Distillers defiant after whisky exports slump despite record investment

Share this article

THE AMOUNT of Scotch whisky being exported has fallen, providing further evidence that the economic downturn is hitting the drinks industry, analysts say.

Whisky has been one of the UK's recent success stories. In 2007, exports of Scotch were up 14% to a record 2.8bn, earning the UK 90 per second and accounting for 25% of Britain's food and drink exports. But provisional export figures from Customs and Excise to the year end of September 2008 show a decline of more than 3%.

Although the 3.4% decrease in volume to 220.9 million litres is offset by a 12.4% rise in the value of exports from 1.92bn to 2.16bn to the year September 2008, analysts say the figures indicate the industry cannot ride out the recession.

Alan Gray, who compiled the figures for the Scotch Whisky Industry Review, said: "The industry is still in pretty good fettle. After two years that were way above trend, we are now in decline from a volume perspective, but compared to other industries this isn't bad.

"The last quarter of the year, October, November and December, I suspect will show a further decrease in volume when the credit crunch and the recession start to bite. I don't think the industry can escape that."

The news comes during a period of unprecedented investment into the industry fuelled by the growth of emerging economies in Brazil, China, India and Russia. The Scotch Whisky Association estimates that over 500m in new capital investment has been made in distilling, bottling and warehousing over the past 18 months. Last month Paul Walsh, the chief executive of Diageo, told Scotland on Sunday that he thought the consumer will continue buying during the Christmas period as alcohol is an "affordable indulgence."

David Williamson, a spokesman for the Scotch Whisky Association, said: "It is a challenging economic environment and distillers are watching consumer reactions to the slowdown carefully, especially in the important Christmas period.

"That said, the first three quarters of 2008 were very encouraging. Whilst consumers may not have bought a new car or were reluctant to enter the housing market, they continued to buy affordable indulgences, such as Scotch."

Distillers argue that although the volume has declined, the value has risen.

They also point out that the figures do not include the last three months of the year, traditionally the busiest time, which generally account for 40% of malt and 30% of blended sales.

One distiller, who asked not to be named, said: "Some of the emerging economies are in recession at a time when the industry is producing more, but the evidence suggests any whisky surplus will be much more controlled than in the past."