UK's independent distilleries expected to see sales top up after 'really tough' 2020/21

Revenues at the UK’s top 20 independent distilleries fell 9 per cent in a “really tough” 2020/21, stymied by the now-lifted US whisky import tariff, but the post-Covid outlook is brighter, according to a report out today.

Accountancy group UHY Hacker Young has revealed the study that shows sales for such firms fell to £1.35 billion in the 12-month period, having been “hit hard” by a 25 per cent import tariff introduced by the United States in late 2019 on Scotland’s national drink. However, other spirits fared better in the period.

The US is the largest importer of Scotch, with its share comprising about a third, while the pandemic, with its restrictions on international travel, slashed higher-margin whisky sales in airport duty-free stores and amongst foreign tourists generally, according to the report.

Nevertheless, UHY Hacker Young believes independent distilleries should see an upturn in revenues in the coming year, in the wake of the US scrapping Scotch whisky tariffs in June 2021 following a trade agreement with the UK, and revenues for whisky distillers specifically are expected to recovery strongly amid lifted coronavirus-related restrictions.

After a tough start to lockdown, 2020/21 revenue growth was more positive for independent distillers of gin, rum and diversified spirits, which saw a 12 per cent jump to £245 million, said UHY Hacker Young. It noted that such operators can grow more quickly than their whisky-making peers as there are no ageing restrictions on their products, such as Scotch’s three-year minimum requirement, and their exports were unaffected by US tariffs.

James Simmonds, partner at UHY Hacker Young, said: “It was a really tough year for the biggest independent distilleries – the US Scotch whisky tariffs hit them hard. This happening at the same time as pub and duty-free store closures made things very difficult indeed for a time. The future looks brighter, with the tariffs lifted and the pandemic behind us.

Excitement

'The future looks brighter, with the tariffs lifted and the pandemic behind us', according to the report (file image). Picture: Peter Summers/Getty Images.

He added that gin and rum distilleries did “rather well” in the pandemic, avoiding the effects of trade wars and benefiting from consumers drinking spirits at home while pubs were closed. “What independent gin and rum distilleries need to do is to continue to maintain consumer excitement about their products,” Mr Simmonds also said.

Figures published in February by the Scotch Whisky Association showed that exports of Scotch whisky grew by almost a fifth in 2021 to just over £4.5bn as the industry continued to recover from the impact of the pandemic and US tariffs.

However, the sector’s woes may not be over, with Scotch Malt Whisky Society owner Artisanal Spirits Company (ASC) recently warning that the Chinese government’s zero-Covid strategy had presented “additional challenges” for the business.

That came after it released results for 2021, reporting a 21 per cent hike in revenue to £18.2m, with a gross margin improvement to 61.5 per cent from 58.6 per cent, with the jump largely attributed to the long-term suspension of US whisky tariffs. The organisation also flagged an underlying loss of £600,000 for the year, swinging from a profit of about £600,000 in the prior period.