A Scottish solicitor who specialises in the spirits industry has spoken about the challenges currently being faced by the Scotch whisky sector after conducting an analysis of the industry’s production, sales, and global reputation.
Angus MacLeod, Partner at law firm Wright, Johnston & Mackenzie LLP (WJM), has highlighted some of the key issues affecting the whisky industry, and discussed the strategies that can be employed to overcome them.
Angus, Head of the firm’s Inverness office, said: “As leading legal advisors in the drinks sector, we recognise the importance of understanding and addressing the pressing issues that are currently facing the Scotch Whisky industry.
“After conducting an in-depth review of how Brexit-driven regulatory changes, trade barriers, sustainability concerns, and other global challenges might impact clients in this sector, it is evident that the road ahead presents both challenges and opportunities.
“From combating counterfeit products to addressing sustainability concerns, the industry must adapt and innovate to thrive in a highly competitive global market.”
Some of the findings from the review found:
Brexit-driven Regulatory Changes:
Following the United Kingdom's withdrawal from the European Union, the Scotch Whisky industry has grappled with introduced regulatory changes and uncertainties. The industry, heavily reliant on the EU's single market and trade agreements, must now navigate different regulations and potential disruptions to supply chains in the new trade relationship between the UK and the EU.
Trade Barriers and Tariffs:
The imposition of trade barriers and tariffs has been a significant concern for the Scotch Whisky industry. Trade disputes, such as those between the United States and the European Union, have in the past resulted in retaliatory tariffs on Scotch Whisky exports. While Brexit untangled the UK from that particular dispute, it has its own disputes and uncertainties over tariffs now. These tariffs increase the cost of Scotch Whisky for consumers and create market uncertainties, affecting the industry's competitiveness and growth potential.
Intellectual Property Protection:
The Scotch Whisky industry continues to battle against counterfeit products and the misuse of its protected geographical indication (PGI) status. Unscrupulous producers in various parts of the world attempt to imitate Scotch Whisky or to produce “piggyback” products, misleading consumers and damaging the industry's reputation. Strengthening intellectual property protection and combating illicit trade remain significant priorities for the industry to safeguard its heritage and maintain consumer trust.
Sustainability and Environmental Concerns:
As global awareness and concern for environmental sustainability grow, the Scotch Whisky industry faces increasing pressure to address its environmental footprint. Issues such as water usage, energy consumption, waste management, and carbon emissions are key areas of focus. The industry is striving to adopt sustainable practices throughout the supply chain, including sourcing ingredients responsibly, reducing energy consumption, and implementing circular economy initiatives.
Changing Consumer Preferences:
The evolving tastes and preferences of consumers pose challenges for the Scotch Whisky industry. Younger consumers, in particular, may have different drinking habits and preferences compared to previous generations. The industry must adapt to changing consumer trends, including the demand for premium, craft spirits, experimentation with new flavours and styles, and the rise of alternative spirits categories. All of this has to happen whilst preserving the heritage factors within the industry’s brands, which are key to its success.
Global Competition:
The Scotch Whisky industry faces intense competition from other global spirits producers. Whiskies from countries like Ireland, Japan, and the United States have gained popularity and recognition, challenging Scotch Whisky's dominance. The industry must continue to emphasize its unique heritage, quality, and craftsmanship to maintain its position in the global market.
Brexit and Workforce Challenges:
Brexit has also created concerns about the availability of skilled workers in the industry. Like many industries, workers in the Scotch Whisky industry, including distillers and blenders, come from other EU countries. Changes to immigration policies and potential labour shortages pose challenges for the industry's workforce, potentially impacting production capabilities and expertise. Navigating new rules for skilled worked migration can be challenging, but skills gaps have to be filled.
Responsible Drinking and Regulations:
Promoting responsible drinking and complying with regulations regarding alcohol advertising, labelling, and marketing are ongoing priorities for the Scotch Whisky industry. Striking a balance between promoting the brand and product while adhering to strict regulations ensures the industry maintains its reputation and contributes to the responsible consumption of its products.
Aside from these challenges, Angus believes the Scotch Whisky industry remains resilient and adaptable. He continued: “Despite the myriad challenges faced by the Scotch Whisky industry, I firmly believe in its enduring resilience and remarkable adaptability.
“The industry has weathered storms throughout its history, constantly evolving to meet changing times and consumer demands.
“With its unwavering commitment to innovation, quality, and craftsmanship, the sector will undoubtedly navigate these challenges, emerging stronger than ever before."
For more information on WJM go to www.wjm.co.uk.
About WJM
Wright, Johnston & Mackenzie LLP is a full-service, independent Scottish law firm, with a history stretching back over 165 years, operating from offices in Glasgow, Edinburgh, Inverness, Dunblane and Dunfermline.
Wright, Johnston & Mackenzie LLP is authorised and regulated by the Financial Conduct Authority. FCA reference number 231170.