The double-whammy of the first fall in the value of Scotch whisky exports since 2009 and the Scottish independence referendum has made it a lively opening year for David Frost as chief executive of the industry’s influential trade body.
The Scotch Whisky Association (SWA) trod a measured path in the often fractious referendum debate. But it voiced its potential concerns about any break in political and taxation continuity, and said its fundamental aim was to get “a business and export environment as supportive as that which we now enjoy in the UK”.
Frost spent 25 years as a British diplomat before taking up the SWA post in January in succession to Gavin Hewitt, another former diplomat.
Having met him twice now, Frost does seem diplomacy personified. One senses he would instinctively prefer referring to a “frank” exchange of views behind closed doors rather than anything as demotic as a row.
So how does his background – with roles and postings including the director for the European Union in the Foreign Office, the UK Mission to the United Nations and the British embassy in Paris – help him promote Scotland’s national drink?
“The Scotch Whisky Association is a really well-known organisation in the diplomatic service,” Frost says. “Most ambassadors have had the phone call from it asking them to press and pursue a trade issue.
“I think the advantage of a diplomatic background in the job is that it brings a network of people here and abroad that you can tap into. There’s a way of engaging with people in other governments to get results. The SWA overlaps government and the private sector in the people we deal with. Having a government background sometimes helps you know how far you can push.”
He also speaks several languages, including French, German and Greek, with the obvious advantages in political and regulatory discussions.
Up to 90 per cent of Scotch whisky goes overseas, and so global travel is a given in the job. Frost says he only spent about 10 per cent of his time abroad in his first year, but that it was “a bit unusual because of the Scottish referendum”, and expects that percentage to rise meaningfully in the coming year.
He has already been to India for the SWA twice, only cancelling a third planned trip earlier this month due to illness, underlining how much potential that country has for the Scotch whisky industry.
Negotiations have been glacial under the European Union-India Free Trade Agreement (FTA) in trying to engineer a cut in India’s swingeing 150 per cent import tariffs on Scotch and other spirits.
But Frost says: “India is already an important market for us, with immense potential. It is the biggest spirits market in the world. We have 1 to 2 per cent of it, and if we could double it eventually I think we would be doing really well.”
He says two factors that could help ongoing talks with the Indian authorities are Scotch market leader Diageo’s acquisition of that country’s domestic drinks giant, United Spirits, “and a good chunk of Scotch whisky going into Indian whisky products”. Other trips he is planning early next year are to China, Taiwan and Korea.
The overseas forays come against the backcloth of the SWA revealing in September that exports fell 11 per cent to £1.77 billion in the first six months of 2014, from £2bn in the same period last year. This was largely due to economic pressures in emerging markets, with declines in Asia and the Americas, including Brazil, Mexico, China and Singapore.
Frost is sanguine, however. “There have been headwinds this year, largely due to slower growth in emerging markets. But we operate in virtually every country in the world. There’s a long way to go before that becomes a real problem for us.”
Back on home turf, the SWA chief said he has been struck most in his first 12 months about the industry he now spearheads by “the depth of history and strength of feeling that goes with it – there is a strong emotional connection with it”.
A well-chronicled fact is that whisky exports make up £1 in every £5 of Scottish exports across all sectors, and more than 20 per cent of total UK food and drink exports. The SWA, not coincidentally, has asked the Chancellor for a 2 per cent duty cut in his next budget.
In the wider political picture, it is clear that Frost – and his recently appointed new SWA chairman, Pierre Pringuet, the boss of spirits giant Pernod Ricard – are intent on anticipating the debate about whether Britain should leave the European Union if it comes to a Tory-promised referendum in 2017.
Frost, a recent head of the EU (Internal) Department, says the European single market has been very important for the Scotch whisky industry, not least in adding heft to various free trade negotiations.
He says the EU can be “complicated and can be painfully slow to get things done, but it does get things done”. He adds: “Any organisation that brings 28 countries together with different traditions, there’s going to be an element of complexity. But EU membership is increasingly important to us. It means no paperwork or border checks. It’s hard to see how we could replicate that if we are outside.”
On a related subject, Frost says he is looking forward to working with Pringuet at the helm of the trade body.
“I worked at the embassy in Paris for three years,” he says. “I did not meet him then, but did meet a lot of senior French business people. They bring an incredible knowledge about how government and private sector works, and how to get results. I see all that in Pierre.”
Frost emphasises that under his tenure, as with his predecessors, there will be no let-up in the SWA’s pursuit of counterfeit whisky producers worldwide. The body has about 70 cases going on at any given time, but Frost is both philosophical and relentless on the issue.
“It’s human nature,” he says. “When you have a great product, people will want to piggy-back on it. You cannot eliminate it [counterfeit whisky products], but you can make it difficult. They know we will come after them if they do try it.”
It is a hint of the steel that has also seen Frost carry on the policy of fighting the Scottish Government’s proposed minimum alcohol pricing policy in the European courts.
He says: “We want to be part of the solution with Holyrood, and where I think the Government is reasonable is that Scotland has an alcohol problem. But minimum pricing is heavy handed when all the evidence says that they [problem drinkers] are insensitive to price. We don’t see why price fixing is good just because the motives are good.”
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