Europe’s troubles water down exports for key whisky sector

SCOTCH whisky exports flat-lined in the first six months of the year at £1.8 billion as the eurozone debt crisis and a tax hike in France took their toll on Scotland’s national drink.

Rising sales in the United States and emerging markets failed to help the industry beat the record figures posted during the opening months of 2011, when French buyers had stocked up ahead of a substantial rise in taxes.

A raft of distillers – including Johnnie Walker maker Diageo and Famous Grouse producer Edrington – have warned about sales in southern European countries being hit by a downturn in demand, with the sovereign debt crisis taking its toll on consumer spending.

The Scotch Whisky Association (SWA), the trade body that compiled the figures, said that the industry was still confident of growth during the second-half of the year, when importers stock up on drinks for festivals including Christmas.

SWA chief executive Gavin Hewitt said: “While there has been a levelling-off in the first half, the industry remains confident about the future. Recent announcements of investments in new distilleries and the expansion of existing facilities demonstrate the level of confidence producers have in future growth opportunities.”

Whisky sales also slowed in several markets outside the European Union. In Brazil, Scotch sales fell by 22 per cent year-on-year, reflecting the broader slowdown in the Brazilian economy, which was growing at 7 per cent in 2010 but has now slowed to 2 per cent.

Japan posted a 21 per cent fall following stagnant figures in recent years. The SWA said Japan was a mature market and can often be tough for distillers.

Yet Scotch has been booming in other mature markets such as the US, where sales jumped by 13 per cent to £303 million, cementing America’s position as Scotch whisky’s biggest market by value. Sales in the US have been boosted by the popularity of whisky in television shows such as Mad Men and in its use as a mixer for cocktails.

France – which developed a taste for whisky during the 1800s when vine diseases devastated brandy production – introduced higher taxes on whisky last year, prompting distributors to stock up ahead of the duty increase. The knock-on effect was a 14 per cent fall in sales in the opening half to £188m.

Emerging markets in eastern Europe – including Latvia and Estonia – took up the slack, with some of their whisky being imported and then sold on to the fast-growing Russian economy.

Diageo – Scotland’s largest distiller and the owner of brands including Bell’s, Buchanan’s and J&B – announced in June that it would invest £1bn to boost production, including the building of further warehouses and at least one other distillery.

A week earlier, French drinks giant Pernod Ricard had unveiled a £40m investment to boost production at its Chivas Brothers whisky arm by 25 per cent.

Diageo – which also makes Gordon’s gin, Guinness stout and Smirnoff vodka – is currently looking to buy a stake in United Spirits from Vijay Mallya to give it greater access to India’s massive spirits market.

Scotch sales in India grew by 28 per cent to £28m in the opening half of the year, but the SWA is “hopeful” of striking a deal before the end of the year for Dehli to lower is 150 per cent import tariff on Scotch to boost sales even further.

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