As we head into 2025, the question looms: is the whisky industry on the verge of another surplus crisis, reminiscent of the infamous “whisky loch” of the 1980s? The numbers suggest that such fears may not be unfounded, so let’s examine the evidence.
The Data
According to the Food & Drink Federation’s Q3 2024 Trade Snapshot report, whisky exports have experienced a significant downturn. Export values dropped by 36.4% to £2.8bn, while volumes fell by 28.5% compared to the previous year. This decline is particularly striking given that whisky remains the UK’s largest food and drink export.
By contrast, other major UK exports, such as salmon (+27.5% value, +31.8% volume) and chocolate (+9.4% value, +15.7% volume), have shown strong growth. The USA, the UK’s third-largest export partner, saw whisky exports decline by 23.2% to £558m. Despite these challenges, whisky remains the largest food and drink category exported to the American market.
While overall food and non-alcoholic drink exports reached a decade high of £12.4bn, the decline in whisky exports contributed significantly to a 10.2% drop in total food and drink exports when alcoholic beverages are included. This suggests that, while other food categories are thriving post-Brexit and post-pandemic, whisky is facing unique challenges in 2024.
Why We Should Be Concerned
The Scotch Whisky Association (SWA) underscores the importance of whisky to the UK economy. In 2022, the industry contributed £7.1bn and supported 66,000 jobs across the UK, with 41,000 of these in Scotland alone. Whisky is responsible for £3 in every £100 of Scotland’s Gross Value Added (GVA), making it the second most productive sector in Scotland, behind energy and renewables.
History Repeating Itself?
Industry veteran Ian Buxton highlights potential storm clouds gathering over the Scotch whisky industry, drawing unsettling parallels with the 1980s whisky loch. Back then, overproduction led to a surplus that devastated the industry, resulting in widespread distillery closures.
Buxton points to several factors that echo this period of crisis. The industry’s rapid expansion, combined with inflation, energy crises, and global trade tensions, are creating conditions eerily reminiscent of the 1980s.
There are additional concerns about the industry’s exposure to the Chinese market, where major producers have invested in single malt distilleries. This could backfire if Chinese consumers pivot to domestic alternatives or if trade barriers emerge.
Wider Problems in North America
The whisky market in the United States faces similar challenges, with overproduction and shifting consumer demand posing significant risks. Diageo, a global giant, recently paused plans for a new distillery in Ontario due to market conditions.
Global Economic Instability and Export Challenges
Global events have compounded the whisky industry’s struggles. The Russia-Ukraine war has disrupted key export markets. Since February 2022, there have been zero whisky exports to Russia, removing a significant revenue stream.
High interest rates and rising living costs have also dampened consumer spending on whisky. Retailers face slower sales, and independent bottlers are scaling back cask purchases.
Hope for Recovery
Despite these challenges, there are reasons to be cautiously optimistic. A resolution to global geopolitical conflicts and economic stabilization could provide a lifeline to the whisky industry. Lower interest rates and stabilized energy costs might help the market recover.
Conclusion
The whisky industry is undoubtedly facing significant challenges, with export declines, overproduction risks, and geopolitical turmoil creating a perfect storm of difficulties. However, history shows that the industry is resilient. With thoughtful management and strategic adaptability, 2025 could be a pivotal year for recovery and growth in the whisky sector.
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