In the past week (at the time of writing) I received notification of plans for a further two new distilleries in Scotland. That makes 15 (maybe 16, no-one seems sure) new plants planned. When you then factor in the increase in capacity at existing sites, it would seem as if we are definitely in a new golden age.
Yes new markets are opening up and it would be silly not to take advantage of this increased, and anticipated, rise in demand, but has everyone been too enthusiastic in its vision of what the whisky world might look like in 12 years time? Don’t get me wrong. I genuinely wish all of these projects success, remain enthusiastic about the return of small-scale distilling to Scotland, and am delighted to see blends once again opening up new territories, but I can’t stop history’s dusty voice whispering in my ear.
It’s something that comes with age. I remember Islay when its distilleries were either closed or on short-term working, I recall writing of distilleries shutting up, being sold or bulldozed. The 1980s showed what could happen in a whisky slump because lessons hadn’t been learned from the 1890s. In some ways, this is understandable as there couldn’t have been many executives with first-hand experience of those days, but Moss & Hume’s The Making of Scotch Whisky should be compulsory reading for anyone in a decision-making position in today’s whisky trade.
So, here’s a quick refresher. The 1890s saw a mass expansion of distilleries, with 33 new plants opened in that decade. Why? Here’s Moss & Hume: “the boom was caused by an expansion of exports, mainly of blended whiskies... [but] The resources of the industry were strained and the major blenders found it difficult to acquire stocks and fillings... So as to help with this difficulty... the blenders began once more to invest in new distilleries.”
New plants such as Craigellachie, Strathmill and Dallas Dhu were all built, while “increasing prosperity also encouraged the rebuilding and extension of established distilleries.
“After 1895, when it became clear that real growth rather than recovery was taking place, investment in whisky became fashionable... This was a speculative mania reminiscent of the sudden expansion of the industry after 1823.” Sounding familiar yet?
This led to the Pattison crash in 1899, but as Moss & Hume point out: “it is very likely that the boom would have collapsed in any event as stocks were becoming completely out of proportion to sales.” Stir in economic depression and the result was a mass closure. Of the 161 operational in 1899, only 113 were in production by 1915.
Is today’s Glencairn glass half empty of half full? It’s both of course. Yes, there are opportunities but there are also dangers, history tells us that. It is vital to have a sensible appraisal of worst-case scenarios. Yes huge markets are opening up, for the major brands, but is the growth sustainable? How can you ensure that the children of today won’t reject the drinks of their parents? Do you know what economies are going to be like in a decade’s time?
The start-ups will be on their own. They won’t be selling fillings but competing with 100 already established distilleries with their own brands. How can they differentiate themselves? How do they persuade a drinker in, say, Sweden to drink their whisky rather than an established brand, a bottling from an independent, or a whisky from a local distillery?
Remember that whisky distilling is now global, there are distillers in every country facing the same issues, resulting in an even more cluttered market. How, then do you cut through?
Where’s the distribution network?How can the distillery be sustained through the tough years between the launch of the three year old and the inevitable fall off soon after as the next new kid on the block appears. Gin?
It’s a lot of questions, but if they are being asked now and the answers acted on, then there is a better chance of success. As Marx said, history repeats itself, first time as tragedy, the second as farce.
If the 1980s was the tragedy, then these issues need to be addressed so that Karl can be proved wrong.