“We just have to sit tight and hopefully come through it.”
When US president Donald Trump announced new 10% tariffs earlier this year, eyes immediately turned to Scotch whisky as one of the industries that would be hit hardest, with it counting the US as its most important market.
The 25% tariff on Scotch whisky brought in by Trump in his previous administration in 2019 hammered the industry to the tune of more than £600 million over a two-year period.
While 10% may not represent the same blow, there is still huge unease about how it will affect the industry in the months to come.
What shouldn’t go amiss as well is the 25% tariff implemented by Trump in 2019 was suspended for five years in 2021 by Joe Biden. This will expire in June 2026, and it will undoubtedly unnerve businesses that this is still a further threat on the horizon.
For Anthony Wills, who runs the Kilchoman distillery on Islay, the US accounts for about 10 to 12% of the company’s sales and he has said the tariffs will be a “big blow” for the industry.
He told The National how his business is having to bring in measures to adapt to “very uncertain” times in the global economy.
Last time, he chose to split the cost of the tariff with his US importer, and he said the same will have to happen again as he is determined to not put prices up.
However, he explained the power of global economic uncertainty is so strong, even keeping prices as they are does not necessarily translate into not losing sales.
“The issue there was consumers automatically made up their minds Scotch whisky was going to be that more expensive just because of the tariffs and didn’t check out pricing as they did in the past,” he said.
“It took a few months to get the consumers to understand we had held our prices.
“This time around you could argue 10% is a lot better for us than in 2019. It’s still a lot to absorb [though] and we are absorbing it again with our importer, 5% each.
“It’s very uncertain times.”
Kilchoman is somewhat unique in the Scotch whisky industry, standing alone as Islay’s only single farm, single malt Scotch whisky, with all production taking place on site from the growing of the barley to the bottling of the amber nectar.
Having made a name for itself over the last 20 years since launching in 2005, Wills believes it has perhaps been easier for his distillery to adapt to the challenges of tariffs than for larger distilleries with the US market accounting for a much larger chunk of their sales.
But he hit out at the UK Government for making the situation much harder for the Scotch whisky industry, with employers’ National Insurance contributions having gone up as well as the minimum wage and duty.
The Conservatives initially imposed a 10.1% hike in duty on whisky on August 1, 2023.
In her Budget last October, Rachel Reeves increased the burden on whisky in line with inflation, which meant a further 3.65% increase which came into effect on February 1 this year.
Wills explained how Kilchoman has been forced to lay staff off at the visitor centre to keep finances in check.
He said: “It doesn’t help when our government decides it’s going to put national insurance contributions up for employers and that duty in the UK has gone up and the minimum wage. That isn’t a recipe for growth.
“Thinking that a National Insurance increase was going to protect the lower paid is nonsense and so is a minimum wage increase because all the businesses are going to do is say ‘we’re not going to take anyone else on and, if someone leaves, we won’t replace them’.
“That’s what we’re doing. We’ve got two less people in our visitor centre, purely on the back of the minimum wage [increase]. We’re as busy as we were and we could do with more, but we can’t afford to. It’s the same in any other area of our business, we’re not taking on any more people because we have to be careful with our expenditure.
He added: “From day to day, and I think the biggest issue for all businesses, is this uncertainty around what’s happening at the moment [in the global economy]. It’s hugely challenging to plan for the future, to invest in your business, to take on more people, to grow your business.
“You’re looking at the moment to just retrench and look after your business in the best way possible until you come out of this period, which we hope we will do.”
Nonetheless, despite all the difficulties the industry is facing now through tariffs and domestic policy, Wills believes the “resilience” it has shown before will shine through again.
Though he expects the coming year to be challenging, particularly for smaller distilleries trying to make a name for themselves, he says the team at Kilchoman just need to “sit tight” and hope for the best.
He said: “I think we’ve proved as an industry we are very resilient, and we will come through this.
“It will be difficult, and certainly for the smaller businesses it’s more difficult. When you’re looking to launch your new single malt in the market, that is incredibly difficult at the moment.
“Some people are reducing prices, you can pick up a single malt for £25 to £30 a bottle in a supermarket. So the big companies are saying ‘we just need our market share and we will reduce prices accordingly’.
“We aren’t in that position so we just have to sit tight, work with our distributors and hopefully come through it and be stronger when we come out of this.”
The UK Government has been approached for comment.
