Impact of the pandemic on the supply chain in Scotch whisky industry
The COVID-19 pandemic is still posing a number of challenges to the global economy. The Scotch whisky industry suffered serious sales damage as global restrictions and lockdowns prevented the spirit from being sold through major sales channels - hospitality and Travel Retail. The industry was also hurt by the reduction in tourism, which was an important source of income for Scotch whisky producers. Fortunately, the pandemic did not negatively affect the demand and consumer interest in Scotch whisky, and the available data shows that the industry is facing a relatively quick rebound. It is worth remembering that the pandemic affected not only the consumer segment, but also affects the entire supply chain of the industry.
Many suppliers have been forced to cut production or even temporarily close their plants. Farmers, contractors and shipping companies were not immune to the effects of the pandemic, which was felt at almost every stage of the supply chain, valued at over £1.8 billion for the Scotch Whisky Association (SWA).
Irregular production during the pandemic resulted in delays in the supply of the dry goods, for example, corks or bottles. This, in turn, had a significant impact on the production plans of the distilleries. It is worth adding that many of them planned significant investments and increasing production in response to growing demand.
Simpsons Malt, the producer of the malted barley used to make Scotch whisky, saw its sales fall to £4.7m in 2020, down from £9.8m in 2019. Simpsons Malt had to adjust its production to government restrictions. As a result, many customers in the brewing and distillation industries were forced to significantly reduce production levels. The delays also apply to producers of mash vats and stills, and the waiting time for the purchase of machines needed to produce Scotch whisky has increased by up to several months, as indicated in an interview with The Spirits Business portal by representatives of Kilchoman and Isle of Arran distilleries. The situation is also greatly influenced by the fact that, as a result of COVID-19, the prices of almost all raw materials have increased dramatically - from steel and copper to wood and cardboard. As a result, in 2021, the prices of some raw materials necessary for the production of whisky are almost 50% higher than before the pandemic.
The transport sector was also affected by the problems. The delays caused by the pandemic were compounded by the effects of Brexit, which disrupted both the supply of imported goods and made the issue of whisky exports difficult.
Producing and bottling Scotch whisky has certainly become much more time-consuming and costly than it was before the pandemic. On the other hand, consumer demand appears to remain very strong, which in turn translates into optimism among companies at every stage of the industry's supply chain, from cereals to glass. Entities operating in this industry think about their businesses in the long term, which is why they are optimistic about the coming years.
Source: www.thespiritsbusiness.com
