This time it's different

Is the Scotch whisky industry heading for disaster?

Possibly the four scariest words in the English language are “this time it's different”. There's even a book about financial disasters called: This Time Is Different: Eight Centuries of Financial Folly. You always know that something is about to go tits up¹ when someone reassures you that this time it really is different. We know what we’re doing. We aren’t going to make those mistakes that everyone else made since the dawn of civilization. 

In my time as editor of the Master of Malt whisky blog I was privileged to publish a writer I had long admired, Ian Buxton. Buxton is something of a house curmudgeon to the whisky industry. While everyone else was celebrating the good times, Buxton was remembering what happened in the dim and distant past, the 1980s. 

Macallan’s Bond villain-esque distillery which opened in 2018

He wrote something in 2019 about the return of the whisky loch, when overproduction  in Scotland met falling demand leading to the closure of such famous names as Port Ellen, Brora and Rosebank. It seems to have disappeared from the site but his 2022 article along similar lines is still up and well worth a read.

We were had just come out of a series of COVID lockdowns which has wrecked the world economy, inflation was taking off and Russia had invaded Ukraine. Yet the response was ‘typical Buxton, he’s always writing things like that. Doesn’t he realise that now whisky is now a global market? There’s infinite demand’. In other words, it’s different now.

Even as late as 2022 when anyone with any ounce of sense could see there was major financial trouble coming round the bend, the Scotch whisky industry was expanding. Buxton writes: 

“Pernod Ricard is planning major expansions at its Aberlour and Miltonduff distilleries. The two Speyside distilleries will receive a total of £88 million (€104m) in upgrades to increase production by 14 million litres of alcohol annually. Dalmore and Kilchoman have both announced major expansion and the huge Glen Turner (Starlaw) grain plant is to construct 11 giant new warehouses, suggesting that production there will be growing substantially.”

This is on top of the huge recent expansions at Macallan, Glenlivet, Glenfiddich and many others. And that’s without going into all the new distilleries in Scotland and abroad.

The problem with Scotch whisky has is that you can’t just turn on a tap to meet demand. Whisky takes time. Distillers have to think at least ten years in the future and the expansions were based on estimates that the market would continue to grow at the same rate. 

But this time it’s different, surely? What about the global market? Well, China is fickle, just ask cognac producers or German luxury carmakers. India is huge but despite much talk, those 150% tariffs are still up and it makes its own increasingly good whisky. Selling into Russia, a huge market, is now not a good look, as the centrist dads might say, due to the its ongoing war in Ukraine.

Europe is stagnant and Latin America is in decline. In fact, Diageo blamed its recent poor results on a disappointing Latin American market. It’s hard to imagine now but Venezuela, now an economic basket case thanks to decades of socialism, was once one Scotch whisky’s biggest markets. 

The Diageo share tumble was one warning sign. Another It was when Glenmorangie released its classic 10 year old as a 12 year old. For years whiskies had been getting younger with more no age statement releases. Numbers are meaningless, we were told, it’s the quality that counts. A raise in age statement suggests that they have unsold maturing stock.

But you really know that there’s a storm a-coming when an arch-optimist like Dave Broom writes an article called ‘There’s a storm a-coming.’ He writes: 

“… this is the first time that those running most firms – especially the largest – have experienced a downturn. Their whisky lives have been filled with rises in sales, a happy life, working in a benign climate, not looking at the horizon where skies have been darkening.”

I’d highly recommend reading the whole thing. It’s worrying time for Scotch whisky but it’s even worse for small distillers. Recently Swedish whisky leader Mackmyra went out of business. Last year East London Liquor Company went under. It was rescued at the expense but investors and crowdfunders lost their money and the whole thing left a nasty taste in the mouth. There will be more to come.

Happily all this woe isn’t necessarily bad news for the customers. I caught the tail end of the last whisky recession in the late ‘90s. You could buy buy 17 year old Islay whisky, rumoured to be from Ardbeg, for £15 a bottle. Every cloud and all that.

1. The other sign is when a company builds a hubristically gargantuan new HQ.