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What have we learned from Scotch whisky's performance in 2016? - Comment

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This month, spirits commentator Ian Buxton ponders the conclusions bandied about following the publication of Scotch whisky export numbers for the first six months of 2016.

Scotch whisky figures released last month showed half-year volume growth for the first time in three years

Scotch whisky figures released last month showed half-year volume growth for the first time in three years

A few weeks ago, in half-year figures for Scotch whisky exports to the end of June, the Scotch Whisky Association, as you might expect, found good news to report. "The global market for single malt Scotch whisky continued to grow," the trade body said last month, "with export value increasing by 6% to GBP431m and volume up 3% to 49m bottles."

In fact, single malts now represent a quarter of total shipments in value terms, with the segment's exports more than doubling (in value) over the last decade.

Moreover, the SWA notes that "despite continued economic and political volatility in some markets, Scotch whisky's global export volume grew by 3.1% over the first half of the year, with the equivalent of 533m 70cl bottles shipped overseas, up from 517m bottles in the first half of 2015". 

So what's not to like? Well, encouraging though they are, these numbers - which cover the period of 2015 prior to the UK's European Union referendum - do little more than reflect the first growth in volume for the Scotch category since the first half of 2013. And yet, despite the fact that all that has happened is a modest recovery to a point that the industry had reached several years ago, the figures are generating some excitement amongst the infamous "teenage scribblers" (for younger readers, this was then-Chancellor Nigel Lawson's disparaging description of City analysts) who were quick to comment on the numbers. "On a market basis," said one analyst, "there were promising signs in the industry's largest market by value, the US. Exports (to the country) increased by 9% in value to GBP357m, with both single malts - up 22% - and bottled blended Scotch whisky - up 6% - enjoying growth. This reflected premiumisation in the sector."

But, let's step back a little here. The Scotch whisky game is a long-term one, and these latest numbers – encouraging though they most certainly are – really only put Scotch in the US back to where it was around 2012, when annual volumes totalled 127.5m bottles and value reached GBP758m. In the last full year for which we have figures (2015), the equivalent numbers were 116.4m bottles and GBP£749m. This encouraging half-year of growth, then, still has some way to go before we can anticipate a return to the halcyon days of 2013, when exports to the country approached GBP820m.

'Premiumisation', though evident in the latest data, is hardly a new song for Scotch. For as long as I can remember (and that's quite a long time), the industry has been hopefully intoning the mantra of 'drink less, but drink better', in the belief that consumers will get that optimistic message.

If Uncle Sam has heard this cry, though, it seems that no one has told the French. In Scotch's largest volume market, the trend is anything but premiumising: While value has dropped by 5% in the latest report, volumes are heading in the opposite direction and have grown by a rather more impressive 5%. "Drink more and drink cheaper" seems to be the riff across the Channel.

Many of the leading brands by volume (most noticeably Marie Brizard's William Peel and La Martiniquaise-Bardinet Label 5) couldn't realistically be considered premium. Indeed, French supermarket shelves, which account for the lion's share of volume, are home to a selection of budget-priced blends not seen elsewhere. French-owned producers from Pernod Ricard's Chivas Brothers to Marie Brizard and La Martiniquaise, dominate sales but, while Scotch sales are humdrum at best, rum is said by the trade to be enjoying a moment in the sun as consumers look around for greater variety.

One familiar name crops up as taking sales from Scotch in the country – in the last two years, Brown-Forman's Jack Daniel's has emerged as France's sixth best-selling whisk(e)y. This is hardly the news that Scotch distillers want to hear.

In summary, one swallow does not a summer make. The full-year figures will tell us more, but will likely be distorted by the impact of sterling's exchange rate slump following the Brexit vote. We can expect some canny international traders to take advantage of the Pound's weakness by stocking up – decoding the underlying trend would have taxed even the experts at Bletchley Park.

The half-year figures tell their own story, but there is a wider lesson: Scotch is subject to long-term trends and, interesting though any six-month period is, conclusions on premiumisation (or anything else for that matter) need a far larger database. 

So, take comfort from the long-term: the single malt segment has doubled its values over the past decade.

Now, that's less but better.


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