In an article for the Sunday Herald, Donald Blair of Polestar Consultants, who worked for three decades in high-profile exporting roles throughout Europe and was a former head of international affairs for a major drinks company, criticised the Scotch industry for “laziness” and “complacency” after recent figures showed that the compound annual growth rate by volume of Scotch whisky was an “awesomely pedestrian” 0.045% since 1978, while the equivalent rate for vodka over the last 20 years was 3.5%.
The estimated value of Scotch whisky exports rose from £2 billion to £3.1bn in the 10 largely recession-free years from 1998 to 2008 – an increase of 51%. But Mr Blair has argued that the profits of premiumisation without volume growth have not optimised benefits to the Scottish economy.
Mr Blair claimed his research, which updated a previous report circulated around the industry in 2008, was inspired by the study titled Global market review of vodka – forecasts to 2014, published by industry commentator Just-Drinks with data from the Institute of Wine and Spirits’ research. This report indicates that the compound annual growth rate (CAGR) of vodka over the most recent 20-year period had far outstripped that of whisky.
“The latest data released shows that volumes of Scotch whisky released to the domestic UK market and exported overseas totalled a little over 331 million litres of pure alcohol (LPA) in 2008. This shows little improvement over the 1978 figure of almost 323m LPA. A growth of fractionally over 2.6% in total volume during the 30 years of the greatest economic boom the world has ever seen is hardly the definition of success,” said Mr Blair. “The long-term growth of vodka has a CAGR of 3.5% – 77 times greater than that of Scotch whisky. Nearly 51,600 extra jobs could have been created in Scotland had the Scotch whisky industry sales volume performance matched that of vodka.
“In other words, the whisky industry would provide direct employment for, or support, over 90,000 jobs in Scotland as opposed to the current 38,000.”
A spokesman for the Scotch Whisky Association (SWA) hit back at Mr Blair’s claims, saying that between 1998 and 2008 the value of Scotch whisky exports rose by more than £1bn, an increase of 51%, and that export volume had risen by 19% in the same period, an increase of 13.4 million nine-litre cases (70.6 million to 84 million cases).
However, Tim Wilson, an independent analyst and author of the subscription-based Wilson Drinks Report described Mr Blair’s intervention as conducive to “healthy discussions” about the state of the whisky industry in Scotland, and the resourcing and approach of its whisky marketing operations.
“The whisky industry has stayed loyal to its core market and its focus on the slightly tweedy middle-aged drinker. Maybe it could have explored alternative ways to deliver whisky without those associations and [make it] more about energy and revving up, which is how vodka is marketed,” said Mr Wilson. “It would be fascinating to see the breakdown of how much profit the big companies make on their vodka portfolios versus their whisky portfolio and how much they spend on promoting the two categories, but all that information is top secret.”
The SWA said that instead of criticising strategy, supporters of Scotch should be united in opposing the Scottish Government’s policy for minimum pricing of alcohol.
“Where we agree with Donnie’s [Donald Blair] report is that Scotch whisky is ‘strategically important’ to Scotland and that the Scottish Government could do more to recognise and support the industry. A good start in 2010 would be to acknowledge the industry’s concerns about the damaging impact of minimum pricing on Scotch whisky at home and overseas,” said a SWA spokesperson.
However, this response got short shrift from Donald Blair, who countered: “Why does minimum pricing interest the SWA so much? The vast majority of its members’ products are way above the minimum price levels envisaged. Since when did the SWA worry about cheap supermarket own brands which true marketers believe devalue the whole Scotch category and are the bane of brand owners. Do the controllers of the SWA also have significant vodka interests – especially alcopops, the entry-route for many consumers into white spirits?”
