Scotch whisky exports grew by 4.4% globally in 2019, to £4.91bn, with shipments up by 2.4% in volume versus 2018, to 1.31bn bottles.
However, that is only part of the tale as distillers in Scotland faced up to the heavy impact of US import tariffs; a concern also shared by their counterparts in the US, albeit over EU tariffs for American whiskies.
New HMRC figures compiled by the Scotch Whisky Association (SWA) showed that Scotch whisky shipments to the US plummeted towards the end of 2019.
On 18 October, US trade officials implemented a 25% tariff on certain EU goods, including single malt Scotch and Scotch whisky liqueurs, as part of an ongoing spat over subsidies for aircraft manufacturers Airbus and Boeing.
The tariffs, which also affected French wine exports, were matched by a 25% value decline in Scotch whisky exports to the US in the final quarter of 2019, according to the data.
For the full year, Scotch volume shipments to the US dropped by 7% to 127 million 70cl bottles, but exports still rose in value, by 2.7% to £1.07 billion. The US remains the largest market for Scotch whisky by value.
While the SWA highlighted global growth in demand for Scotch in 2019, including in Asia and Africa, it said US merchants pre-ordered whisky to get ahead of the tariffs, while merchants elsewhere also stockpiled bottles in case a ‘no deal’ Brexit disrupted trade.
Karen Betts, chief executive of the SWA, said the US tariffs were ‘already impacting Scotch whisky exports to the US, which is our most valuable single market’.
If the situation continues, the SWA warned that the industry could lose around £100m in annual exports.
Smaller distillers hit hardest
Smaller distillers are worst affected and Betts said, ‘Some are now asking themselves how they can continue exporting to the US, whether they can build up alternative markets, which is not something that can be done quickly, and if not, how their businesses will cope.’
Ivan Menezes, CEO of global spirits company Diageo, recently expressed a similar concern. ‘In the US, we’ve got a big Tequila business, an American whiskey business, a vodka business, a rum business, so we can handle [the tariffs] to some extent,’ he said.
‘It’s the smaller distillers in Scotland we’re concerned about, and the farmers and the supply chain, because that impact is serious – it’s hundreds if not thousands of jobs.’
Betts said the SWA is now urging the UK government to create a ‘package of support’ for distillers while the tariffs remains in place. This includes a cut in duty for spirits in next month’s budget, which would ‘allow distillers to re-invest in the UK market while sales are under pressure in the US’.
EU tariffs on American whiskies
Meanwhile, the US spirits sector is facing its own tariff hurdle, which threatens to ‘upend [a] decade of growth’, according to trade group the Distilled Spirits Council of the United States (DISCUS).
In June 2018, the EU imposed a 25% tariff on a number of US goods, including American whiskey, in response to Washington’s own tariffs on steel and aluminum imports.
New data released by the US International Trade Commission this week shows that American whiskey exports to the EU plunged by 27% in 2019. The EU is the largest export market for US spirits.
Global shipments of American whiskey were down 16% last year, and worldwide exports of all US spirits fell by 14.3%.
‘The data is clear,’ said Chris Swonger, CEO and president of DISCUS. ‘These tariffs are chipping away at American whiskey’s brand equity in our top export markets. These great American whiskey products that have been the toast of the global cocktail scene are struggling under the weight of the EU tariffs.’