Scotch Whisky Sales Surge in H1

IWSR forecasts show global consumption of Scotch whisky reaching 103.1m 9-litre cases in 2023, up from 95.3m in 2018 - what is driving this sudden spike in popularity?

Scotch whisky sales increased by 10.8% to £2.19bn in the first half of 2019, according to data released by the Scotch Whisky Association (SWA). The volume of exports also increased by 7.1% to 598m 70cl bottles.

 

Single malts continue to grow in popularity, with exports up 18.8% to £652m in the first six months of the year. Single malts now make up 30% of the value of all Scotch shipped overseas. Exports of blended Scotch grew too, rising 7.5% to an export valuation of £1.35bn.

Commenting on the half-year export figures, SWA Chief Executive Karen Betts said: “Demand for Scotch whisky is growing both in developing markets, like India, and in established ones like the US, Japan and Germany. This reflects the enduring popularity of Scotch whisky in so many cultures around the world. It also reflects our industry’s continued focus on improving trading conditions – for example, removing tariffs and discriminatory taxes – across our global markets.”

The SWA believes that a proportion of this year’s export growth also reflects actions taken by a number of distillers to mitigate the risk of a no-deal Brexit in March/April by exporting some stocks early, evidenced by a spike in EU exports in Q1. For example, there was significant growth in exports to South Korea and Morocco, both markets where tariffs could have been re-imposed if the UK had exited the EU without a deal on 29 March.

The EU saw significantly more growth in value and volume in Q1, (+27.9% and +14.5% respectively compared with Q1 2018), than in Q2 when they dropped by -13.2% and -20.5% compared to Q2 2018. This reflects shipments ahead of the 29 th March Article 50 deadline.

Shipments to South Korea increased by 25%, and exports to Morocco increased by 74% in the first half of the year, again reflecting forward shipping ahead of potential tariffs following Brexit.

The USA remains the top export market for Scotch, with export value increasing sharply (+19.5%). The USA has benefited from increasing premiumisation in recent years, and distillers have launched a number of new products which have increased market share of Scotch in a competitive brown spirits market. Notably, consumers aged 25-34 now account for the largest age demographic, having come to appreciate the ageing process of whiskies.

Consumers worldwide are increasingly willing to pay more as they learn about the range and variety of single malts on offer.

Commenting on the latest figures, Humphrey Serjeantson, Research Director at IWSR Drinks Market Analysis states that: “IWSR forecasts show global consumption of Scotch whisky reaching 103.1m nine-litre cases in 2023, up from 95.3m in 2018. While blends will still account for the lion’s share of Scotch, malts will grow at a faster rate (4.1% vs 1.2%), showing that consumers worldwide are increasingly willing to pay more as they learn about the range and variety of single malts on offer, and as they become more educated about how Scotch is made. While overall volumes are set to decline in Europe over the next five years, growth in the Americas and Asia Pacific will more than make up for this.”

As noted by the SWA, the increase in shipments of Scotch should not be seen as a direct indication of an equivalent increase in consumption – much of the growth in Q1 will have been stockpiling in an effort to reduce the risks posed by a disorderly Brexit.

Overall volume growth in Scotch between 2018 and 2023 is forecast at 1.6% CAGR, compared to 3.9% for US whiskey, 6.3% for Irish, and 6.7% for Japanese, as the slower growth of blends will outweigh the 4.1% growth in malts.

Scotch’s image as a status spirit is helping drive growth across many markets, especially the potentially huge Asian markets of China and India as these economies grow. But the traditional image of Scotch also arguably puts off younger consumers in existing markets where other categories are seen as more dynamic. Various methods are being attempted by producers of blends to reach out to new consumers, partly via broadening the occasion of consumption into cocktails (especially via highballs) and partly by reworking the traditional image of blended Scotch by tie-ins with popular culture. The key recent example here would be Diageo’s Johnnie Walker brand and its “Game of Thrones” tie-ins. Johnnie Walker is by some margin the largest Scotch brand globally, with just under 20% share by volume, and its activity will be closely watched by the industry as a whole. Could Johnnie Walker’s innovation help drive a turnaround in the fortunes of blended Scotch? It would be unwise to rule it out.

 

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