Why the whisky industry is bouncing back from the pandemic


Alan Hamilton

Alan Hamilton

Corporate Finance Director


This article first appeared in Harpers on 1 July 2022.

Well-respected whisky industry veteran Billy Walker, owner of the GlenAllachie Distillery in Moray, recently said we are living through one of the “great periods” for Scotch whisky. He believes the enthusiasm for single malts has never been higher than in the last 12 months, and that it was a “purple patch” for the whole industry.

Our Corporate Finance team is seeing significant activity across the sector, and it’s fair to say we don’t disagree with Mr Walker’s sentiment. Projects we have been involved in recently include M&A and fundraising with interest in the sector underpinned by Scotch whisky’s significant global footprint and growing demand for the product across a number of international markets.

The Scotch Whisky Association recently announced that global exports of Scotch whisky grew 19% to £4.5 billion in 2021, following continued recovery from the pandemic and the positive impact of the recent suspension of tariffs in the USA. While the value of global whisky exports is still lower than pre-pandemic, there are a number of positive dynamics underpinning future growth opportunities.

Rising global demand creates opportunities for investors and we have seen this across the board in Scotland.

The potential lifting of tariffs on Scotch to India, the world’s largest consumer of whisky, would open this market to a wider range of producers and could deliver a significant export boost. Key emerging markets include Brazil and China, which continue to grow strongly, and higher disposable incomes in the Asia-Pacific region are also driving demand.

Meanwhile, the suspension of tariffs in the USA has already seen an increase in exports and this is expected to continue, while additional drivers of growth post-pandemic include consumers returning to bars and restaurants and international travel and tourism increasing.

Rising global demand creates opportunities for investors and we have seen this across the board in Scotland. There has been substantial investment in production facilities and tourist attractions, and several new distilleries are in the pipeline as the price of bottles and casks continues to soar.

A growing number of companies are offering investment opportunities in maturing whisky casks to individuals. The distillers use this as a means of generating working capital to invest in making new spirit, and the increasing value of maturing stock makes it an attractive opportunity. 

In some cases, individuals are investing directly into the sector, funding a range of initiatives from more mature distilleries looking to fund growth, to new distillery ventures. And there is ongoing interest from both private equity funds and trade players looking to expand their range of spirits and use their distribution networks to leverage brand potential and drive sales. For distilleries, there is a clear opportunity to use third party investment to help accelerate their growth plans and enhance shareholder value.

Potential investors need to consider that whilst high demand will continue to create growth opportunities, the sector faces the same global challenges as many others, including ongoing trade disruption, increasing supply chain costs and other inflationary pressures such as energy costs. For example, there is growing supply chain issue in the availability of quality casks and bonded warehousing space. Having a broad and reliable supply base in place should help mitigate any potential disruptions due to increasing demand pressures.

Understanding your target markets is key for companies moving forward. For example, Taiwan and Singapore consume significantly more single malt whisky than other Far East markets, with consumers particularly interested in product quality, heritage and production. This increasing awareness and desire to try product from different distilleries means these are important markets for independent bottlers. Whereas in China, Scotch whisky is still seen by many as a status purchase to be enjoyed on special occasions.

Securing a network of distributors that understands local markets is essential to maximising sales opportunities and driving investor returns. Having a clear view on production capacity and the maturity profile of its whisky stock is key to understanding the future sales potential of the business.

Like many other sectors, those companies looking for investment should have in place a clear business strategy, particularly around branding, target markets and distribution, and how these will drive future sales and growth. A carefully considered production and stock maturation plan, including how this is to be funded, is also key in determining the ability to drive future sales and value.

Global demand for Scotch whisky is expected to continue to grow so it is essential that a business has a clear strategy in place surrounding how it can benefit from this. Whisky is in a great position right now and I’m confident more positive times are ahead for this thriving industry.

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If you would like to discuss this further, please don't hesitate to get in touch with me, a member of our Corporate Finance or Food & Drink teams, or your usual Johnston Carmichael adviser.