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Once the party ends, the hangover begins: Last year saw scotch whisky wake up with a nasty headache, following the remarkable export performance of 2022. In 2023, according to HMRC shipment figures reported by the Scotch Whisky Association (SWA) in February, export volumes fell by 19% to the equivalent of 1.35bn bottles, while shipments by value were down 9.5% to GBP5.6bn (US$6.9bn).
In volume terms, nine of the category’s top ten export destinations all reported declines, including double-digit falls for France, India, Japan, Germany, Spain, Brazil and Mexico. Value performance was more mixed, with increases for Singapore, Taiwan, China, Spain and Turkey.
“There’s no doubt that 2023 was a challenging year in scotch whisky,” says International Beverage’s global sales director, Veronica Amago. “Particularly towards the end of the year, consumer spending in the West was being impacted by inflation, and spending on non-essential items – including premiumised goods such as alcohol and beauty – dropped.”
To others in the industry, 2023 is less a concern, and more a symptom of a market correcting itself after the volatility of the pandemic and the global supply chain crisis – the latter evolving from a position of shortages to overstocking as consumer spending cooled.
“Scotch whisky exports have recorded remarkable growth on pre-pandemic numbers in value [+14% since 2019] and volume terms [+3% on 2019],” points out the business acceleration marketing director at Pernod Ricard’s Chivas Brothers unit, Sébastien Borda. “This is consistent with the long-term value growth of the scotch whisky market over the past two decades, which has grown by 154% from 2004 to 2023, according to SWA 2023 export data.
“Whisky is a long-term game: short-term fluctuations are to be expected as the market continues to normalise … . These fluctuations are very much contextualised within a robust growth trajectory.”
Similarly, the apparently worrying declines in the US – volumes down 7% 2022–23, and flat 2019–23 — are dismissed by the president of global whisky & prestige at Suntory Global Spirits, Robbie Millar. “We see this as short-term as the market continues to reset post-Covid-19, and consumer demand remains encouraging,” he says.
Amago, however, isn’t convinced. “This isn’t just an issue of post-pandemic disruption,” she says. “There’s a lot of change on the mid-term horizon, which we all need to be preparing for. Regulatory changes are now more at the forefront, driven by increased global instability and the redrawing of political alliances.”
The impact of a possible Trump return to the White House, the threat of possible tariffs imposed on cognac imports into China, positive tax reforms in India and Dubai – change can be positive as well as negative, although it’s hard to find many plusses in the worsening geopolitical crisis in the Middle East.
Brands betting on Eastern promise
For the moment, though, there is still optimism, particularly about Asia, and despite China’s own economic concerns. A Diageo spokesperson describes the market as “really exciting”, pointing to a 13% sales increase from the group’s scotch portfolio in Greater China in the 12 months to the end of June last year and highlighting especially strong super-premium performances for Johnnie Walker and The Singleton.
Millar echoes those sentiments, noting Suntory Global Spirits’ “long-term focus” on India, while the global MD for spirits at Campari Group, Raul Gonzalez, is particularly bullish about the prospects for single malt Glen Grant in Asia. “Markets like South Korea and Japan have shown remarkable enthusiasm for high-quality spirits, and there’s a burgeoning base of discerning consumers in these regions who seek an exceptional whisky experience,” he says. “To capitalise, we are intensifying our efforts to meet and exceed the expectations of these markets through more exclusive offerings.”
Gonzalez believes top-end iterations such as Glen Grant’s limited The Devotion and The Visionary expressions effectively target high-net-worth consumers who are less sensitive to economic fluctuations – while also premiumising the core range through the introduction of Glen Grant 21 year-old.
Meanwhile, Millar says innovations in the ultra-premium and prestige price tiers – such as Bowmore’s ARC-52 (above), part of the Islay single malt’s tie-in with luxury car maker Aston Martin – are bringing a new level of interest into the category as a whole.
Can this pursuit of ever more dizzying price tags through ever rarer, longer-aged bottlings go too far? “I think there’s still a place for luxury products, but by that I mean true luxury,” says Amago at International Beverage. “Consumers at this level are savvy and they don’t buy into brands just because they have a high price tag. They will pay for genuine rarity, authenticity and personalisation, which I believe is the new definition of luxury.”
At a time of rapidly shifting macroeconomic and geopolitical events, in an industry that is as large and diverse as scotch whisky, it pays to have a varied portfolio, and to be nimble in your deployment of it. “There is by no means a consistent trend in consumer behaviour, because today’s whisky drinker comes from a variety of socio-economic backgrounds,” says Borda of Chivas Brothers. “Ultimately, we believe in the concept of ‘less but better’. We firmly believe in our premiumisation strategy in the mid to long term, but we have a wide portfolio of products at different price points to cater for a range of consumer needs and occasions.
“While there are markets where the challenging economic environment is impacting consumer purchasing decisions, there are also markets where we’re seeing ultra-premium scotch outperforming other price tiers – there is no one-size-fits-all approach.”
