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Scottish Diversity in a Global World

1826 words (7 pages) Business Assignment

5th Oct 2020 Business Assignment Reference this

Tags: Business AssignmentsBusiness

The Scottish industry I have chosen to write about is the alcohol industry in Scotland, Scotland’s brewing and distilling sectors play a vital role in the Scottish economy, with large worldwide brands such as: Famous Grouse, Tennants, Bells and Gordons and is famed across the globe for being one of the best countries to distill whisky. It also indirectly promotes tourism within Scotland with people wanting to visit famous distilleries. The drinks industry helps sell Scotland to the world. The UK’s distillery sector is going through an unexpected boom with continued growth in the spirits industry due to the cocktail culture of pre mixed drinks and the recent boom in the Gin industry. It is no surprise that Scotland is still dominant in the whisky distilling sector with hundred of years of expertise.

In this portfolio I will be discussing the changes this industry has seen in the past 20 years, how these changes have affected this industry, how political changes have affected this industry and the considerations for the future this industry must take.

Change

Globally, the consumption of beer has steadily fallen for a few years. However, this has not decreased the number of brewery start-up rates to respond to consumer drinking more expensive, specialized beers, such as IPAs. In the 1970s there was only 11 breweries in Scotland but now in 2019 there is a massive 115 breweries in Scotland, a great increase from the 1970s. the great increase of breweries has resulted in the beer manufacturing base increasing by 229% during the period of 2010-2018. This growth has been mainly due to micro-breweries that represent 83% of Scotland’s brewing base. The average turnover across all Scottish breweries was around £270,000 in 2018 compared to an average turnover of £673,000 for all Scottish businesses in the economy. Ten percent of Breweries in Scotland have sale levels over £1 million. The sharp increase in breweries has had a positive affect on employment in Scotland as well.

Scotland is home to 128 malt and grain distilleries, which makes it the highest concentration of distilleries in the world. In an eight-year period 15 of Scotland’s local authorities had a distilling business presence but now has 22 local authorities. While many countries can produce whisky, Scotland is the only country in the world that is able to make ‘Scotch’. In 2017, the value of scotch exports reached a massive £4.36 billion. In comparison to the tourism industry, the total expenditure from international visitors in 2017 was £2.3 billion. This also makes Scotland’s breweries and distilleries responsible for 20% of all food and drink exports in the entire UK.

The spirits industry contributes approximately 3% to total Scottish GDP. during the 18 years of available data, the contribution of the sector to GDP has averaged 2.7% and peaked at 3.4% of total GDP in 2013. Gross value added at basic prices for Scotland's 'spirits and wines' industry was £3.9 billion in 2015. This was lower than the record high year of £4 billion in 2013. The two most recent years of available data, 2014-15, show a possible downward trend.

The supply chains for brewing and distilling encompass a much more than just on-sit production but has increased the business of upstream farming inputs, such as barley and malt, and downstream industry such as bottling, package design, marketing and transport. Thus, creating a larger amount of jobs in these sectors.

The growth of both distilleries and breweries has brought spun-off benefits to the tourism sector with record numbers of tourist exploring Scotland’s whisky trails and breweries, such as the Tennants brewery tour in Glasgow. There are also numerous drink festivals such as whisky festivals, craft beer festivals to boost sales.

Culture

recently in the past couple of years there has been a massive boom in the Gin industry with 43 million bottles of Gin being sold across the UK according to the Wine and Spirit Trade Association. Scotland has not been surprised with this boom as it holds three of the world’s bestselling Gins (Hendrick’s, Gordon’s and Tanqueray). This has caused whisky distilleries to investigate distilling gin as well as whisky as it is quicker to make and offers them a large return in profit whilst they wait for their whisky to mature. The increase in Gin’s popularity has seen an onslaught of new Scottish brands hit the market.

Gin production, going by the UK industry code is a mixture of actual distilling, amending and blending. It is difficult to decipher these activities and there is some evidence of mixed production within the distilling plants. Some companies also have their gin produced entirely by other producers on contract. These activities can be classified as below:

  • Main alcohol production.
  • Prepare botanicals rectify and blend with purchased Grain Neutral Spirit.
  • Outsource entire production process.

Hence, just some are spirit producers, whereas others may be involved only in rectifying and blending of produced spirit. Added to the already highlighted challenges around data on gin producers in Scotland, it is difficult to establish what parts of the production processes are happening in Scotland - the proportion producing base product and those rectifying or blending the spirit.

Media reports in 2017, highlighted concerns that not all Scottish gin is made in Scotland. It was revealed that some Scottish gins were made by contract distillers in England. And, unlike for scotch, which has name protection, there is no similar legal protections for other spirits produced in Scotland. The Scottish Distillers Association wants Scottish produced spirits to have the same protection as scotch whisky. The Association is encouraging those making spirits in Scotland to sign up to their accreditation scheme to ensure authenticity and quality of Scottish products.

It is important for the Scottish alcohol industry to adhere to the standards of other countries and notice trends of what alcohol is being consumed in each country around the world as gin is making a large boom in the UK in north America there has been a large increase in ‘light beers’, a trend which Scottish breweries could take advantage of.

Political changes

It is worth noting that the Scottish Government can legislate and formulate policy on alcohol in aspects of health, licensing, treatment and criminal justice. The UK government has control over taxation and broadcast advertising.

Scotland is a country which is merged together with Northern Ireland, Wales and England to create the United Kingdom. Having been directly governed by the UK Government Since 1707, a system of devolution was established in 1999, after the Scottish people voted by a large majority to take back law making within Scotland

Alcohol duties: there are considerable differences in the level of tax between different types of drink, with wine and spirits having higher rates of duty on average than cider and beer taxed at the lowest rate of any drink. Commentators argue that there is a strong case for reform of alcohol duties. The current system is not well targeted at heavy drinkers and has anomalies. Related this paper has highlighted questions around the small brewery relief scheme.

One of the most obvious possible political change within the distillery and brewery sector is the constant reminder of Brexit. Although it is still so uncertain how Brexit will affect brewing and distilling in Scotland, thou consequent challenges could include loss of workforce and skills, fluctuations in supply and cost of input, uncertainties in trade deals, and continued recognition of Geographical Origin status.

Recently in May of 2018 a minimum pricing guide was implemented in Scotland in which a minimum of 50 pence per unit of alcohol sold. This meaning that stronger drinks, such as whisky and gin, will have a higher minimum price. This only affects own brand spirits as branded spirits have already a price higher than the minimum price. This has decreased the amount of people buying cheap alcohol as the pricing of alcohol directly the amount of alcohol consumed. Although a positive affect to society it could have a small impact to the profits of some distilleries and breweries.

Other recent changes in the drink drive limit has been reduced from 80 mg of alcohol per 100ml of blood to 50mg of alcohol per 100ml of blood. This making it very close to 0, this could affect the alcohol industry as people are less likely to drink the night before an early morning drive the next day thus reducing the alcohol consumption and possibly negatively affect sales.

Future considerations

For future consideration it is important for the Scottish alcohol industry to continue to identify emerging trends in worldwide buying habits of different drinks, it would seem the industry is well prepared as it sells a wide variety of beverages. It can also find a new way to connect and advertise to tourist by having festivals worldwide to attract new customers. It is important to note that political changes such as Brexit could have a negative affect on trade within the EU with tariff costs possibly being higher. It is vital for the industry to adapt. The alcohol industry could face the same affect the tobacco industry faced with continued higher and higher taxation on products and possibly have branding and advertisements removed completely due to consumption levels being dangerously high.

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