...where distraction is the main attraction.

Monday, January 14, 2019

Scotch Whisky Exports in 2017, or The rowboat still pulls the steamship

Welcome back to my annual analysis of the Scotch Whisky export market! Yes, one year was skipped. And there will be only two posts, instead of three, this year. This is because the Scotch Whisky Association no longer shares their annual Statistical Report. That report was my data source. So now I am piecing together data from various publications, including smaller items from the SWA and summaries from IWSR.

That means there are no new data for whisky consumption in the UK, nor annual production levels by SWA members, nor the age of whisky sitting in warehouses. Is this information being withheld on purpose? I don't know. But those data points certainly clashed with nearly every press release squawking about the burgeoning Scotch market.

Those narratives aside, the most noticeable change in the SWA publications was the categories. No longer was it Malt and Blends, but Single Malt and Blended Whiskies. I almost gave up writing this post entirely because I thought my big data sheet was rendered useless. But it wasn't. I just had to rethink the comparisons. Blended malts and bulk malt had been removed, and what was left was a more familiar, relatable subject: The Single Malt. And therein breathed the solution to today's post.

Since the great peak of the Scotch Whisky export market in 2011, volume sales have had a bumpy ride year to year:

2012: -5.2%
2013: +2.6%
2014: -3.0%
2015: -2.8%
2016: +4.0%
2017: +1.6%

Even with those last two gains, export volume in 2017 was still 0.4% under 2013 levels, and 3.1% beneath 2011's totals.

Meanwhile, the value of Scotch Whisky exports was 3.3% above 2011's amount. As mentioned in previous years' posts, value can increase while volume decreases when the value per unit rises. In this case, it's GBP (Great British Pounds) per liter. Thus the price of exported whisky went up enough to offset drops in actual whisky being sold.

But it's not that simple. Three other factors have had a considerable effect on the Scotch Whisky export market's monetary gains: inflation, exports to the United States and single malt sales. Bring out the charts!

click to embiggen
I always start off with the above chart to show that Scotch volume sales are indeed up and look healthy since the 1980s and early 1990s. But then I always follow it with this chart:

This chart does a number of things. First, it puts all that volume growth into some perspective. It also shows what looks like stratospheric increases in value and GBP/liter. Scotch whisky appears to be a booming business. But those gains aren't quite what they appear to be.

This graph shows the monetary gains from the previous chart adjusted for inflation, starting with 1980 (the beginning of my data set). What one sees is an industry that has struggled to out perform the UK's inflation. In fact, the GBP/liter price in 2017 is still lower than the adjusted 1980 amount. It wasn't until 2011 that export value jumped ahead of inflation, but that was largely due to the peak volume sales mentioned above. Annual value sales were trending back to the 0% mark until the solid gains made in 2017.

I'm going to zoom to look at the past decade:

As referenced in previous years, volume sales have been anything but flourishing. And for a few years the reported annual value was also slumping. Yet there's been a 55% gain in value sales over this 10 year period. Again, this seems like business has been awesome.

But this shows again that the industry was in danger of underperforming the UK's inflation rate. Adjusting for inflation tempers all value gains, but as one can see from these charts, there have been actual increases in sales. One of the drivers behind the boosts is Scotch Whisky's highest valued export market, the Occasionally-United States of America.

Even as the whole market's sales (in value) dropped after 2011, whisky exports to the United States continued to rise.

Between 2008 and 2017, the value of Scotch exports to the US increased by nearly 150%, while the non-US export market saw gains of 28%. When adjusted for inflation, the US gains were still 116%. The non-US gains vanished, turning into a loss of 3%.

The United States is the largest export market in terms of value not volume, which means there's a higher than normal GBP/liter rate for its Scotch. That substantial rate is due to the fact that US is the biggest recipient of single malt whisky in the world, with totals larger than the second and third largest single malt markets combined.

And if one is still searching for some sort of Scotch Whisky Boom, one may find it in single malt sales.

While sales of blended whisky have plateaued (at best), single malt exports have zoomed in terms of volume and value over the past decade. And, unlike almost all other indicators in the Scotch Whisky export market, it shows no signs of letting up:

With these massive gains in single malt exports, why haven't Scotch exports blasted off as a whole? Well, single malt whisky still makes up a tiny portion of the market when it comes to volume.

But, as can be noted from the charge above, it is no longer an insignificant part of Scotch's value. Though it makes up only 10% of the volume, it will likely cross the 30% marker in terms of value by 2019.

On the flip side, blended whisky has been bleeding value market share:

And it's not just value. Blended whiskies' annual volume sales total in 2017 was still beneath that of 2008. But blends are such a behemoth that their declines always weigh down the entire market. Single malt sales are the rowboat pulling the steamship in Buster Keaton's The Navigator.

(pic source)
What's causing blended whisky's stall out? Blended whisky brands are much more recognizable. Names like Johnnie Walker, Dewar's, Chivas and Ballantine's are synonymous with Scotch, worldwide. And blends are priced much more affordably.

Of course this chart doesn't show the actual prices of single malts and blends, but it does show the difference in how the exports are valued.

Single malts are more luxurious (price-wise) and have the reputation of being well-aged premium spirits, but their names are less familiar, appearing as various Glens and/or cryptic Gaelic phrases. Are consumers leaving blends for single malts (and other whiskies)? Or are new drinkers going directly to single malts, skipping over blended whisky entirely? Are they seduced by the high prices or the connotation and mystique of the term "single malt"? Or are blends dropping in quality due to the demand for their most valued ingredient, malt whisky?

Whatever the cause, people (especially Americans) are spending a lot of money on single malt whisky. As blended whisky sales struggle and the Scotch export market barely keeps above the inflation rate, this continuing ascent of single malt sales has the been the key to Scotch's financial success in the past, present, and, possibly, the future.


  1. Oh yes, the return of yearly analysis ❤️

    1. Thank you, sir! Part 2 will be here on Thursday or Friday.

  2. If you need a follow-up, explaining the logic of Ballentine's single malts could work well. A blend name to get single malt drinkers in the door is an odd one for the industry.

    1. I think the Ballantine's Single Malts idea is/was for international markets where the blend brand is even more ubiquitous than Johnnie Walker. Korea and Japan, for example. Everywhere else though, it's bizarre, and potentially confusing.

  3. Interesting analysis. Makes you think. And the Ballantine's question above is a good one...