The first step towards Scotch whisky industry recovery

The Scotch Whisky Association has released the latest figures that indicate a recovery in exports after a sharp slump caused by the pandemic, Brexit and harmful import duties on the largest export market - the US. At the same time, the organization emphasized that the industry still faces major challenges.

New data shows that Scotch whisky exports increased by 31% in the first half of 2021 compared to the first half of 2020 and amounted to £2.2 billion. The sales volume increased by 42% in the same period and amounted to almost 600 million 0.7l bottles. This increase, however, relates to 2020, which cost Scottish whisky exports over £1bn, making Scotch whisky exports lowest in a decade. Thus, the increase in the value of exports may be encouraging, but it only illustrates the slow process of market recovery after unprecedented declines in 2020.

The SWA emphasizes that despite the promising recovery, exports in the first half were still 10% lower than in the corresponding period in 2019, before the outbreak of the pandemic. The Scotch whisky industry is still struggling with the effects of global restrictions caused by the coronavirus pandemic, but this is not the only factor causing difficulties in this market.

The British economy also has to face significant difficulties and uncertainty related to the effects of Brexit. The UK left the European Union at the end of 2020, which still significantly affects the UK's international trade. Exporters face delays at the borders of several months, which may mean that export data may not reflect the overall market situation.

The SWA also says distilleries still need some time to offset the effects of US tariffs, which are blamed for a one-third decline in exports to the US to £ 729m in 2020. In June 2021, the United Kingdom and the United States announced a five-year suspension of harmful tariffs. In the first half of this year, the value of Scotch whisky exports to the US was almost 4% higher than in 2020, but still over 30% lower than in the first half of 2019.

“The pace of recovery of Scotch Whisky exports is very promising.  Last year, the combination of US tariffs and Covid-19 brought Scotch Whisky exports to their lowest level in a decade, so it’s encouraging to see them start to regain strength. But like many other sectors, Scotch Whisky companies are feeling the ongoing impacts of trade disruption on our supply chain and global distribution, and the cost of goods and services has risen significantly” said Karen Betts, chief executive officer of SWA.

Krzysztof Maruszewski, CEO of Stilnovisti, commented on the latest Scotch Whisky Association data: “In 2020, the Scotch whisky industry has been affected by three unprecedented events - the global coronavirus pandemic, a customs war with the largest export market and significant changes in international trade caused by Brexit. The early signs of a recovery in Scotch whisky exports in the first half of 2021 are a good signal, but a long time has to pass before the industry returns to its 2019 levels. This is particularly evident in the industry's domestic trade, i.e. the whisky casks market. While the prices of Scotch whisky bottles are rising, fueled by the phenomenon of premiumization, which even accelerated during the pandemic, the prices of semi-finished products - casks - are subject to the influence of the largest and richest players on the market. Such entities wait through a period of uncertainty by holding their casks and buying available market goods at low prices from individuals and companies that urgently need cash. The drop in the prices of semi-finished products caused by the current situation creates a unique opportunity for investors to buy whisky casks at favorable prices, wait out the current situation and realize a profit after the industry has dealt with the effects of the challenges that fell on it in 2020."

 

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