Alan Powell had planned to retire in 2021. Instead, the 63-year-old, who advises investors on new distilleries, says he’s never been busier thanks to the booming Scotch whiskey market.
In a period that has included a pandemic that halted travel and kept people at home, major changes to UK trade rules due to Brexit, supply chain problems and rising inflation that threatens to ‘push major economies into recession, whiskey has been surprisingly resilient.
In Scotland it is generating so much investment that the number of distilleries in the country’s five producing regions is the highest since the Second World War, according to industry body the Scotch Whiskey Association. Demand is increasing from less mature markets such as Asia and Africa, and last month a rare cask of whiskey sold for a record £16m to a collector in Asia.
Domestic consumption during the pandemic offset the pause in tourism and sales to bars and restaurants, leading to shortages in some vintages of a product that cannot be quickly replenished.
“Even during Covid, I was busier than ever,” said Powell, who is convenor of the British Distillers Alliance. “New entrants are seeing the opportunity.”
Last year, Scotch whiskey accounted for 75 per cent of Scottish food and drink exports, 22 per cent of UK food and drink exports and 1.4 per cent of all exports of UK products, according to the SWA.
A whiskey cask is inspected at Speyside Cooperage in Craigellachie, Scotland. © Peter Summers/Getty Images
It was one of the main drivers behind a nearly 20 percent rise in UK drinks exports to £7.6bn in the year, according to consultancy Hazlewoods. Figures from the SWA show Scottish exports are on track to at least match their 2019 level of £4.9bn, after reaching £2.2bn at the end of May.
“Many British drinks brands have successfully leveraged their heritage image to establish themselves as premium buys overseas” and whiskey distillers have led the way, said Rebecca Copping, associate partner at Hazlewoods.
Ian Stirling and Paddy Fletcher are two Edinburgh residents who are building a distillery they say will be capable of producing 400,000 liters of pure alcohol a year on the city’s historic Leith Docks.
They found that the whisky’s longer production schedule, which must be matured for at least three years, can have drawbacks for potential backers with short-term investment horizons.
“The institutional investors laughed at us,” Fletcher said of the distillery site, which is due for completion in early 2023.
They turned to smaller investors to complete the £14m fundraising to build the distillery, while a crowdfunding campaign that closed at the end of July attracted 570 investors, they said.
Ian Stirling, left, and Paddy Fletcher, co-founders of Port of Leith Distillery inside the facility. © Jeremy Sutton-Hibbert/FT
Sukhinder Singh and his brother Rajbir pioneered online retail in the industry, starting The Whiskey Exchange in 1999.
The pair sold the company to Chivas Regal brand owner Pernod Ricard in 2021 and are now expanding into production, as well as retail, through their Elixir Distillers business. The brothers are building a distillery on Islay, the Hebridean island already famous for its whiskey, and are buying the Speyside Tormore brand from the French company.
“More and more people are falling in love with whiskey,” Sukhinder said, but it will be years before increased capacity catches up with demand, he added, because “you can’t just open the tap”.
Artisanal Spirits Company is the listed Scottish producer that owns the 35,000+ member Scotch Malt Whiskey Society. CEO David Ridley said the high end of the market could be worth up to $4.3 billion.
In July, the company reported a “remarkable” 50% increase in sales in China in its interim results.
“The convenience of what we have to offer outweighs the current situation in terms of the economy,” Ridley said.
Graeme Littlejohn, the SWA’s director of strategy and communications, said the long-term nature of the industry meant it was able to defy short-term economic volatility, noting that at the height of the financial crisis the 2008-11, exports increased by 40. percent.
While “he was not immune to the global situation, the long-term view means that some of the bumps in the road have been smoothed out.”