Big picture take on future of Scotch and sustainability

Expert panellists were assembled and I was delighted to chair two panels – one on the big picture for the outlook for Scotch, the other examining sustainability in the industry in its widest sense.

Scotch whisky– the big picture

Sebastian Burnside, chief economist at the Royal Bank of Scotland, discussed the big financial issues impacting Scotch and other sectors.

“In terms of tariffs, it’s very encouraging to see the broad trajectory of negotiations happening. The UK-India trade deal is something which many parts of the economy have been looking for a long time,” Sebastian said.

“In the UK, we take for granted the deepness of our links with India, culturally, through people and through the potential markets. So it’s really encouraging that the politics have aligned to be able to get a deal. And even more encouraging that clearly Scotch was a big part of the specifics. It will hopefully benefit from a good increase in demand and from those reductions in tariffs.”

He added: “Scotch, and Scotland in itself as a brand, deserves an enormous amount of credit for punching above its weight in terms of its prominence and significance in people’s minds, hearts and perceptions across the world.”

However, Sebastian said the drinks industry needs to be responsive to changing attitudes to alcohol, including lower consumption. He referred to a consumer phenomena he had recently heard of – “zebra striping” –whereby people alternate between alcoholic and soft drinks on social occasions.

Expanding on the analysis of the industry, Laurence Whyatt, director Barclays equity research team, which is focused on the global beverages market, said he had good and bad news.

He explained the use of demographic changes to predict alcohol consumption. “The amount of alcohol consumed is really dictated by the number of young people aged from about 25 to 45,” he said.

“There are some countries with a growing young population and that’s good news. The US is one of them and one of the most important alcohol markets in the world.”

Laurence observed that we don’t see evidence for cannabis substitution or the use of weight-control drug Ozempic having a material negative impact on the demographic’s alcohol consumption.

He said the only truth in young people drinking less is a decline in underage consumption – but not age 21+ consumption – and a slight decline in heavy consumption of five or more drinks in a row.

Laurence’s outlook is less positive when it comes to markets with a shrinking younger population, with him saying: “China has been an extremely important alcohol market, particularly for Cognac, Scotch and beer, and it is facing some of the worst demographic changes of any country. The Chinese birth rate in the 1960s and 1970s was about six babies per woman, by the early 1990s it had fallen to one and a half.”

Also on the panel was writer and businessman Mark Stevenson, who describes himself as a “reluctant futurist” and has advised many, from popstars to governments, on approaches to climate change.

He was asked what impact things such as President Trump saying “drill baby drill”, and the pushback on sustainability in some parts of the world was having.

He replied: “One thing that is very clear is that the future is going to be very different than any of us can imagine. You might have heard this acronym, VUCA – volatility, uncertainty, complexity and ambiguity – and I think we can all feel it. With Covid, and now what’s happening in the Ukraine and Middle East, all of us begin to realise these things are not disconnected.”

Mark added: “There is a lie that we are told that having a sustainable, equitable and just world is too expensive. The truth is, not having it is way more expensive.”

As a luxury product, Mark believes that Scotch whisky, and related supply chain companies such as McLaren Packaging, are ideally positioned to be fully sustainable and able to regenerate the country’s economy and ecosystem in the long term.

He added: “I’m a huge fan of Scotch whisky and I live by a mantra which is ‘a life well lived, on the planet well loved.’”

Turning to what producers are doing to futureproof the industry, Sarah Badesha, head of engineering at drinks giant Chivas Brothers, told the assembled: “We have a big investment programme, particularly at our flagship Kilmalid bottling site in Dumbarton, where we’re looking to invest over £60 million on modernising our facilities. We need to be competitive and at the forefront in terms of technology.

“Another reason we invest is that we have safety as a driver. The more we can automate and take risky activities outof the workplace, the safer our people.”

For a storied company like Chivas Brothers, which has a huge range of well-loved, high quality brands, it is vital to balance modernisation with protecting history and heritage. Sarah explained: “We have parts of our portfolio where we’ll always hand fill bottles, hand polish and hand inspect, but we’ve augmented that with 360-degree cameras so that we know what goes to consumers is utterly perfect.”

Focusing on consumer behaviour and attitudes to brands, Piers Lawson, client director at Leith-based agency Contagious Design, said: “We’re working a lot with clients to redefine codes of luxury within Scotch. Traditional markers like exclusivity, rarity, and craft still matter, but they now sit alongside a growing demand for transparency, responsibility, and cultural relevance.”

