Tariffs and falling demand leave Scotch distillers under pressure

"Growing numbers of Scottish spirits producers are showing signs of financial strain as weakening export demand, rising costs and trade barriers squeeze margins across the sector. Research by restructuring specialist BTG Begbies Traynor found that 69 Scottish distillers were facing "significant" or "critical" financial distress at the end of the year, up from 49 in the previous quarter. According to the Scotch Whisky Association,"

"Thomas McKay, managing partner of BTG in Scotland, said producers were facing a "perfect storm of lowering demand, rising production costs and increased tariffs in key markets". Exports to the United States and China, two of Scotch whisky's most important markets, have been dented by tariffs and duties, while domestic trends have also shifted. Several UK pub groups have reported that customers are increasingly trading down from spirits to cheaper alternatives such as beer or soft drinks."

"McKay noted that demand for Scotch whisky and gin peaked during the pandemic in 2020, when lockdown consumption surged both in the UK and internationally. "When that demand fell away, the resulting oversupply pushed prices down, just as additional export costs to the US began to rise sharply," he said. Distillers have also been hit by steep increases in energy and labour costs over the past two years, further eroding profitability."

Growing numbers of Scottish spirits producers are experiencing financial strain as weakening export demand, rising production costs and trade barriers squeeze margins. BTG Begbies Traynor identified 69 Scottish distillers in significant or critical distress at year-end, up from 49 the previous quarter. Scotland hosts more than 150 whisky distilleries and over 90 gin producers. Exports to the United States and China have been dented by tariffs and duties, while domestic consumers are trading down from spirits and younger cohorts are drinking less. Pandemic-driven demand peaks created oversupply and price pressure, and rising energy and labour costs have further eroded profitability, prompting closures.

Read at Business Matters