A recent in-depth analysis by the FT has depicted a challenging landscape for the Scotch whisky industry, citing suppressed demand and an increasing volume of maturing spirit. The report, co-authored by Simeon Kerr and Madeleine Speed, suggests that overproduction during the 2010s has resulted in an excess of casks maturing at a time when demand has softened due to the global cost of living crisis and evolving drinking habits among younger consumers.
The FT's analysis referenced the 'whisky loch' of the 1980s and highlighted investor fears that alcohol could be in structural decline, similar to tobacco. However, Tom Bruce-Gardyne believes such a pessimistic outlook is unwarranted. Trevor Stirling, a senior analyst at Bernstein, noted that while Diageo acknowledges a structural element, they consider the issue to be more cyclical than structural.
Figures cited from the Commercial Spirits Intelligence newsletter put current maturing stocks at 1.4 billion litres, a significant increase from less than 400 million a decade ago. Duncan McFadzean, CEO of Noble & Co, clarified that this figure represents cumulative surplus production beyond assumed steady consumption. Alastair Valpy of Volpe & Castello, a bonded warehouse and bottling company, does not believe these figures indicate a new 'whisky loch' is imminent.
Despite some challenges, Scotch whisky exports saw growth in the first half of this year, with volumes up 6 per cent and value up 3 per cent. This contrasts with more significant difficulties faced by other spirits like Cognac, Tequila, American, and Irish whiskey.