. They are poised to help create jobs and underpin communities around the country. This surge in investment reflects confidence in Scotch’s strong export performance over the last ten years, with international prospects remaining bright.
New distillers will benefit from being able to walk in the footsteps of those who fashioned the age-old traditions that underpin the making of Scotch and, if successful, will build brands upon the best of what went before. This advantage comes with a responsibility to safeguard the industry’s reputation for consistency and quality while innovating and making a modern offer to an ever more educated market place.
But new distillers also face many barriers to entry. Scotch Whisky is, by its very nature, a long-term investment, with limited returns over the first decade. There is a complex array of licences, rules and regulations to navigate and cash flow to generate. It is no doubt a daunting, as well as exciting, prospect.
Delegates at the event heard that starting a new distillery is not for the faint-hearted. Those who have succeeded have faced ups and downs, delays and heartache. It requires patience, passion, a long-term view, investors with foresight and access to the correct advice to ‘get it right’ first time. This is all while daring to be different in an industry where new developments have been the norm rather than the exception.
The SWA exists to help create the conditions for Scotch Whisky’s long-term growth at home and abroad – from legal protection of Scotch Whisky from fakes to securing fair and equal access to export markets.
My own focus is to secure a competitive and sustainable business environment for all distillers, in areas as diverse as energy, taxation, product labelling and marketing. As our industry evolves, we want to work with new distillers to steer them towards the best available advice and to learn more about their plans. We were pleased to be joined in Perth by a number of high profile and expert speakers from Fergus Ewing MSP, Minister for Energy Enterprise and Tourism, HMRC, the Scottish Environment Protection Agency (SEPA), Scottish Enterprise and, importantly, from individuals such as Anthony Wills of Kilchoman Distillery who has already navigated the unclear path to create a durable site with an international brand.
I hope our event will help new distillers take their plans forward and I wish them every success in their exciting ventures. Judging by the number of handshakes I saw at our New Distillers Forum, the business cards being exchanged and the real bustle over coffee and lunch around the exhibition, I feel encouraged that this new generation of distillers are on course to engage, collaborate and learn, as well as, perhaps question and challenge. This is the stuff our great industry has been built on.
Julie Hesketh-Laird, Scotch Whisky Association director of operational and technical affairs
Scotch Whisky: Powerhouse in Europe
I was happy to be back in Brussels this week, my old stamping-ground when in government. I was speaking at the launch of SpiritsEUROPE’S brochure on the importance of spirits exports to European prosperity.
Its title says it all, Spirits: a European powerhouse for trade. The keynote speaker was the European Commissioner for Trade, Karel De Gucht. Also on the panel, compered by Paul Skehan, SpiritsEUROPE’S director, were my opposite number in France, the head of the Cognac association (BNIC), Catherine Le Page, and Hosuk Lee-Makiyama, from the think-tank ECIPE.
All of us in our different ways underlined the success of the European spirits sector. Over the decade to 2013, European spirits exports outside the EU doubled to €10 billion, making them the EU’s most valuable agricultural export. Scotch Whisky represents about 40% of this total. We also underlined the sector’s capacity to carry on increasing exports significantly over the next five years, and stressed how important it was for the incoming European Parliament and Commission to carry on supporting a positive trade agenda.
I said the following about the success of the Scotch Whisky industry over the last decade:
1. We currently export €170 of Scotch Whisky every second from the UK, with about €100 going outside the EU, and that proportion growing. The growth in our exports tracks growth in emerging markets, and even in difficult markets our record is good. For example, in India our exports increased by 12% last year, despite all the barriers and a 150% tariff; Brazil is our 10th biggest market, with exports up by nearly 20%. And in Nigeria, although exports are still well below potential, we saw them increase by over 40% last year. Getting fuller and freer access to these markets is vital if we are to continue to succeed.
2. We have succeeded because:
– we make a long-term commitment. Scotch Whisky companies have had a presence in the main emerging markets for years. They know local preferences and networks and can work with them. They have invested in high-reputation brands that appeal to aspirational consumers.
– we protect our reputation. We’ve made a determined effort to make sure Scotch Whisky is produced to high and rigorous standards, in Scotland. We’ve determinedly chased down fakes and products that, by implication, suggest they are Scotch Whisky when they are not. Over a long period, this pays dividends. Just as German machine tools command a premium and are sought by customers, so is Scotch Whisky from Scotland.
– like the rest of the spirits industry, we’ve used trade policy mechanisms to get results. We were a pioneer in getting trade deals through bilateral EU agreements, for example the Spirits Drinks agreements with the US and Mexico. We press when necessary for the use of WTO and single market enforcement mechanisms. In all this being able to work closely with both the Commission and British Embassies is vital.
