Scotch whisky exports remain flat

Whisky bottling line The Scotch Whisky Association said exports remained strong but there were still short-term "economic headwinds"

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Scotch whisky exports stagnated last year, as sales were hit by slowing demand in China and other emerging markets.

Figures from the Scotch Whisky Association (SWA) showed overseas sales remained flat at £4.3bn by value.

In volume terms, exports increased by 2.5% to the equivalent of 1.23 billion bottles.

Scotch whisky performed strongly in the US, Mexico and India but direct exports to China fell by nearly 30% to £51m.

Sales to Taiwan, South Korea and Japan also fell in value, by between 13% and 15%.

We've heard from individual distillers that the fall-off in the Chinese market has a lot to do with official government disapproval of conspicuous consumption, and a crackdown on the culture of business gifts, as they easily cross the line into corruption.

It's a challenge that has hit the premium and luxury goods market in quite a big way.

The best performers included the US, which saw exports of Scotch grow 8% on 2012 to a record £819m.

The US was by far the largest market for whisky by value.

France remained the largest volume market for Scotch.

SWA said sales there rose by 16% as the market recovered following a tax hike on spirits at the start of 2012.

India, which is now Scotch whisky's fourth biggest market by volume, saw the value of whisky sales climb by 12% to £69m.

SWA said it hoped EU-India Free Trade Agreement negotiations would restart following this year's Indian elections, leading to a reduction of the current 150% import tariff.

Exports to Brazil and Mexico grew by about 20% - to £99m in Brazil and £110m in Mexico.

Analysis

A career in the British diplomatic service means David Frost is schooled in the art of choosing his words carefully.

The Scotch Whisky Association's chief executive has concerns about independence but he is careful not to overstate them, insisting the vote is a "decision for the people of Scotland," not for its companies.

Nonetheless, Mr Frost is seeking "reassurances" about the "risks" of a 'yes' vote.

In the SWA's sunny boardroom in Edinburgh he told me he was concerned that the Scottish government's white paper on independence "talks of a network of 70 to 90 overseas embassies," compared to "getting on for 200 posts" in the existing UK diplomatic service.

According to the SWA, Scotch whisky represents about 85% of Scottish food and drink exports and about one quarter of the British total, with the industry's exports worth £135 a second to the UK balance of trade.

"It is important that an independent Scotland gives the same kind of support to the industry and finds ways of doing it that are comparable to what we have now," said Mr Frost.

"We're confident this industry is going to succeed whatever the situation after the 18th of September. So we are concerned about the conditions in which we would be operating. We see some risks. We want reassurances. But are we going to be successful? Yes, you bet."

In January, spirits producer Diageo reported slowing sales in China and other emerging markets.

The company said new rules over gift-giving and spending by Chinese officials dented sales in the country by 66%.

SWA chief executive David Frost said: "Scotch whisky exports remain strong and the industry's impressive performance makes a major contribution to the UK's trade performance.

"The unprecedented investment programmes in Scotch whisky by producers show that in the long term they are confident that demand will continue to grow.

"However, in the short run, there are some economic headwinds. Formal and informal barriers to trade remain."

He added: "We should remember that the industry's success does not come automatically but is based on hard work, investment and careful stewardship."

Mr Frost also made a plea for strong government backing for the industry.

He said: "As a former ambassador, I know that the industry also depends on strong political support from government, for example to influence European Union negotiations on our behalf or to press other countries to allow better access to their markets.

"Both the UK and Scottish governments have played an important role in this so far."

He added: "Whatever the outcome of the Scottish referendum, as an industry exporting to around 200 markets we will continue to need the backing of an effective diplomatic network with the necessary global reach, commercial expertise, and capacity to influence."

Overall, Scotch whisky accounts for about 85% of Scottish food and drink exports and nearly a quarter of the British total.

Top Scotch whisky export markets by value

Position 2013 2012 % change

Source: Scotch Whisky Association

1. USA

£818.7m

£758m

+8

2. France

£434m

£434m

0

3. Singapore

£329.7m

£339.2m

-3

4. Spain

£180m

£195.3m

-8

5. Germany

£172m

£168.8m

+1.8

6. S Africa

£163.5m

£161.6m

+1

7. Taiwan

£144.6m

£165.4m

-12.5m

8. S Korea

£115.4m

£135.7m

-15m

9. Mexico

£109.8m

£91.8m

19.5

10. Brazil

£99.1m

£83.6m

18.5

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