Scotch whisky continues to go global

As my team and I travel around the country and overseas, we often repeat the evidence that SMEs that export and trade internationally grow much more quickly and have far lower rates of default than those businesses that are purely domestic focussed. The reason we do this is to highlight the real benefits of exporting in order to encourage more SMEs to start or increase their international trade, given that the percentage that do so is still too low.

I was delighted to be invited as a speaker at the Scotch Whisky Association (SWA) annual members’ day last week in Edinburgh but this was an audience to whom I did not have to spend much time rolling out these statistics as virtually all Scotch Whisky companies export, making it one of the UK’s great export successes!

The SWA notes that Scotch whisky exports grew by 7.8% in value in 2018, to a record ￡4.7bn, with exports to 175 markets worldwide. Blended Scotch whisky continues to form the mainstay of the industry with global exports of ￡3bn although there was continued growth of 11.3% in Single Malt Scotch whisky, reaching ￡1.3bn. An astounding fact is that 90% of all Scotch whisky is exported.

In 2018, while the US became the first billion-pound export market for Scotch whisky, the EU remained the largest region for exports, accounting for 30% of global value. Hence, the SWA is naturally and understandably very concerned about an orderly Brexit given the importance of exports to the EU. Frictionless trade at our borders will be key to keeping the sector moving, and also for businesses to avoid new challenges such as additional labelling requirements.

However, Europe is not only a market to preserve but also one that offers very attractive growth opportunities. Exports to Poland, for example, have been growing steadily over the past 10 years, with an increase of 16% year on year. It is also a market that is very open to new brands and tastes, with German rock band Scorpions releasing their own popular brand of whisky there last year.

But the SWA is fully aware of the potential for growth that lies beyond Europe and is actively encouraging its members to take advantage of these opportunities. Indeed, markets such as the UAE are increasingly attractive. It is now the seventh largest market for Scotch whisky and Dubai in particular, is seeing growth in Scotch sales. This is due to a fairly sizeable expat community and a growing wealthy middle class with Scotch seen to convey luxury and status. In order to try and further boost exports to the market, Santander has entered into a strategic partnership with the number one alcohol distributor in the region (MMI) and we are working together to connect businesses, including Scotch whisky companies, to opportunities in the region.

Then of course we have China. While obviously offering huge potential, China interestingly is still only the 17th largest export market for Scotch whisky. Up until now, the Chinese market has been dominated by a top-down strategy with market players focusing on exporting rare, precious and collectible whiskies. This is the approach taken by Glenfarclas, Balvenie and others. It has yet to trickle down to non-exclusive brands due to the absence of a “volume market”. To try and help boost export growth here, at Santander we have developed strategic partnerships with two key consolidators who can pool purchases, support with associated logistics, and channel these products directly to Chinese buyers. Similarly, certification in China has, at times, been a factor in sub-optimal export growth rates. In order to help ease these issues, Santander is now an official UK Banking partner of the China Certification & Inspection Corporation, who can enable certification to happen here in the UK, removing a large part of the concerns down the line once goods have actually made their way to China.

Across all markets, lack of information and trust tend to be two principle barriers for further export growth. To help with the former, our Trade Portal Information on upcoming trade shows, export duties and customs requirements helps break down these knowledge gaps. While this is crucial, gaining access to known buyers and distributors is also vital and our Trade Club Alliance will link whisky producers to new and trusted buyers and distributors from key and growing markets, not just within Europe, and North and South America via Santander’s own network, but also those in Seoul (via our partner IBK), Lyon (Crédit Agricole), Montreal (Royal Bank of Canada), Cape Town (Standard Bank) and many, many other markets.

Listening to the key speakers at the conference, it was enormously encouraging to hear how the sector has a clear plan for 2050 and is looking sustainably to the longer term both in terms of how they produce and the people they will need to manage that production. They are challenging themselves, and proactively and constructively engaging Government. And of course, and we do love this, they are constantly eager to embrace new markets! It is important to remember this is a sector which directly employs 10,000 people in Scotland (including 7,000 in rural areas), and supports a further 30,000 jobs across the UK. In challenging times, if the UK is looking for a model sector which is far-sighted, inclusive and truly global in mind-set, Scotch whisky may take some beating.