Comment - Spirits - The Thorn in Scotch Whisky's Side?
This month, we welcome another regular commentator to the just-drinks fold. Augmenting our spirits coverage, Ian Buxton will be casting his eye over the brown side of the sector. To kick off, this month Ian looks at a character who is ruffling the feathers of many in the Scotch whisky industry.
Is everything in the garden rosy, or should the Scotch whisky industry be listening to the prophet of doom?
I refer, of course, to Donald Blair formerly of Seagram/Chivas and United Distillers, now retired but something of a thorn in the side of whisky’s establishment. In April, Blair presented to the World Whiskies Conference where he was heard in what might be best described as “polite silence”. Then, he popped up in May on BBC Radio Scotland, only for his industry record to be questioned by a spokesman for the Scotch Whisky Association (SWA).
In all fairness, it’s hardly trivial. Blair spent several years at the Strathleven Bonded Warehouses in the mid-'70s, running a dozen high-speed bottling lines at what was then the most automated spirits bottling plant in Europe with robotic packing and automatic palletisation. He then took a corporate planning role for Chivas Brothers, (then part of Seagrams), before eventually ending up at group HQ in New York. After a break from the whisky industry, he returned to establish what today is Diageo’s Polish operating business, staying with United Distillers/Diageo for seven years.
Blair collected the International Public Relations Association's "Gold Award" for Public Affairs in recognition of a successful campaign to reform the alcohol tax/duty regime in Poland and, in 2005, was the first foreigner elected to the Executive Committee of the National Council of Spirits Processors in Poland.
He does seem to have a knack of getting under people’s skin though; Blair is nothing if not persistent and seems unlikely to go away any time soon. I think he sees himself as the little boy in Hans Christian Andersen’s tale of The Emperor’s New Clothes – exposing inconvenient truths to an audience with a significant vested interest in maintaining that all is for the best in the best of all possible worlds.
Using data from HM Revenue & Customs, the SWA, the UK Office for National Statistics, IWSR and the University of Groningen, Blair certainly doesn’t take that Panglossian view; in fact, he states bluntly, “Scotch whisky has failed Scotland”.
His hypothesis is simply stated: “Global Scotch whisky volumes have increased by less than 11% in the last 35 years while the global economy has expanded by almost 190% - more than 17 times faster than Scotch whisky,” he claims. What’s more, using our own 2009 just-drinks/IWSR report on vodka, he points out that, over a comparable 20-year period (1988-2008), the growth of vodka has been 3.5% annually, compared to yearly growth for Scotch of 0.65% - or more than five times the rate of increase in Scotch whisky and matching annual Global GDP growth of 3.47%. While it’s hardly a surprise to see vodka prospering, the figures for Scotch seem sobering.
Vodka has doubled its global volume from around 800m litres of pure alcohol (lpa) in 1988 to just over 1.6bn lpa in 2008. Throughout the same period, Scotch whisky peaked at the 347m lpa level in 2007. Since then it has fallen back, with final 2010 figures expected to show an almost 7% decrease from this pinnacle of success.
Increased premiumisation is often held up as the answer. Blair is having none of it. Taking account of inflation, he points out that the real value of exports of Scotch whisky peaked around the mid-'90s and that, according to him, the frequent industry claims of “another record year for Scotch” are to be regarded as no more than special pleading.
But, he doesn’t stop there: he has taken the performance data and used the SWA’s own figures on jobs and economic value to calculate the economic impact on Scotland had Scotch grown like vodka, or in line with Global GDP. He concludes that “This under-performance has cost Scotland 40,000 jobs and a revenue loss of GBP4.7bn (US$7.66bn) every year.” And, almost as an aside he points out that “there has been a major loss in high-level sales, marketing and strategic jobs based in Scotland”.
While the job claims may be hypothetical, the volume numbers can hardly be denied - this remains provocative stuff. But, he says, no one is listening. Blair claims to have presented his findings to the Scottish Parliament, the Scottish Government, Scottish Enterprise, the SWA and a whole raft of quangos - only to be ignored. Just like the Emperor’s courtiers, apparently no one wants to hear the bad news, but at least one critic suggested to just-drinks that selecting a different base year would produce a somewhat rosier picture.
However, asked for comment on the figures, SWA spokesman Campbell Evans was keen to look forward. “Here is a drinks industry which is continuing to find new markets; has ridden out economic storms; invested over GBP1bn in the last five years and looks set for growth in both new and mature markets over the next decade,” he riposted. “International businesses are clamouring to buy into Scotch whisky, reflecting its confidence and strength and their belief in its future.”
I don’t know if Donald Blair is right, or even half right. just-drinks doesn’t know if he’s right. But he deserves an answer to the pretty serious questions he’s raised. If the figures are wrong, then someone needs to show where he’s at fault, if only to make him go away.
And, if his figures are even partly correct, it just might be worth the Scotch whisky industry doing even more about it.
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