SCOTLAND’S whisky industry is facing a turbulent future with the introduction of tariffs on American exports brought in by President Donald Trump, but distilleries' innovation could offer new opportunities, a leading drinks expert has claimed.
In the last Trump administration, whisky exports were significantly impacted by 25% tariffs, which lasted 18 months, with the Scottish Whisky Association estimating that the industry lost £600 million in sales during the period.
For Scotch whisky makers, the US is their most important overseas market, worth £971m a year, but it is now under threat again with the UK subject to 10% tariffs on all exports to the US.
However, Stuart McCallum, Head of food and drink at RSM Scotland and a non-exec at Scotland Food and Drink, said that the White House policy will not deter major distilleries from maintaining their production levels.
He believes instead that distilleries will manage their tighter margins and will continue to plan for the years to come, as many have done so for decades already.
“I think whisky has been particularly very good at not having all its eggs in one basket,” McCallum (below) said.
“From what I see with our whisky clients, they will, if there are tariffs, move that product if they can't get the level of return or the demand that they need. They'll move it to new international markets.”
He added: “I think there are lots of them that are probably exploring new markets or going back to markets where they've maybe not had as much of a profile.”
McCallum said that Scottish distillers are going to have to “pick their battles” and insisted the industry is already experimenting to find new ways to evolve the national drink, be that with different types of casks, age profiles, or even entry points for customers.
One example McCallum said is a good example of finding new markets is the Glasgow-based Artisan Spirits, which have built their business around making whisky cocktails for affluent businesses like hotels.
Another example McCallum gave was Daftmill Distillery, located on a farm just outside Cupar in Fife, which mainly farms barley, selling it to the bigger companies in the industry but keeps a small amount for themselves so they can produce a “very limited” amount of stock.
“It's incredibly premium in terms of the price point, because it's really good quality, but it's also limited.”
“Their strategy is not to try and kind of attack the big ones because they can't, they've just found a niche in terms of a very, very high-quality product that's in incredibly high demand.
“They have international markets, but they've got a really strong base in Scotland.”
He added: “A real whisky connoisseur is looking for something different and is willing to spend a bit more.”
Innovation in the Scottish whisky industry isn’t just tied to the drink, as McCallum pointed out, distilleries have really capitalised on Scotland’s booming tourism industry and are now offering “visitor experiences”.
The concept of opening up distilleries to loyal customers and curious visitors is something which has been successful from the “big guys” like the Johnnie Walker experience on Princess Street in Edinburgh to the Isle of Harris distillery in the Outer Hebrides.
Combining the learning of the rich history and heritage of Scotland’s distilling along with offering an immersive cultural experience is something Glenturret in Crieff have done to an “unbelievable scale”, McCallum said.
The distillery boasts a two-Michelin-star restaurant so customers can enjoy some fine dining while they sip on their coveted whisky.
McCallum added that one of the best things for Scotland’s whisky industry is that it is known as a high-quality product internationally and is renowned for being a premium product.
He believes that if Scottish distilleries continue delivering the high-quality it is world-renowned for there will always be a strong international market for it.
“If you look at spirits globally, I think Scotch whisky is probably right up there with the different kinds of hard spirit categories as being a really premium product,” McCallum said.
“It can only be made in Scotland, which again reinforces the visitor experience as it has that kind of wow factor.
“When you roll up to maybe something like the MacAllan distillery and you go, ‘that's absolutely amazing’.”
He added: “It’s the same for some of the smaller ones in terms of the locations across Scotland.
“I think it's a really good harmony between tourism and whisky.”
McCallum did not downplay the challenges the industry faces over the next few years if Trump’s tariffs continue, but he was hopeful that Scottish distillers are well-equipped to navigate the stormy headwinds.
He pointed out that there might be infrastructure challenges in the years to come, highlighting that the A9 could become a pinch point for distilleries in Speyside, along with island-based businesses, making sure they can invest and keep people in their workforce.
“I think the majority of them will be able to roll with punches for a couple of years,” McCallum said.
Adding that the protected characteristics of whisky will help production and businesses in Scotland, unlike other goods manufacturers who could ship production overseas.
McCallum said: “I think they've always been a very long-term thinking business.
“They're strong financially, they can weather a couple of years, and I think it's just that inherent long-term thinking that makes them sustainable.”