He expanded: “What we’re seeing more with younger drinkers is that they’re promiscuous with their palettes, but loyal to brands whose values they share. It’s about tapping into emotional connections and storytelling with brands across all aspects, from packaging, to brand home experience, to digital media”Piers commented that consumers are more informed these days, including on the subject of sustainability.

“Consumers are really interested in what decisions are being made by brands to help the environment,” he added. “Sustainability should be treated as a non-negotiable hygiene factor for all brands.”

On competition from other whiskies, Piers said: “Scotch has always had a powerful edge in its heritage, craft, and global reputation – but heritage alone isn’t enough anymore. What’s changing is the pace of innovation and storytelling from newer whisky-producing regions.“

For Scotch to stay ahead, it needs to move from being the category benchmark –think craft, heritage, global reputation – to being the category leader in reinvention. In terms of the consumer, the new wave of whisky-producing regions can be mutually beneficial. A larger category will offer greater choice for consumers, allowing them to start their whisky journey from other geographies and move up the funnel to the Rolls-Royce of whisky – Scotch!”

Barnbougle Castle | Supplied

Scotch whisky and sustainability

Discussion during the second panel session covered a wide range of sustainability related topics, from the challenges and opportunities of net-zero to the efforts to encourage a more diverse workforce.

Professor Tim George, director of the International Barley Hub, explained that one of its priorities is to reduce “scope-three emissions”, or the greenhouse gas associated with barley production, saying: “We’re also interested in how we can improve the resilience of barley to the stresses associated with climate change.

“There’s also a lot of interest in understanding the impact of the production systems on soil, water, and air, and reducing the detrimental environmental impacts. We’re looking at how regenerative agriculture can improve the environmental credentials of production.”

Tim gave the example of research funded by Diageo looking at the effects on soil health by making agriculture more regenerative.

Kristin Hughes, head of global sustainability grain to glass at Diageo, said: “We’re taking a very direct approach and have already invested quite a bit of CapEx to drive decarbonisation in our own operations. At Cameronbridge, for example, we’ve invested to allow us to use the spent grains from distilling to heat the boilers. We’re therefore taking a circular approach. At Leven, we’ve invested in around 7,800 solar panels to provide a lot of the energy we need.”

While Diageo is the world’s biggest producer of Scotch, also on the panel was Jessica Stewart, sustainability manager at InchDairnie Whisky, a relatively new distiller founded by industry stalwart Ian Palmer.

Jessica said: “When InchDairnie was built in 2015, the founder wanted to design a distillery that could overcome a lot of the challenges faced by the industry over the decades.

“We have a distillery with a huge amount of innovation – energy and water efficiency, alongside flavour, are at the core of the business.”

She added that InchDairnie is aiming to become BCorp certified, something only a handful of whisky producers have achieved, saying: “It shows you are accountable and willing to measure, report and improve on sustainability.”

On the supply chain, Donald McLaren, managing director of McLaren Packaging, reported that its customers are wrestling with key challenges around sustainability – costs, varying attitudes and legislation in different countries, as well as the huge amount of information to digest, including misinformation.

He explained: “We’re helping our customers with these things and it’s our job to steer our business in the right direction. We focus on being local here in Scotland and being open and collaborative.

“Being an independent company means we can choose to partner with those that have invested in low-carbon, low-impact ways of doing things.”

Donald added: “We created our own sustainability strategy six years ago, and we’ve voluntarily committed to report carbon emissions in our financial results.”

Diversity and inclusion was discussed by panellists. SallyAnn Kelly, chief executive officer of Aberlour children’s charity, explained: “We currently support about 1,000 unaccompanied asylum-seeking children who have made their way to Britain through problematic and difficult routes. They are hugely motivated young people, but hold with them huge amounts of trauma because many of them have come from conflict zones. It’s really important to us to hold onto inclusive values.”

According to Kristin, developing a diverse workforce can also help reach a wider base of customers. And Tim added: “In science, diversity is absolutely key. We need to attract talented people to the International Barley Hub.”

Corporate social responsibility is also core to sustainability and Donald explained that McLaren Packaging takes this very seriously within Inverclyde, the community where the company was founded in 1979 and where the firm is headquartered.

He said: “Inverclyde sadly has some of the highest levels of harm through poverty in the UK and across Europe. As a business we commit to providing 3 per cent of our operating profit – or £200,000 minimum – a year to the Newark Trust, a local grant giving charity focused in Inverclyde.”

After these thought-provoking sessions, formal discussions were concluded with questions and answers from the audience and conversations continued.