A DISTILLERY has ripped up the contracts of about half of its staff, claiming the Scottish Government's planned law on minimum pricing of alcohol is partly to blame for the move.

Loch Lomond Distilleries in Alexandria has transferred about 16 posts to a job agency in a move that will cut costs for the firm and result in a drop in benefits, including pension rights, for staff affected.

Workers have been warned of potential redundancies following an imminent review of operations at the Dunbartonshire plant. In a letter to employees outlining the move, the company claimed the proposed introduction of minimum pricing of alcohol next year would worsen an already difficult period in the company's history.

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One of the key products produced at the distillery is High Commissioner blended whisky, the fifth most popular brand in the UK, which retails for as little as £8.79 a bottle. Under the pricing model, which would set the cost of alcohol at a minimum of 50p per unit to halt the sale of cheap and strong drinks, the same bottle of High Commissioner would rise to £14.

The distillery also produces Glen's Vodka, the second-biggest-selling vodka on the market.

The policy, which is currently being challenged at European Commission level following a move by Scottish Conservatives, is designed to clamp down on the drinking culture, with the SNP claiming it would cut alcohol-related death by more than 300 within 10 years and reduce the £3.6 billion public service bill racked up by alcohol misuse.

John Peterson, a director of Loch Lomond Distillery, was unavailable for comment yesterday, but in a letter to staff the company said: "The last year or so has been a difficult time for the company. Over that time we have lost around three million litres of blended whisky sales from our two biggest customers. With the economic recession likely to continue, the level of activity in the warehousing/bond is much reduced.

"The situation is liable to grow worse when the minimum pricing of alcohol becomes law in April 2013. This is likely to result in reduced sales for High Commissioner."

The impact the minimum price policy will have on the alcohol industry has been a matter of wide-ranging discussion and differing opinion.

The Scottish Whisky Association (SWA), which has consistently opposed the minimum pricing proposal, says 250 to 400 Scottish jobs could be at risk.

Gavin Hewitt, chief executive of SWA, said: "This news shows the unfortunate impact minimum unit pricing (MUP) of alcohol is having on just one company. It provides hard evidence to undermine the claim repeatedly made by Scottish Ministers that, as a premium product, Scotch whisky won't be affected by MUP."

A spokesman for the Scottish Government said: "We are doing all we can to support small businesses in these tough economic times, however there is no evidence of a connection between any job losses and the introduction of minimum pricing. In addition to saving lives and reducing harm, minimum pricing is predicted to reduce costs to the health, social care and criminal justice services and contribute to an increase in the productive capacity of the Scottish economy as a whole."

A spokesman for Unite union said that discussions were ongoing at Loch Lomond distillery but described the relationship between staff and management as "hostile".