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Scotch battles back from decline

Volumes of Scotch exports grew by 3.1% in the first half of 2016, marking another turning point in the category’s fortunes following several years of decline.

According to analysis published today by the Scotch Whisky Association (SWA), volumes of scotch exports worldwide grew by 3.1% in the first half of the year – the first growth in volume reported since the first half of 2013.

A total of 533 million 70cl bottles were shipped overseas, a rise of 16 million bottles on the number shipped in the first half of 2015.

“The first half of 2016 was marked by an improving Scotch Whisky export performance, suggesting a strengthening in global consumer demand compared to the last couple of years”, said David Frost, Scotch Whisky Association chief executive.

“The industry-wide emphasis on craftsmanship and provenance, backed by investment, means that Scotch exports are well-placed to grow in the future, appealing to consumers in both mature and emerging markets.”

Values dropped by just 1% over the sam period to £1.7 billion, from £1.71 billion the previous year. This represented a slowing decline compared to the previous year, when values dropped by 3%.

The fight back

Scotch exports had been in decline since 2013, but turned a corner last year when the value of Scotch whisky exports reached £3.86 billion, representing a decline of 2.4% from £3.95bn in 2014. This compared to a 7% decline from 2013 to 2014, indicating a slowing decline, and put total export value at 56% higher than a decade ago.

In the first half of this year, bottled blended Scotch still dominated exports, with volumes rising by 1% to 362m bottles. Export values decreased by 4% to £1.16bn.

The SWA suggested that this decline may reflect the growth in single malts, which saw the value of shipments rise by 6% to £431m and by 3% in volume to 49m bottles. Overall, single malts now account for a quarter of total global export values, having more than doubled over the past decade.

This growth was driven in part by the US, with exports to this market increasing by 9% in value to £357m, with single malts up 22% and bottled blended Scotch up 6%, which the SWA said “reflected premiumisation in the sector.”

Growth of exports to India were highlighted by the SWA with the value of exports up 28% to £43m. This market, however, is not expected to reach its full potential until a 150% basic customs duty is addressed.

Post-Brexit challenge

This was just one of the issues raised by the SWA post-Brexit, as the UK works to develop new trade relations. Generally, the SWA said the UK faced long-term challenges to define new trade relationships, but that in the short term the weakness of sterling since the Brexit vote is “likely to boost export competitiveness.”

On the challenges faced post Brexit, Frost added: “It is clear that the uncertainties of the Brexit vote will create challenges for exporters and we continue to encourage early clarity on the likely shape of the UK’s future trading relationship with the EU and other countries.

“We are working closely with our members and government to ensure the industry’s trade priorities are well understood, to promote open markets, and to identify opportunities to grow our exports in the future.

“Given the continued international uncertainty, we also look to government to make every effort to put in place a competitive domestic tax and regulatory environment, supporting a key home-grown industry.

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