Whisky makers, including drinks group Diageo, home to the Johnnie Walker brand, have had a tough year with restructuring and a drop in sales.
When workers at drinks group Diageo’s Johnnie Walker scotch whisky packaging plant in Kilmarnock, southwest Scotland, agreed a redundancy deal days before Christmas it ended six months of bitter protests over the group’s decision to sever links with the town after 189 years. The plant’s closure marks the culmination of a tough year for the scotch whisky industry which has been forced to slash jobs in the face of a deep recession.
As with many of its consumers, scotch producers partied through several bumper years only to face a major financial headache last year. Demand for the spirit began to slow early last year and cracks began to appear in some of the industry’s traditional export markets. Scotch Whisky Association (SWA) figures show sales, by value, were down 3.5 percent at £2.1 billion (US$3.4 billion) for the first nine months of the year.
After the high of three boom years, which culminated in record exports of £3.1 billion in 2008, last year was one of the toughest in recent memory for the industry. Diageo prompted union fury by pushing through restructuring that will eliminate 900 jobs and end Johnnie Walker’s historic links with Kilmarnock. Whyte & Mackay, owned by Indian billionaire Vijay Mallya, cut a third of its workforce, while in November the Edrington Group announced plans to mothball Tamdhu, the Speyside (Scottish Highlands) distillery, whose malt is a main component of Famous Grouse, for only the second time in its 112-year history.
However, SWA public affairs manager David Williamson says the figures for last year were “encouraging” as conditions had improved after a “tough” first quarter: “Scotch whisky has been recession-resilient if not recession-immune.”
A surge in exports to countries such as Venezuela, which jumped 83 percent, helped offset problem markets such as Singapore where sales slumped 20 percent.
Diageo says the restructuring of its Scottish operation was not a defensive move, but the magnitude of the global recession is seen to have hastened its progress. Johnnie Walker sales fell 11 percent last year while J&B, a favorite tipple of Spaniards when mixed with Coke, was off 13 percent as whisky exports to the recession-ravaged country plunged 26 percent. Edrington said the mothballing of Tamdhu was to “rebalance its distillation capacity” after the downturn “flattened” sales.
It is not the first time the industry has faced a hiatus. In the late 1970s, exuberant sales estimates resulted in the so-called “Whisky Loch.” However, distillers were forced to turn down production and mothball sites after growth fell short of expectations. Exports also slumped during the Asian economic crisis, dropping from £2.4 billion in 1997 back to £2 billion in 1998.
About 9,500 people, many in economically deprived parts of Scotland, are employed directly by the industry and the UK supply chain has more than 60,000 workers. Geography was a significant factor in the political firestorm that followed Diageo’s decision to close the Johnnie Walker bottling plant in Kilmarnock and the Port Dundas grain distillery in nearby Glasgow, even though 400 new jobs are being created at its Cameron Bridge grain distillery in Fife on the other side of Scotland. The bitter six month-long dispute was only resolved in recent days when workers voted to accept the redundancy package.
Diageo says history is not repeating itself and its strategy remains unchanged despite straitened times.
“The industry got it badly wrong in the ’70s,” says Ken Robertson, head of corporate relations at Diageo Whisky, who says consolidation and sophisticated forecasting methods mean the industry is a leaner, more efficient beast today. “The restructuring was not driven by the recession but by a long-term view of our business and the way we see investment panning out in the future.”
He says the industry learned a harsh lesson from the “Whisky Loch” years as they were followed by two decades of tough love, when growth bumped along at 0.5 percent. It was only five years ago that flowering demand from India, China and emerging markets gave the industry grounds for optimism.
The SWA insists that scotch producers still have a bright future.
A tough year for exports of scotch whisky also coincided with some big blows to Scotland’s distilling pride. Early this year international whisky authority Jim Murray named 18-year-old Sazerac Rye from Kentucky in the US the finest whisky in the world.
Its top billing in Murray’s 2010 Whisky Bible pushed Ardbeg Supernova from Islay into second place, while there was further upset for the scotch industry with his third place choice — it went to a single malt distilled in Bangalore called Amrut Fusion. Japanese producers have also been enjoying widespread acclaim for their malts, piling up awards and exporting their whiskies around the world. England got in on the act last year, as the English Whisky Co bottled the first English whisky for more than a century and has even been shipping to Scotland.
CAUTION: Taiwanese should be alert, even if they have just liked or shared posts that would breach Beijing’s national security legislation for Hong Kong, the council said Due to the newly implemented Hong Kong national security legislation, the Mainland Affairs Council (MAC) has drawn up a list of what it described as “high-risk groups,” cautioning them not to travel to Hong Kong. People who support independence for Taiwan, Hong Kong, Tibet and Xinjiang; those who are critical of the Chinese Communist Party (CCP), the Hong Kong government and the “one country, two systems” concept; and those who donated to or voiced support for the Hong Kong anti-extradition bill movement are urged to refrain from visiting Hong Kong, the council said on its Web site. It released two posts on
NEW HONG KONG LAW: A visit to Beijing-friendly nations or those with weak judicial systems could leave people at risk of deportation to China, a former MAC official said Beijing could request countries with which it has extradition agreements to deport Taiwanese to China to face criminal charges following the implementation of national security legislation for Hong Kong, a former Mainland Affairs Council (MAC) official warned yesterday. Some developing countries, and those close to China because of the Belt and Road Initiative, are likely to accommodate Beijing’s requests to extradite Taiwanese to China, said former deputy MAC minister Chen Ming-chi (陳明祺), who served from July 2, 2018, until May 20, and then returned to his former post as an assistant professor of sociology at National Tsing Hua University. While Taiwanese
IN THE PIPELINE: The Ministry of National Defense said the sale, expected to take effect in one month, would be the seventh arms sale under the Trump administration The government yesterday thanked the US for approving the possible sale of a US$620 million missile repair and recertification package to Taiwan. The US Department of State has approved the sale of a package to recertify Patriot Advanced Capability-3 (PAC-3) missiles to the Taipei Economic and Cultural Representative Office (TECRO) in Washington for an estimated US$620 million, the US Defense Security Cooperation Agency said in a news release on Thursday. The agency has delivered the required certification to the US Congress, notifying it of the possible sale, it added. The TECRO had requested to buy an upgrade package that would support an operational
INJURED: Several KMT lawmakers fought their way through DPP members into the legislative chamber, while others lay on a driveway to block Chen Chu Scuffles broke out at the Legislative Yuan yesterday as Chinese Nationalist Party (KMT) lawmakers again occupied the legislative chamber, stymieing a report by Control Yuan presidential nominee Chen Chu (陳菊) and a question-and-answer session. The KMT lawmakers showed up at the back door of the chamber at about 5am and tried to enter, but were stopped by several Democratic Progressive Party (DPP) lawmakers who were guarding the door. Scuffles broke out as the KMT lawmakers tried to force their way through the door, injuring legislators on both sides. KMT Legislator Hung Mong-kai (洪孟楷) tackled DPP Legislator Wang Ting-yu (王定宇), while DPP Legislator Wu