The beginning of the year saw several reports lament the financial distress of a number of Scottish whisky distilleries. 69 were said to be in a critical financial state, making up 19% of the entire sector there.
This sobering news has only been worsened since after Trump’s announcement that the 10% tariff the UK had been subjected to will soon climb to 15%.
A Supreme Court hearing on 20th February saw a majority of the judges vote against the tariffs that the US president implemented last year, stating that he wasn’t legally able to employ them.
In retaliation, Trump hit out on his own social media platform to declare that he would enforce a minimum 15% tariff instead, this, he insists “will continue our extraordinarily successful process of making America great again – greater than ever before”.
How did the previous 10% tariff affect distilleries?
Scotch whisky remains one of the UK’s biggest exports, and the US is Scotch’s biggest market. As such, any tariff put in place was bound to hurt.
Since the 10% tariff was implemented, a 15% drop has been recorded in bottles of Scotch being shipped to the US. This has come at the same time that the cost of doing business in the UK has increased too, leaving many distilleries close to the brink.
Will American buyers absorb the extra costs?
Of course, apart from the distilleries, the other party that will feel these changes the most is the end consumer, who will be expected to pay significantly more for the same bottle of Scotch they’ve always had.
Given that America doesn’t generally produce whiskeys with the same flavour profile as Scotch, there’ll no doubt be plenty that begrudgingly absorb the extra cost in order to enjoy their favourite tipple, but that 15% decrease in exports already reported is still likely to rise as more consumers struggle to justify the increased outlay.
That already damning 15% drop may even include increased orders as customers try to get ahead of any potential tariff rises. If this is the case, then the figures for this year may be even worse than expected
Who could be affected?
Suntory recently announced cost-cutting plans that will merge operational teams at Laphroaig and Bowmore. No compulsory redundancies have been made as of yet, but they have offered voluntary redundancy to staff involved.
Although there has been no plans announced to close what are two of Scotland’s most iconic distilleries, it still highlights the tightening purse strings in the sector.
January saw Clynelish announce plans to close its visitor centre, while Glenglassaugh, InchDairnie, Rosebank, and Isle of Harris distilleries have all looked into the possibility of restructuring recently.
Ways forward for the sector
There’s no easy fix for finding access to your main market hindered so badly. Apart from cost-cutting exercises such as those seen from Suntory and Clynelish above, the most obvious route is to explore new and emerging markets.
For Scotch, that would mean Asia, an area in which interest in their whisky has been growing steadily over the last decade. Recent tariff reductions in China and India provide the potential to tap further into huge markets, while countries such as Thailand and Indonesia could perhaps join India, Singapore, Taiwan and China in being some of the Scotch industry’s biggest audiences.
Don’t allow external forces to kill your business
If trade is getting slower and bills are slowly starting to get trickier to pay, it could be that your company is sleepwalking into trouble. Whether it be a restructure, business sale, or closure that works best for you, it’s best to act as soon as possible.
With a range of solutions aimed at making life easier for business owners, Forbes Burton can help you to successfully navigate any difficulties. Get in touch for a free consultation today to see how we can help. Call us on 0800 060 8508, or email advice@forbesburton.com for your free consultation with no obligation.
