Whisky exports take a tumble

The SWA revealed exports by value fell 7 per cent. Picture: Colin Hattersley

The warning from Scotch Whisky Association (SWA) chief executive David Frost came as the body revealed exports by value fell 7 per cent to £3.95 billion in 2014 from £4.26bn the previous year.

It was the second consecutive year they have fallen, although the decline in 2013 was comfortably under 1 per cent.

Frost highlighted Russia and its sensitive relations with the West over Ukraine, and the ensuing sanctions against the country, as well as a continuing Chinese crackdown on expensive official present-giving, as examples of the political volatility hurting export sales.

“Economic and political factors in some important markets held back Scotch whisky exports in 2014 after a decade of strong growth,” he said.

“It shows that the industry’s success cannot be taken for granted and that we must continue to argue for more open markets and ambitious trade deals that tackle barriers to market access.”

Frost, who took over from Gavin Hewitt at the beginning of 2014, said: “Russia has been affected by the sanctions and the fall in the value of the rouble, and the general atmosphere of crisis in the region.

“There has been a significant fall-off there and it does not surprise anyone. And in China the [government] austerity campaign has lasted longer than many people thought. It’s getting on for two years now.”

Scotch whisky export volumes were down 3 per cent last year. In value terms, exports to Singapore plunged 39 per cent to £201 million, partly a knock-on effect of the government austerity campaign in China, where a lot of the Scotch shipped to Singapore eventually ends up.

“It’s difficult to tell exactly [how much Scotch to Singapore has China as its ultimate destination] but you are talking tens of millions of pounds,” Frost said. Direct export sales to China, the 26th largest Scotch market by value, were down 23 per cent.

Exports to Brazil slumped 20 per cent to £80m, and were down 18 per cent to £141m in Germany.

Sales to the US, the biggest market for the product, slid 9 per cent to £750m. But the SWA said this was largely due to Stateside destocking rather than declining consumer tastes, as the US Distilled Spirits Council has said the market shrank by only about 1 per cent last year.

Despite the political and economic headwinds, the trade body spotlighted success stories, including a 36 per cent jump in sales to £197m in Taiwan, partly driven by the popularity of single malt Scotch.

Exports to India were up 29 per cent £89m despite the 150 per cent import tariff. Sales in France, the second biggest Scotch market by value, rose 2 per cent to £445m, while Japan was ahead 8 per cent at £64m.

“The important hub market of the United Arab Emirates continues to boom, with exports up 27 per cent by value,” the lobby group said.

Global exports performed better in the second half of 2014, down 4 per cent, compared with the first six months of the year when they fell 11 per cent.

The SWA said this gave it confidence that the “longer-term fundamentals are sound”. It stressed the need for an early reopening of negotiations between the European Union and India on a free trade agreement given the immense export potential of that country.

Frost said the growth of an aspirational middle class in emerging markets, with desire for luxury products like Scotch, remained a key driver of broad sector growth.