The latest export figures for Scotch whisky make uncomfortable reading for  brand marketers and the strategists at the Scotch Whisky Association, showing declines in both Asian and European markets. Chris Losh reports.

The Scotch Whisky Association has done its level best to put a gloss on the latest export figures, issued at the end of March. But despite the news that malt whisky was in double-digit growth, and the US and China were both performing well, there was more than an element of peat-smoke and mirrors about it all.

Few Scotch markets showed any growth last year, and, more worryingly, some of its previously most dynamic performers showed sizeable falls. The performance of single malts was, indeed, impressive - up by 15% on 2003 to 55m bottles. Yet malts account for only 6% of the overall market, and even their double-digit rise couldn't make up for the steady decline in blended scotch, which remains a category in trouble and seemingly with few answers.

Overall, volume and value of scotch exports in 2004 were both down, by 2% and 6% respectively. When you're selling over £2bn worth of Scotch abroad, even a few percent makes a big difference.

Many of the problems originate in Asia, a region that had, until last year, been whisky's engine room. It's perhaps no surprise that Japan, a market that is simultaneously making the shift from blended scotch to single malts and grappling with economic difficulties should be down. Nonetheless, the size of the fall (18%, on top of a decline of 35% in 2003) will have sent alarm bells ringing in Edinburgh that this could be more long-term trend than temporary blip.

No longer a top-ten market, Japan is a shadow of its former self, but more worrying for the Scots will be the dramatic reversal in previously buoyant markets such as Taiwan and, particularly, South Korea.

The latter had been a star performer as recently as 2002, but since then, Scotch's fourth-largest export market has seen falls of 7% in 2003 and 31% in 2004. The decline is less to do with Scotch itself than a government plan to discourage its population buying on credit, all of which means it's hard to see a turn-around any time soon.

"Korea has been the most significant market for Scotch - the drink's global engine room, but it's tricky at the moment and no-one knows where it will come out," says one Asia Pacific brand manager.

No-one would expect Taiwan, which saw growth of 40% by volume and over 80% by value in 2003, to maintain such astonishing rates of growth. But the market has ground to a halt, with value up by just 1% in 2004, and there are worries that, as with Korea, this could be the start of a dramatic reverse.

Indeed, the only unequivocal bright-spot in the Far East is China, which, following its accession to the WTO and tariff liberalisation in 2000 has shown prolonged three-figure growth and has edged into the top-twenty export markets in just five years. "China is an extraordinarily exciting market for Scotch," said one brand manager. "It's taken the baton from South Korea as the lead growth market in Asia, if not the world."

While Asia has always been a volatile region, capable of delivering enormous growth and enormous falls in relatively short periods of time, it is likely to be Scotch's performance (or non-performance) in the more mature markets of Europe that taxes many brand owners.

France, the continent's biggest export market was up both in volume terms (+2%) and by value (+7%), indicating both growth and premiumisation. But this is a lone ray of hope, and elsewhere the region provided little to shout about.

The most worrying of a fairly demoralising list of under-achievements were Spain, Greece and Germany. All showed double digit falls in value of 10%,17% and 24% respectively.

Although disappointed, the SWA was not surprised by Spain's poor performance, blaming it on a duty rise in 2002 and ensuing overstocking as demand cooled. And while some see similar pre-Olympics stockpiling as at least partly responsible for Greece's problems, others remain concerned that all three markets are showing worrying signs of having plateaued.

Scotch, it seems, is rather better at spotting and nurturing nascent markets than it is at maintaining its tried-and-tested favourites. The domestic market remained resolutely flat, and marketeers have to look to the Cape and across the Atlantic for any further cheer from English-speaking countries. The US is growing in value if not in volume as drinkers follow markets like the UK and Japan to drink less but better. This may be good for the category's long-term image, but is likely to see volumes continue their move southwards in the medium-term.

The main concern for Scotch must surely be that, with the exception of France, none of its main markets are showing growth across the board. This is different from even a few years ago when good increases in large, dependable European markets like Spain were more than offsetting slow-downs in places like Japan and the UK.

Now, the only serious growth seems to be taking place in smaller markets, and it is unrealistic to expect double- or triple-digit growth in countries like Russia, Turkey and China to make up for even modest declines in established powerhouses like Spain, Germany and Greece. Add the problems of a volatile Asia into the mix and the 2004 export figures point to difficult times ahead over the next few years.