Global Scotch Whisky Exports Grow While Tariffs Cut Into U.S. Market

By Mark Gillespie

February 11, 2020 – For years, the United States has been the most valuable export market for Scotch Whisky producers. A year from now, that may no longer be the case. The 25% tariff imposed by the Trump Administration since October 18 on imports of Scotland’s single malts and Scotch Whisky liqueurs has had a dramatic impact on exports, according to a new report released today by the Scotch Whisky Association.

The report is based on data from HM Revenue & Customs, and shows global Scotch Whisky exports grew during 2019 by 4.4 percent to £4.91 billion in value ($6.34 billion USD), while exports by volume grew 2.4 percent to the equivalent of 1.31 billion 70cl bottles. While the U.S. held on to its position as the most valuable market by value with a 2.7% increase over 2018, the tariff led to a 25% drop in exports over the final three months of 2019 and a year-over-year annual decline of 7 percent. That drop helped India leapfrog over the U.S. to claim second place in exports by volume for the first time.

The Trump Administration is doubling down on its hard-line stance in the ongoing dispute with the European Union over aircraft subsidies that led to the whisky tariff, and could announce an increase in the tariff as early as next week. That has Scotch Whisky Association CEO Karen Betts concerned for the fate of Scotland’s smaller distillers, estimating that the annual impact just from the current tariff could reach £100 million.

“Our smaller distillers tend only to produce single malts, and all of them will be producing brands that they will be selling into the U.S., niche interesting brands that you will see in many of your specialist whisky stores, and so it’s really impactful for those companies,” she said in an interview conducted before the release of the annual report.

The association is pressuring Prime Minister Boris Johnson’s government to include a package of support for distillers in next month’s budget, including a cut in excise duty. Betts says that would allow smaller distillers to re-invest in the British market, noting that Johnson pledged to conduct a complete review of the UK’s alcohol tax scheme during the recent Parliamentary election campaign.  “It’s something that would have been much harder to do when we were within the European Union,  so we’re looking forward to that review, and looking forward hopefully to a system that is a little less quirky than the one we have now,” she said, arguing that the current system puts whisky and other distilled spirits at a competitive disadvantage to beer, wine, and cider.

SWA analysts credit strong demand from consumers in the Asia-Pacific region and Africa for the the overall increase in exports. The Asia-Pacific region accounts for around 25% of Scotch Whisky exports by value, and posted a 9.8% gain to £1.24 billion over 2018 largely on strong gains in India and Japan. African exports gained 11.3% to £176 million, or a 4% share of the export market.

The largest regional export market remains the European Union (30%), where exports grew by 5.4% as importers stocked up ahead of planned Brexit deadlines in June and October anticipating a “hard exit” that could have caused shipping problems. France, which traditionally leads market rankings based on volume because of high demand for blended Scotch whiskies, actually showed declines in both volume (-7.9%) and value (-2.4%).

Additional data on the impact of the U.S. whisky tariff will be released Wednesday when the Distilled Spirits Council of the United States holds its annual economic briefing for reporters and analysts in New York City.

Links: Scotch Whisky Association