From the Editor

From the Editor

Editor's Word | 16 Apr 2000 | Issue 9 | By Charles MacLean

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The price of whisky in British shops comes tumbling down at Christmas every year. Five pounds off a bottle of malt is common; £1.50 off a blend.“Great,” is our reaction to such a situation. Then we might ask ourselves, “If prices can be cut to this extent are we being ripped off the rest of the year?”The simple answer is that the producers make only a very small margin on such heavily discounted goods. Once tax (excise duty and VAT totals 66 per cent of the retail price), production and packaging have been taken into account, we are talking just £1.70 profit on a blend retailing at £11, and £1.98 on a malt discounted to £13. From this sum both the distributor and the retailer have to get their margins. The latter’s is typically around a fifth of the full retail price for malt whisky and the cost of supermarket Christmas promotions is borne by the whisky producers.Christmas accounts for around 90 per cent of some brands’ UK annual sales. Producers have to get their products onto the supermarket shelf at this time of year – and off the shelf, which means advertising, and a further reduction in profit.The whisky industry hates Christmas discounting. It is commercial suicide. But if the competition is discounting, individual producers have to follow suit, and if they don’t discount, the supermarkets won’t stock them. The buying power of the big multiples enables them to drive keen bargains at any time of the year, and at Christmas they simply ask the producers whether they want to participate in (ie subsidise) the promotion or not.The knock-on effect of this upon smaller retailers is onerous. They cannot demand the same discounts as the big boys, yet if their prices are much higher than the supermarkets, they won’t sell the whiskies. Many simply de-list the discounted brands.Discounting may be good for us in the short term, but it is potentially disastrous in the long term. One solution for producers is to withdraw brands from the home market. Many old favourites such as Ballantine’s, Johnnie Walker Red Label, Long John, and Dewar’s are rarely encountered in the UK today. Brand cutting will continue unless margins on blended whisky improve.Malt whisky, which is more costly to produce (because of longer maturation periods, shorter bottling runs and more costly packaging) will be offered younger, with no age statement. By all means take advantage of discounts and special offers. Make hay while the sun shines. The truth is that the price of Scotch should go up, not down, if we are to continue to enjoy the diversity and quality of all those whiskies currently available to us.
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