3. But we could do more. On what basis?
– The potential of EU Free Trade Agreements is not yet fully developed. The EU’s FTA negotiations started off ten years ago as an emerging markets programme, to help improve the business environment in those countries and deal with behind the border barriers. In practice is has become a developed markets programme, with deals concluded with developed economies like Korea, Singapore, and Canada, and with the most live negotiations with the US and Canada. Meanwhile, progress is slow on major emerging market talks such as with Mercosur, with SE Asia, and with India. We hope the new Commission will give new energy to these vital negotiations.
– FTAs also need to actually generate free trade. We are disappointed that alcoholic drinks were excluded from liberalisation in the West Africa EPA and perhaps will be from other EPAs too.
– There could be more creativity in trade negotiations. The EU/US TTIP is potentially an excellent example here, with the proposed Spirits Drinks Annex to set out best regulatory practice as an example to others. Moreover, the TTIP will enshrine the Commission’s excellent idea of a “living agreement”, ie providing a framework to negotiate issues that don’t make it into the initial deal. This too could be a model. With our biggest partners, we could aim at continuous negotiating processes providing periodic agreements, rather than big bang deals. This would mean that sectors not in an initial agreement could still look forward to the prospect of liberalisation, rather than, as now, losing it for a generation.
– Finally, we’d like to see DG Trade getting more resources. The scope of its work has expanded massively in the last few years, and resources have not kept pace. The Commission needs to be more rigorous in moving people from low to high profile areas, and be more willing to take in staff from Member States on a temporary basis to help get things done.
David Frost, Scotch Whisky Association chief executive
You can read the brochure here: http://spirits.eu/files/24/brochure-pdf-final-low-resolution.pdf
Scotch Whisky Industry Builds Links With Mexico
Senior representatives of the Scotch Whisky Association (SWA) visited Mexico last week (4-7 June) to promote the industry and to sign an agreement with the regulatory body for Tequila.
Mexico is a rapidly growing market for Scotch Whisky, with exports increasing 20% last year to reach £110 million. It is now the ninth biggest overseas market for Scotch.
Demand from aspirational consumers has helped make Scotch one of the fastest growing UK exports to Mexico, representing 8% of all UK exports to the market.
On Friday 6 June, David Frost, SWA chief executive, delivered a talk in the Mexican city of Guadalajara. He gave an overview of the SWA’s work to protect and promote the Scotch Whisky industry around the world, including its commitment to sustainability.
The Scotch Whisky industry launched its ambitious Environmental Strategy in 2009 and it is well on course to meet its targets. For example, use of non-fossil fuel for energy has increased to 16% from 3% since 2008 and greenhouse gas emissions have been reduced by 10%. The target for 2050 is for 80% of energy to come from non-fossil fuel.
David Frost also discussed the benefits of Scotch Whisky’s status as a Geographical Indication. This means, by law, Scotch can only be made in Scotland from cereals, water and yeast according to strict legal requirements.
While in Guadalajara the SWA signed a Cooperation Agreement with the Consejo Regulador del Tequila – the Tequila Regulatory Council (CRT). The agreement is designed to protect two globally recognised, iconic spirits and consumers. It will encourage greater co-operation in a range of areas, such as fair competition and promotion of responsible drinking.
David Frost and Alan Park, SWA legal affairs adviser, also met government officials in Mexico City to discuss issues relevant to the Scotch Whisky industry.
David Frost, SWA chief executive, said: “The Cooperation Agreement with the Tequila Regulatory Council will help Scotch Whisky and Tequila work together to improve market access for both spirits and protect their reputation for quality.
“Mexico is an increasingly important market for Scotch Whisky – exports reached £110 million last year and it is now a top ten market. It is good to share the success of the industry with a range of audiences in Mexico and discuss the importance of protecting Scotch Whisky worldwide.
Duncan Taylor, Her Majesty’s Ambassador to Mexico, said: “Mexico is the UK’s second largest trading partner in Latin America and is a key strategic market for the UK. Scotch whisky is one of the UK’s fastest growing exports to Mexico, and I am delighted to see this cooperation between the Scotch whisky and tequila industries, which I am confident will lead to further growth in trade between our two countries”.With media enquiries please contact David Williamson at the Scotch Whisky Association on 0131 222 9226/07730 496 151 or email dwilliamson@swa.org.uk.
The SWA is the trade body for the Scotch Whisky industry.
www.scotch-whisky.org.uk
Twitter @ScotchWhiskySWA
The CRT is the regulatory body for the Tequila industry in Mexico. It protects and promotes Tequila.
http://www.crt.org.mx/
10 Jun 2014
